Make More Rain : leverage

The Only Profit Driver

RussHaskin — Fri, 12 Feb 2010 13:00:00 GMT

I have spent the better half of the last decade working with firms on the drivers of profitability. If you are knowledgeable on the topic these drivers have many acronyms (e.g. RULES) but for simplicity sake I will list the generally accepted ones below...(read more)

Planning Concepts and a Sneak Peek at the LexisNexis Redwood Planning Application

MichelleStPierre — Thu, 10 Dec 2009 14:45:00 GMT

Planning Overview The LexisNexis Redwood Planning application is a sophisticated management tool that uses a firm's profitability model to look at client planning and alternative choices in the staffing and pricing of new matters as well as the consequences...(read more)

Leverage - The 2009 Scenario

MichelleStPierre — Fri, 20 Nov 2009 18:22:00 GMT

Four times per year we host the Redwood Forum, which is a chance for Redwood users to get together online and talk about business intelligence, law firm management and finance, and the role our tools play in that space. The following post is guest authored...(read more)

Know Your Alternatives: Another Week – Another Conference

RussHaskin — Fri, 13 Nov 2009 19:08:00 GMT

As I mentioned last week, there is no doubt that alternative arrangements are the hottest topic this year. It is by far the number one topic firms are asking about and the number one conference topic as well. Therefore given this is near and dear to my...(read more)

Putting a Price on Training

MichelleStPierre — Thu, 30 Jul 2009 17:54:00 GMT

I'm sure that many of our readers may disagree with my colleague Brian's statement yesterday that salary is not the only driving factor impacting a young lawyer's decision to join a law firm. I'm not a lawyer, and I didn't go to law school, nor did I carry a huge amount of debt upon my graduation from college, but I was fortunate enough to graduate with an Economics degree and a minor in Finance when the job market was considerably more robust than it is today. I entertained no fewer than six job offers out of college, from Wall Street Investment banks to commercial banks. And it's the absolute truth when I tell you that I took the job with one of the lowest salaries because they offered a perk that no other company came close to matching...

...(read more)

Is The Worst Behind Us?

BoYancey — Mon, 20 Jul 2009 13:00:00 GMT

Some of the most recent headlines in the legal press have been aimed at the recession's impact on large law firms, and would leave one to believe that the industry is in shambles. Indeed, the world's formerly largest law firm, Clifford Chance, saw its profitability decline by a whopping 37%, while a Top 20 U.S. firm, Morgan Lewis, has just announced that it was cancelling altogether its 2010 summer internship program, after deferring start dates for 2009 hires to October of 2010. Much of the current commentary is focused on whether Morgan Lewis's decision is the first of many, and what that will mean for the industry generally, and current law students (and law schools) specifically.

...(read more)

More Thoughts on Reducing Headcount

MichelleStPierre — Fri, 10 Jul 2009 13:45:00 GMT

The post yesterday by my colleague Brian exposed some interesting ideas about maintaining profitability. Another one of my colleagues, Bo Yancey, previously published an article in the 2009 LexisNexis Business of Law Insight on a related topic, exploring various 2009 scenarios to "right size" firms in the face of reduced demand and downward pressure on pricing. Bo draws a similar conclusion to Brian's assertions - the four scenarios he addressed in the article show that firms cannot maintain profitability by just reducing associate headcount, and he encourages firms to explore structural leverage.

...(read more)

Part Two of Leverage: Friend or Foe

Admin — Tue, 14 Apr 2009 20:02:00 GMT

In Leverage: Friend or Foe of Maximized Profits per Partner I discussed an approach that a firm could use to address the dropping demand for legal work. In short, this approach suggested that a firm could reduce their supply of legal work to match current demand by cutting heads in its most junior ranks, the ranks that produce the lowest $PP contribution. This is simply de-leveraging. By doing so, the firm would ensure sufficient utilization and would generate the highest possible $PP for existing partners . At the same time I also hinted at a second alternative that would enable a firm to deliver greater PP$ than simply de-leveraging.

