I trust this edition of KMS “Robservations” finds you in
good health and prospering…
In this post I have briefly covered a few more issues that
are impacting lawyers in small-medium firms in Australia and New Zealand…and
flagged the upcoming KMS “The Future Is Now” Forum series in October…
I hope you find the content of interest and value to you in
your practice…
How Many Hours A Day
Does The Average Full-Time Employed Lawyer Really Work?
The title of this item begs the question of what is
considered to be encompassed by the word “work” in this context.
I will address that in some detail.
Do you expect your professional team members to be investing
on average two and a half hours a day, every working day of the year (usually
about 230 days) in so-called “General Administration”, or “Non-Chargeable
Time”?
Do you bother to track the large annual alleged “investment”,
or is it considered not worth the trouble?
Certainly there’s a real need for ongoing training and
development, and some need for formal Continuing Professional Development
(mandatory in many jurisdictions), as well as some Business Development, but
around 575 hours a year, year in year out?
If there isn’t this focus on properly using the opportunity
of that FirmTime™ you are paying for, and it has to be valued at least at
$125,000 per year, usually a lot more, why on earth would your firm only be
expecting 5 to 5.5 hours a day of client file work from your employed lawyers?
Worse still, most firms I first encounter are not even achieving
that average ClientTime™ in fact.
The working day is getting shorter for most lawyers, not
longer.
The right and proper confidence of women to return to the
workforce as mothers is increasing the percentage of lawyers who are simply not
prepared to commit to consistent days of input longer than 7 or 7.5 hours. From
the point of view of both those parents and their children that is not at all a
bad thing.
There is an increased preference for better lifestyle
balance by today’s younger lawyers in particular, and that is also keeping a
lid on total hours invested in their work.
In Australia there has been a marked trend in recent years
(particularly since the introduction of the National Employment Standards)
towards the 38-hour week, a level of input unheard of for a full-time lawyer
not so long ago.
Most lawyers are prepared to work outside core hours when
client needs demand it, when there is a specific function to attend, or a great
marketing or relationship-building opportunity to be taken.
Nevertheless all these various social factors create days of
an average length that doesn’t allow much time for lawyering! This makes it
more difficult to generate reasonable profits, especially in firms that have
poor leverage between owner Principals and employees.
In some firms that appear well-leveraged, the production
levels are so poor that most, if not all, of the potential benefit to the
Principals is being lost. Extra investment by them that is not generating
decent margins, and is placing pressure on cash flow.
Very few days would go by during the year when I am not
asked to prepare a KMSWorkPlan™ for a lawyer based on average weekly hours of
38, net of all private time.
In fact I’m regularly (and currently) assisting firms where
WorkPlans™ for all full-time lawyers are being shortened from historical levels
of 45 hours a week to 40 hours or 38 hours.
When you’ve only got
7.6 hours a day to utilise in pursuance of your Business Plan, you’ve got to be
very, very, careful how it is used.
In setting budgets individual by individual I always stress
the wisdom of starting at the FirmTime™ end. This is diametrically opposed to
where most law firm managers start the exercise.
Work from a checklist of the types of FirmTime your firm recognises,
and match your team member’s skills to that list individual by individual,
deciding item by item what seems like a wise level of investment across the
year currently being planned.
Readers interested in having a copy of such a checklist can
email me on robkkms@
bigpond.com for a free copy.
This exercise should also take place with every job
applicant you propose to make an offer to, so, even before acceptance, there
are no misunderstandings.
In my wide experience with this process most employees will
find it very hard to justify anything like the 2.5 hours a day that
inadvertently gets allocated to “General Administration” when a less rigorous
approach is used.
Again, regularly I find that with the correct approach, around
an hour a day less is perceived to be needed from the outset, and that hour can
be added back to the client file side of the ledger, the area the team members
were trained for after all!
But it doesn’t end there.
Having team members capture their time investments into
FirmTime™ work in the same manner most capture client file work, whether or not
the firm still has any by-the-hour charging, ensures that accurate data as to
how people spend their time is available as soon as the end of month one.
That data can be used to focus on getting people to invest more
time as originally planned, or to lead to a decision that not as much time
needs to be allocated as thought, in a particular area.
Precedents is an area of FirmTime™ honoured much more in the
planning than in the execution, and Marketing is often discussed
enthusiastically, and with great hope, in the planning stage, but actually
engaged in at a much lower level.
Quite apart from whether they are any good at it, many
lawyers find it very hard to prioritise Marketing, and can often engage
themselves in over-servicing legal files to the detriment of focussed effort in
writing an article, blog or LinkedIn post, or planning a highly-relevant client
seminar.
The likelihood of getting the client to pay for
over-servicing is low, counter-productive to good relationships and future
work, and verging on unprofessional conduct. The time would be much better
spent elsewhere.
If a team member is not suited to being trained in effective
Marketing, my strategy is to use other means of creating a healthy backlog of
Client file work for that person, and to lift their daily ClientTime™ target
accordingly, because the legal work is there.
It should not be assumed from this strategy that I believe
that every person who has a healthy backlog will regularly hit their production
targets. Unfortunately some people will almost always have arguments, that they
are fully convinced are valid, for why they haven’t got a piece of work
finished on time.
It’s just that very wide experience has shown me that it’s
much more likely that a person with a healthy backlog will hit targets than one
who hasn’t, and that’s a good enough starting point for me.
