Make More Rain : leverage, hr

Spinning Increases Law Firm Income

Admin — Fri, 31 Aug 2007 17:24:00 GMT

Allison Wolf’s post, the fine art of delegation, is an insightful interview with Adam Pekarsky about the influence of leverage and delegation on partner income. “Spin” is the term Fraser Milner Casgrain LLP uses for work ones pushes down in the organization.

According to Wolf, Pekarsky put it this way: “If partners don’t delegate the lower level work then it’s like driving a formula one race car around a Safeway parking lot.”

Too many law firm partners hoard work to the detriment of long term growth in per-partner income. Wolf makes it clear:

A lawyer who spins down the work keeps the most interesting, highly paid work for his/herself.

The lawyer who spins doesn’t have to write down bills and gets paid at a higher rate.

Another clear message is that partner compensation should emphasize the sum of partner production and spin.

I would expand on Wolf’s message by adding that a firm’s compensation plan is often the reason Why Partners Hoard Work. That, in turn, leads to poor leverage, underutilization of associates and high turnover.

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Best Law Firm Practices for Increasing Leverage

Admin — Fri, 16 Dec 2005 20:51:21 GMT

“Leverage or not to Leverage?” seems to be the question now days.

It really is pretty simple. Leverage is good and works when it is “working”. You have to have enough work to keep them “working” and they have to have enough skill to do the “work”. If your leverage isn’t “working” then you either have too much of it or the wrong kind. If you are turning down business or not looking for more business because you are doing work others could do, then you have too little of it - leverage that is.

Bruce MacEwen in his Blog, AdamSmith,Esq.com, does a great job in exploring the relationship between leverage on one hand and utilization on the other as he reports on an article in The Recorder. Leverage and under utilization leads to lower partner income. High utilization together with high leverage results in high partner income. People without work to do are a cost not an income source.

The list below is a reminder of steps that you can take, among others, to increase leverage and improve per-partner income.

Steps for Increasing Leverage

· Reduce the number of partners through retirement and attrition

· Change the firm’s compensation plan to favor supervision over working credit

· Raise partnership criteria

· Consider classes of partners

· Create or expand layers (titles) of permanent leverage— paralegals, staff associate, senior associate, executive associate, senior council, non-equity partners, etc.

· Improve recruiting to hire more associates and paralegals

· Increase lateral hiring to add experienced associates

· Invest in a better business system to provide business intelligence information that facilitates management of associates and paralegals

The approach to raising per-partner income should be done with long-range considerations. First, determine how the firm stacks up against benchmarks such as those available from Altman Weil surveys, http://www.altmanweil.com.

Fix the areas where you fall short.

The first item to consider should always be improved marketing, especially to existing clients. The second item is adjusting leverage to fit the nature of the practice. Third is to engage in structured planning to identify the main things the firm should concentrate on to improve the business over the long term. Fourth is to improve management with focus on the law firm business model - leverage, utilization, rate, realization and margin. Doing so requires a sound business system that provides the business intelligence and tools to keep the firm in line or ahead of its peers at all times.

Best Law Firm Practices for Increasing Realization

Admin — Thu, 15 Dec 2005 19:45:13 GMT

The approach to raising per-partner income should be done with long-range considerations. The first set is to determine how the firm stacks up against benchmarks such as those available from Altman Weil surveys, http://www.altmanweil.com. Concentrate on the areas where you fall short.

The list below is a reminder of steps that you can take, among others, to increase realization and improve per-partner income.

Steps for Increasing the Firm’s Realization

Implement and enforce client intake standards
Pursue alternative fee arrangements that let the firm benefit from increased efficiency and technology
Shorten the billing cycle to speed up collections and reduce bad debts and adjustments
Pre audit bills against engagement standards (rules) to eliminate bill rejection and reduce adjustments by corporate and financial clients
Establish controls over unilateral write downs during the billing process—so-called invisible expenses average $31,000 per attorney per year
Improve training to reduce write-offs
Centralize follow-up on accounts receivable
Improve collection tools and procedures
Set goals and hold people accountable
Invest in better business systems to speed up billing, track adjustments and write-offs by those responsible, automate engagement rule compliance and manage the collection function.