Previously I had described the firm structure that delivered the highest possible $PP, which I called the Managerial Maximum. In essence, the Managerial Maximum is the highest amount of leverage that a firm can effectively manage. By having the maximum # of associates working (Sr., Jr., etc.) per partner, they are generating the maximum $PP contribution which results in the maximum $PP, assuming 100% utilization. Any deviation from this maximum leverage ratio will deliver lower $PP. (see example pyramid below)

But what should a firm do if demand for legal work decreases and they can no longer maintain 100% utilization? What most firms are doing in today’s environment is de-leveraging, which is taking them away from the Managerial Maximum. I propose that firms should not be making cuts exclusively to lower level associates as the current de-leveraging strategy espouses, ie. cutting off the bottom of the pyramid. Instead I suggest that firms cut the side of the pyramid off, “thinning”, which entails cutting partners and the appropriate ratio of non-equity associates/staff until they reach a point where their supply of legal work matches the demand for legal work. (See example pyramid below)

By adopting this approach to matching supply and demand a firm is also ensuring that the maximum leverage ratio is maintained, which will result in the maximum $PP possible. For a given amount of legal work, this approach will generate more $PP than will de-leveraging. However, it will require cutting into the partner ranks, which may be culturally and politically challenging.

Below is an example that shows the impact to $PP of the different ways a firm can react to a decline in demand.

In the Base Case, demand is 200,000 hours. This firm is fully leveraged and is delivering $4,350,000 PP$.

Now demand has dropped to 140,000 hours and the firm cannot maintain 100% utilization or the Managerial Maximum leverage. The firm can de-leverage, “thin” or a combination of the two in order to increase utilization and improve leverage.

Below is a table that shows the PP$ result of the various lawyer combinations the firm can choose depending if they decide to de-leverage or “thin”.

If the firm chooses to address the decline in demand solely with de-leveraging the PP$ will drop to $3,600,000, however, if they also adopt a “thinning” approach their PP$ can increase back up to the $4,350,000 they had delivered in the past. In a vacuum, my recommendation to this example firm would be to “thin” down to 6 partners as this would permit the firm to stay fully leveraged while matching hours demanded as close as possible to hours worked (ie. supplied).

Overall, there are two ways a firm can react when demand for legal work declines: 1) they can de-leverage or 2) they can “thin”. De-leveraging will deliver the maximum $PP for existing partners, “thinning” will deliver the maximum $PP possible. Note: I recognize the challenges of eliminating equity partners from a firm. This recommendation is strictly the result of objective considerations.

--Scott Nickerson

Scott is an analyst in the Redwood Think Tank.

Martindale-Hubbell Connected Launches Networking for Lawyers

Admin — Tue, 31 Mar 2009 21:27:00 GMT

Social networking has evolved significantly from pressing the flesh at boring seminars and dinner events to the online world of LinkedIn and other such sites, and at LexisNexis we’re proud to be a part of that world now. Today marks the launch of Martindale-Hubbell Connected.

At Redwood we have always endorsed the idea of business development from within – it’s easier, faster, and less expensive to bring in new business from existing clients than to pound the pavement in search of new clients, and given today’s economic client, this is even more important. However, the cost effectiveness of online networking can change that equation. The opportunity to connect online – in a private, authenticated network – with General Counsel and other legal professionals across the globe through existing trusted relationships is one key to the success of business development in a time of budgetary constraints.

From martindale.com -

Martindale-Hubbell Connected combines the largest global resource of legal contacts - more than one million lawyers and law firms around the world - with social networking technology to create a dynamic, authenticated network enabling corporate counsel and private practice attorneys to uncover new relationships and trusted referrals, share information and insights, and to identify their connection to firms, corporate legal departments or other lawyers.

To join Martindale-Hubbell Connected, lawyers can visit www.martindale.com/connected. We’ll see you over there soon!