Ironically, there is almost always more than enough work in
a firm, it’s just that it’s poorly distributed, resulting almost always in more
senior lawyers having too much, and doing too much work on files that they know
in their heart of hearts they will not be able to fully recover.
Exactly how you lift the performance of individuals you are
supervising can be the subject of another item on another day.
What Annual Fees Should Your Employed Lawyers Be Producing?
As usual, of course…it depends!
As I work with new client firms across Australia and New
Zealand I encounter very few employed lawyers who are producing even close to
what they are capable of.
There are a number of reasons:
1.
Too little time is spent working for clients on
their files, and too much is spent in allegedly useful activities for the firm.
2.
Even on the work done for clients, poor
engagement and poor billing practices, coupled with a lack of confidence, means
too little is charged for the work done.
3.
Old habits and paradigms, and that lack of
confidence again…
…the list goes on…
These days it’s not simply an exercise of multiplying hours
that should be spent by a lawyer on client files by an hourly rate, to come up
with an approximate annual production level.
Rapidly changing billing practices and other factors make it
a much more nuanced exercise, but here are some rough guidelines for your
interest.
Other important factors are the degree to which someone is
genuinely supervising the work of others, and genuinely involved in effective
business development.
The figures below do not include shares of fees attributable
to any levels of support staff…
First year lawyer…$175,000+
Fourth year…$450,000+
Ten years and above…$550,000+
Where Poor File
Velocity Can Really Hurt You…Are You Ticking All The Boxes?
Managing even a small-medium legal practice is like dealing
with an octopus on steroids…attending to most of the tentacles most of the time
sometimes just isn’t good enough!
In the past few months I’ve noticed a number of situations
in firms where serious cash flow problems were emerging that were not directly
attributable to the usual repeat offenders, over-spending, over-drawing, slow
payment by Debtors, or lack of available client work.
Despite good production numbers, with new “apparent” Raw
Work In Progress recorded at least at the KMSWorkPlan™ levels of the
individuals, recent billings were well below targets.
The billing systems in place were still ensuring that
billing was happening at the earliest possible time, commensurate with the
arrangements with all clients.
On close examination the problem lay in too many team
members failing to be pro-active enough in genuinely moving their matters
forward. Often, seemingly modest delays in turnaround, and acceptance of
unacceptable delay by other parties, was adding large amounts of time in
matters between “go and whoa”.
Work In Progress age was deteriorating, and precious working
capital was being soaked up in files that were simply not moving forward fast
enough to conclusion, or other event-driven billing points.
Just five days delay in carrying out twenty required actions
on a file can almost invisibly push out your billing point 100 days.
Multiplied across a substantial proportion of your files the
impact on billing timing, and thus cash flow, can be a major dose of “sand in
your gearbox”, despite all members of your team being ostensibly “very busy”.
It is a problem not usually able to be fixed quickly…quite a
lot of effort needs to go into taking a lot of steps a lot more quickly on a
lot of files to turn the ship around, and often firms will need access to more
working capital in the meantime…if they can get it.
To combat this problem more firms need to institute matter
management systems, with consistent monitoring, and underpinned by random
auditing of files for velocity as distinct from other aspects of quality.
There’s not always a need for over-elaboration in implementing such systems, a
good dose of common sense goes a long way in the interim, before you work your
way firm-wide to whatever is considered best practice.
One particularly “nasty” manifestation of the lack of
velocity is when inexperienced, or tired and over-worked, practitioners adopt a
mentality of “dealing with” actions in a file simply by sending the ball back
into the other party’s side of the court…getting the file off the desk…and
doing nothing more until the shot is eventually returned, or a frustrated client
enquires about “progress”!
High Quality, Cheap, Law
Degrees, Just A Few Hours Away...Across The Ditch…
Victoria University of Wellington is one of the world’s
leading universities at which to take a Law Degree, ranked in the top 1%...
I was made aware recently that Australian students are
regarded as “domestic” students in New Zealand, and accordingly pay only domestic
fees.
In 2014 Victoria University had only 200 Australian students
enrolled. Expect to see those numbers jump as tuition fees rise strongly in
Australia in the next few years…
KMS National Future
Of Law Firms Forums…Theme: Your Law Firm Future Is Here Now!
Seldom does a year go by without multiple commentators
telling us that there are big changes coming for our small-medium law firms “in
the future”, with dire warnings for those who do not change and adapt.
The October 2015 KMS National Future Of Law Firms Forums series will see Rob Knowsley leading discussion with
small groups of lawyers and law office managers (maximum 20 per event) with a
big focus
on what is already happening, with big impact on your profitability and
enjoyment of practise, and how you can best take advantage.
Experience across more than thirty years has shown Rob that
over twenty participants actually restricts discussion, so that the benefits of
a having a good cross-section of attendees is lost. Registration will be on a
first in-best dressed basis.
Firms will be restricted to having a maximum of three attend
to ensure that good cross-section of attendees.
As usual with KMS seminars, sole Principals may elect to
join with like-minded peers to benefit from the savings available for multiple
attendees.
Where and When?
Sydney CBD
Tuesday Morning 6th October, 9am-1pm.
Brisbane CBD
Wednesday Morning 14th October, 9am-1pm.
Please contact us for a Registration Form...
