KMS Robservations September 2015

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...