LEVERAGE: Friend or Foe of Maximized Profits per Partner?

Admin — Mon, 30 Mar 2009 15:21:00 GMT

There has been a significant amount of debate on the subject of leverage over the past few weeks, and there appears to be some passion around the concept. Articles have attempted to show that it does not work, while others tout its value. My belief is that regardless of economic conditions, more leverage is better than less leverage if the end goal is generating the maximum possible Profit Per Partner ($PP).

In order to discuss leverage, it is important to establish some groundwork, so that we can build examples to illustrate key points.

All examples discussed assume 100% utilization unless otherwise noted. There are many variables in the leverage equation, so in order to keep things orderly and understandable some of the variables, such as utilization, will be kept fixed until it makes sense to free them up.

Leverage is defined in several ways depending on who is discussing it. For this discussion we don’t get into specific leverage ratios, so a standard mathematical definition isn’t required, however, we do need to establish the upper and lower extremes of leverage.

The lower limit of leverage (ie. the least leveraged) is a firm that is made up of one partner and no associates. The maximum Profit per Partner ($PP) that can be generated in this case is however much the one partner can bring in.

In order to determine the upper limit of leverage (ie. the most leveraged a firm can be) we need to consider the main constraint that limits leverage, managerial effectiveness. There are other relevant constraints that limit leverage but for now we are assuming that we can find associates to hire and offices for them to sit in. Managerial effectiveness is simply the measure of how many people each level at a firm can manage effectively while still delivering on their other responsibilities. In our examples we are assuming a partner can effectively manage 3 Sr. Associates, and a Sr. Associate can effectively manage 1.3 Associates and 1.7 Jr. Associates. When a firm is structured so that each level is managing their effective maximum number of subordinates and they have in place all levels that are applicable (ie. Partner, Sr. Assoc., Assoc., Jr. Assoc.), the firm is considered fully leveraged and will be generating the maximum possible amount of $PP.

Why is this true? Because each incremental non-partner employee will bring in some incremental $PP given that their billing rate is higher than their cost rate and utilization is at 100%. This structure has the maximum number of employees bringing in their maximum $PP contribution, which generates maximum possible $PP. This is the upper limit of $PP, the upper limit of leverage and I refer to it as the “Managerial Maximum”. If firm structure was viewed in the shape of a pyramid (shown below), it would be the size and shape that maximizes $PP. There would be no other size or shape (ie. structure) that could deliver more $PP and in fact, most changes to the structure would negatively impact $PP.

Note: There are a variety of reasons why this theoretical “Managerial Maximum” may not ever be reached, but it provides a yardstick to measure other potential structures against. Regardless, given 100% utilization, more Leverage will generate greater $PP than will less Leverage.

The above pyramid displays the organizational structure that will generate the greatest $PP given sufficient hours demanded to deliver 100% utilization. But what happens when hours demanded declines and the firm can no longer maintain 100% utilization? This situation is what many firms today are facing and there are two conceptual approaches to how they can handle this. In both approaches, firms are attempting to better match their supply of legal work to the newly lowered demand for legal work.

Approach #1: De-leveraging

This is the approach that most firms have chosen during these down times. In de-leveraging, a firm pulls work back from some levels (and reduces headcount) in order to keep other levels fully utilized. In this example and in reality, it is usually the case that the higher on the pyramid a fee earner is, the more $PP per hour they are generating. That is, a Sr. Associate will generate more $PP for an hour worked than an Associate will, etc. Because this relationship exists, the optimal approach to leveraging is to always have work done by the highest level in the organization and only push it down to lower levels after higher levels have reached capacity. And when de-leveraging, the optimal approach is to pull work back from lower levels first in order to keep higher, more profitable levels fully utilized.

Note: This exercise is ignoring the impact of billing rates on demand for hours and the fact that legal work is not always fungible, but in the interest of gaining a conceptual understanding in a perfect world, this is how a firm would roll out and roll back leverage.

In the pyramid below, the color of the lowest level has been changed to indicate the removal of work and the reduction in headcount. This approach to leverage, both increasing and decreasing will generate the maximum $PP possible, for the hours demanded, for the group of existing Partners.

As I have explained the optimal approaches to leveraging and de-leveraging, I have been very careful to emphasize that optimal leveraging will maximize $PP for existing partners. Earlier in this blog I had presented a theory that the upper limit of $PP would be achieved only when a firm was leveraged to its “Managerial Maximum” and any deviation from this point would deliver lower $PP. Therefore the approach that most firms are taking, de-leveraging, is taking these firms further away from their “Managerial Maximum” and as a result they are leaving incremental $PP on the table. Later this week I will propose a strategy (Approach #2) that will permit firms to match their supply of legal work to existing demand while also chasing the more profitable “Managerial Maximum” and will permit them to recapture some of the $PP they left on the table when they de-leveraged. In the meanwhile, I welcome your comments.

--Scott Nickerson

Scott is an analyst in the Redwood Think Tank.

Strategic Leverage: Just as Important as Ever

Admin — Wed, 25 Feb 2009 20:54:00 GMT

It is part of my job to make sure I am up to speed on all the economic movements of firms here and abroad as this economic downturn has not trickled down but headed full- fledged into the legal industry. Each day I read article after article about associate and staff layoffs at firms of various sizes and peer status. In addition I attend conferences and listen to Managing Partners, CFOs, and other C-level staff address how to combat this downturn through various actions used to cut costs. At most conferences there has been an inevitable line of presentations on reducing overhead along with addressing the headcounts of staff and salaried timekeepers. If I have to hear about controlling space planning and technology expenditures anymore I think my head might spin.

I speak with CFOs all the time and the prevailing theme is that budgets have been cut so much recently that the line is very thin on providing appropriate support to the primary operations of the firm. I am not saying that these measures of analyzing overhead aren’t important. In fact I agree they are and should be done on a consistent basis, not just when there is an economic downturn.

Most consultants I have spoken with all agree, if you had no strategic plan in place before the recession you are probably too late. Since many firms fall into that category they have fallen into an immediate cost cutting tactical strategy that almost completely focuses on the easiest things to cut (staff, associates, technology, etc.) In some cases the staff and associate cuts are valid in that the recession has produced a prime opportunity to do what was probably overdue in eliminating poor performers. For other cases it is the perceived method of addressing what aims to be a possible rough year or two. Unfortunately I feel that this method of reducing costs is shortsighted and evasive of one of the key detriments to firm performance within an economic downturn, underperforming partners.

Let’s address the shortsighted nature first. In the early 90s the legal industry felt the effects of a recession that lead to mass layoffs of associates and staff. As time passed and the economy improved those firms found difficulty in re-staffing properly for the growing legal work they were receiving. Gone were the associates who were already trained and ready to be the next leaders of the firm leaving a re-tooling effort that could have been avoided. By purging large numbers of associates it mortgages the future of the law firm, leaving a void to fill when the economy turns. This, despite the fact that when it comes to strategic leverage, a well levered firm can be much more profitable.

Strategic Leverage

Below is an extremely simplified view of the effects of leverage. Assuming 100% utilization and 1800 budgeted hours the impact of a shift in the non-partner to partner ratio of 1:1 to 3:1 clearly would reduce revenue, a point that is often used to counter the initiative of leverage, but the key statistic for the legal industry, Profits per Partner, increases. This is generally due to the higher percentage return that associates bring in. Another component that is not even captured in the model is a likely reduction in overhead. This sort of analysis should be done by firms on a consistent basis regardless of economy to find the right mix. You obviously need partners for reasons that anyone reading this blog should be aware of but leveraging is a true way to improve firm profitability. That fact reinforces the shortsighted nature of the removal of staff and associates for cost cutting purposes. You just cannot cut and cut all the way down into profitability.

Addressing the Economic Slowdown through Underperforming Partners

This leads into the other concerning trend I have seen. The legal industry is not focusing enough effort on underperforming partners. As mentioned by my colleague Bo in his forward looking view of leverage last week, smart firms are the ones who will take this opportunity to deal with underperforming partners as well as associates. But we’re just not seeing it here in the US.

I have often wondered why that is the case, but from many discussions with managing partners, the prevailing theme seems to be a feeling that by disturbing the “glue” it would show weakness and perhaps cause unrest among the other Partners. At face value I can understand, but the examples are before us where turning a blind eye to underperforming partners have contributed to successful partners actually leaving firms and causing those firms to fall into decline. I think the point is that subjectively most partnerships have a general idea on who is performing and who is not within the ranks. Technology and consulting can bring data to back those beliefs, but if nothing is done about the underperformers, the over performers may develop resentment as their pocketbooks get hit.

Within recent weeks we have seen several firms release partners in the UK. Linklaters just announced a reduction in their partnership as has Addleshaw Goddard. The Times Online recently spoke with Nigel Boardman one of the UK law firm Slaughter and May’s top partners. He had several great quotes that illustrate this need to address underperforming partners, “I don’t think it follows that a downturn in work means that you cut your associates…If you have to cut, cut your partner profits and even your partners…good lawyers are hard to find.” Mr. Boardman is addressing that thinning the junior ranks will leave firms without qualified talent as the years go by and that is not a good long term strategy.

Profitability of law firm is driven by several factors, but the seemingly elephant in the room (cutting underperforming partners) seems to be a factor that firms have difficulty addressing. It could date to years gone by when partners were considered untouchable. Yet the recessions of the past have changed that as has the changing model of the law firm. This recession is weighing on the legal industry and those firms that finally address partners and practice areas that have not been performing to firm standards and make the move to strategically shift their firm for the long term are going to come out ahead when the economy turns the corner.

--Russ Haskin

Russ Haskin is Director of Consulting for Redwood Analytics/Lexis Nexis.

A Different 2011 Scenario: Leverage Expands

Admin — Sat, 21 Feb 2009 01:01:00 GMT

Over at the AmLawDaily, Paul Lippe recently caught our attention here at Redwood Analytics with his sensational headline, ("Welcome to the Future: The 2011 Scenario and the End of Leverage,") but we're having trouble connecting the dots to get to Mr. Lippe's vision for the future of the legal industry.

Mr. Lippe's assertion: Leverage will be less prevalent, because the market value of associate work will be less than it is today. While partner contribution may be essentially the same as today, the declining value of the work of non-partners and other fee earners will reduce overall revenue for work between today and two years hence by as much as 20 percent.

We're not convinced that firms will devalue leverage for two reasons:

Mr. Lippe's hypothesis assumes that the legal work of 2011 will be identical to the legal work of 2008. We disagree.
What is described as the "end of leverage" is in actuality an extension of leverage. The current supply/demand dynamic between purchasers and providers of legal services does not mean the end of leverage. If anything, an expectation of reduced pricing power argues for more efficient planning and staffing of matters and a closer look at the structure of practice groups and law firms.

The Work of the Future

Whether Mr. Lippe is correct about the relative value of a piece of work today and in three years is largely irrelevant. For starters, today's premium work is tomorrow's commodity work. This is the case in most industries, and we don't believe the legal industry is an exception. While partners will appropriately be compensated for their "deep expertise, and judgment about the client, the law and best practices....." pricing power is as much about the type of law as the lawyer. This is at least in part a function of supply and demand, and will impact associate pricing right along with the partners for whom they are working.

We're hard pressed to believe that the nature of legal work will be static over the next three years, and that there won't be new types of work, new areas in which there will be an opportunity to become an expert, and areas of law in which the demand for expertise will return pricing power to the lawyer and the law firm.

Leverage Continues to be the Answer

Mr. Lippe points to four places that dollars will go instead of into the pockets of law firms:

1. "Clients will just flat-out spend less, drive harder bargains and get more for their money."

Clients driving harder bargains will force law firms to produce efficient work. That means good work at the lowest cost. Alternative pricing and deep discounting does not argue for a de-emphasis of leverage as a driver of profitability. While most firms are cutting headcount through associates and staff, we believe that the smarter firms are the ones who are taking this opportunity to deal with underperforming partners as well.

2. "Some work will go to outsourcers, whether onshore or off."

How is this not leverage? This form of leverage will continue to expand, and we acknowledge that there is work currently done by large full service firms that will be handled much more efficiently by other providers. We refer again to the fact that legal work is not static in nature. There is certainly work that is handled today by paralegals that was handled by associates 10 or 20 years ago.

3. "More work will go to contract lawyers or proto-associates not on any kind of partnership track."

This form of leverage too will continue to expand.

4. "Some associate time will get replaced by technology."

Nothing new here. No question, legal work will continue to evolve and technology will help firms become more efficient. This is the ultimate form of leverage.

Mr. Lippe asserts that "associate time is a pricing mechanism, not an indicator of value." While we don't disagree, it seems fairly clear that all fee earner time is a pricing mechanism within an hourly billing system, and that the market itself is the indicator of value. For Mr. Lippe and other proponents of the argument that law firms are on the brink of "the end of leverage" we're very interested to learn how firms will maintain, or grow, profitability without the use of leverage. While there may be a small decline in overall leverage ratios of large firms over the next year or two, we believe this will be the result of firms being slow to make hard decisions about partners. This, surely, must be temporary. At Redwood, we've studied the drivers of profitability across hundreds of firms, and found that leverage is far and away the second biggest driver of firm profitability (behind revenue per lawyer). We just don't see leverage diminishing in importance, regardless of economic factors or advances in technology. These things aren't new.

As for the current demand imbalance between law firms and clients: as a wise man once said, "this too shall pass."

--Bo Yancey

Bo Yancey is the Director of Professional Services at Redwood Analytics. He leads a team of consultants who provide practical advice to law firm leaders interested in using analytics to manage the business of law.

Watch This Space

Admin — Fri, 20 Feb 2009 00:35:00 GMT

Keep watching MorePartnerIncome.net, now sponsored by Redwood Analytics as part of LexixNexis, as we bring you more of the thoughtful content you've come to expect on the financial management of the law firm. We welcome your comments and ideas, and look forward to offering insightful financial management techniques and business practices for law firms.

How Law Firms Can Increase Income By $100k Per Partner In 1 Year

Admin — Mon, 25 Feb 2008 08:00:13 GMT

Measurement improves performance. If you measure the following 5 key performance indicators, your profits per equity partner will increase. These drivers are:

Leverage
Rate
Realization
Productivity
Margin

Leverage in the above model is based on head count leverage. Head count leverage is the ratio of equity partners to non-equity fee earners.

Rate in the above model is based on the effective billable rate for all fee earners. You get this by adding all fee earner rates and dividing the sum by the number of fee earners.

Realization in the above model is based on the amount of fees billed against what was worked. You get this from dividing the sum of all fee earner hours billed by the sum of all fee earner hours worked.

Productivity in the above model is the sum of all fee earner billable hours divided by the total number of fee earners.

Margin is net income divided by total fee revenue.

Here is the scenario. Your firm has 29 fee earners. Eleven equity partners, eleven associates/non-equity partners/of counsel, and seven paralegals. You have a total of 50 employees including equity partners. Your effective billing rate is $275, your average fee earner productivity is 1,690 per year, your firm writes down or discounts an average of 10% of work performed (90% realization) and your cost per head is $140,903.

Based on the above, profits per equity partner would be $462,255.

Now, let's play with the numbers. First, we'll look at rate. If we increase rate by 6.5% (which was the average rate increase predicted by respondents of the 2007 Law Firm Economic Survey by LexisNexis), factor in cost inflation (currently around 4.25%), total PEPP increases to $486,314, an change of $24,059.

Factoring inflation, the increase in income is not substantial. However, it underlies the importance of increasing rates annually to avoid devaluing your rate due to inflation. The secret to beating inflation, though, isn't rate; It is productivity. High productivity creates the gap (margin) between cost (which includes inflation) and revenue. The higher your margin, the less inflation hurts you. The lower your margin, the more inflation works against you.

So let's consider productivity. If you increase billable production by 100 hours per fee earner per year (a meager 24 minutes per day based on a 50 week year), PEPP increases to $527,505, a change of $65,250 per partner!

This is one way to make a substantial increase in income with very little change in your workload. In fact, you can likely make up the 24 minutes per day by just entering your time as you are doing the work. Tools such as MyJuris Mobility take advantage of mobile devices such as Blackberry devices to recover nearly an hour per day of productive time.

Finally, we'll consider leverage. If you add two non-equity fee earners (assuming you have the business to necessitate such growth), PEPP increases to $512,686; a change of $50,431 per partner.

Best performing firms, however, do well in several indicators. If you were to combine the above, the results would be striking. If you increased rate 6.5%, added 24 minutes a day to each fee earner's billable goal, and added two associates, you would increase income from $462,255 to $609,677, a change of $147,422 per partner. The effect of compounding factors works to increase the effect of each indicator on income more than you would by increasing any of the indicators alone.

Even if you only increased rate and productivity, you would increase PEPP by $90,733. Click here to download a sample spreadsheet (you must be registered to this site to access the downloads page) and work the numbers yourself. Use it to forecast your increases and measure your performance to reach your financial goals.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

Changing Law Firm Leverage

Admin — Tue, 12 Feb 2008 08:00:01 GMT

Much is said regarding the importance of leverage for increasing per partner income. However, changing headcount leverage is not an easy task. There are HR considerations (do new attorneys fit in, do they have the right attitude, will they stay for the long term, etc) as well as existing habits (partners not sharing work). However, based on the 2007 Law Firm Economic Survey from LexisNexis, if your partners can learn to share work, more immediate benefits are possible through billable hour leverage.

The way you get there is through increasing billable hour requirements. Does this mean more work? Hardly. How about just providing blackberries for your fee earners and utilize tools like Juris' Mobility Connector? According to a study from Ipsos Reed, blackberry users recover 54 minutes a day in productivity. That improves productivity by roughly 196 hours per year per fee earner.

Next is to put your partners to work - non-billable work. This year is a critical year for law firms. If in fact we are headed towards an economic down cycle, there will be tighter budgets for clients and that means price pressure on law firms. Relationships are key. Lawyers need to market themselves as not only experts, but trusted counselors. It can't be said enough that if your equity partners are not willing to get out of the office and maintain as well as create new relationships, non-equity partnership may be a better fit.

What to do with the work that is being left on the equity partner's desk? Give it to associates (or non-equity partners). Don't let them become idle! The 2007 survey shows that there is a strong correlation between associate productivity and per partner income. If you have associates already billing at or near 1,800 hours, then it is time to hire new associates. If you want to push that number to 2,000 that is fine, but you don't need to work that hard to make your target profit.

Assuming you have the workload to justify new hires (including taking the extra work from partners who are out building and maintaining relationships), increasing head count leverage is your best bet for increasing per-partner income.

In the above scenario, based on 29 fee earners working 1,610 hours a year, profit per equity partner totals $284,398. Below, just by adding two associates and increasing hours a mere 12 minutes a day (50 hours per year per fee earner), per equity partner profit increases nearly 20% to $340,418.

Just think what the above would be if you gave fee earners blackberries and you recovered an hour per day from each of them utilizing tools like MyJuris Mobility.

Head count leverage is a valuable tool for increasing income but is dependent on workload. If equity partners are not willing to pass work to associates and get out of the office to build and maintain relationships, your firm is leaving both scalability, money and eventually your own talent for other firms to take.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.