Driving Productivity in Law Firms Andrew Allen November 2017

Application to “a law firm” Impact of model variables Overview Profit making model Explanation of model Application to “a law firm” Impact of model variables Improving productivity Practical MI pkf-francisclark.co.uk

Profit making model GEARING HOURS RATE RECOVERY MARGIN X X X X

Profit making model GEARING HOURS RATE RECOVERY MARGIN X X X X G5 Team size per EP Productive time Average rate? Billing skills Overhead management GEARING HOURS RATE RECOVERY MARGIN X X X X G5 G1,150 £130 80% 23%

PEP £137,000 Profit making model GEARING HOURS RATE RECOVERY MARGIN X Team size per EP Productive time Average rate Billing skills Overhead management PEP £137,000 GEARING HOURS RATE RECOVERY MARGIN X X X X G5 1,150 £300 80% 23%

Profit making model –Future ? Team size per EP Productive time Average rate Billing skills Overhead management GEARING HOURS RATE RECOVERY MARGIN X X X X G5 1,200 £130 90% 23%

PEP £161,000 Profit making model GEARING HOURS RATE RECOVERY MARGIN X Team size per EP Productive time Average rate Billing skills Overhead management PEP £161,000 GEARING HOURS RATE RECOVERY MARGIN X X X X G5 1,200 £300 90% 23%

Profit making model Chargeable hours? (and raised recovery to 90%) 52 weeks less 6 weeks holiday x 5 working days x 5.0 hours per day = 1,150 PEP = £155,000 (PEP increase = 13%) 52 weeks less 6 weeks holiday x 5 working days x 5.5 hours per day = 1,265 PEP = £170,000 (PEP increase = 24%) 52 weeks less 6 weeks holiday x 5 working days x 6.0 hours per day = 1,380 PEP = £186,000 (PEP increase = 36%)

Profit making model Average rate and hours increased? (80% recovery retained) Increase average hourly rate from £130 to £150 creates PEP of £159,000; an increase of £22,000 on the base model (16%) Increasing average hourly rate from £130 to £150 AND increasing chargeable hours average to 5.5 hours per day creates PEP of £175,000; an increase of £38,000 on the base model (28%) Increasing average hourly rate from £130 to £150 AND increasing chargeable hours average from 5.0 hours per day to 6.0 hours per day creates PEP of £190,000; an increase of £53,000 on the base model (39%)

Profit making model – Practical actions? Based on a typical law firm…. Actual Fees per fee earner in 2017 = £120k 20 Employed fee earners plus 5 equity partner fee earners – so 5 fee earners per partner PEP achieved £130k Increase fees per fee earner £5k to £125k So; every fee earner on average increases their recovered fees by £5k with no other additional costs i.e. from productivity improvements Extra 125k of fee, no additional costs, divided by 5 partners Increase in PEP = £25k (19%)

Profit making model – Practical actions? Achieving extra £5k on average? (Equivalent to £20 per working day per fee earner) Fee negotiation / scoping Time recording / capturing improvements Controls over extra service delivery 2nd partner / fee earner reviews of write offs Setting chargeable hours and recovery rate targets …..not necessarily by doing more work! (What would a £10k improvement take to achieve PEP growth of £50k? )

Influencing the model – Practical actions? Chargeable hours Partner driven behaviour Budgets & MI; reviewed Time management training Time recording processes Software advancements Reward structure Rate and recovery Partner driven behaviour Budgets & MI; reviewed Fee negotiation training Second review of write offs Second review of budgets Client communication Work allocation (margin) Reward structure

Profit making model – MI provision Partner Driven Regular MI (all month and ytd vs Budget) Chargeable hours Fees Recovery Debtors WIP Ensure the focus is a “recovery culture” not a hours culture

Profit making model - Summary Your role as partners….. Get good people Record time (keep them busy) Think about pricing and billing the time Get better at bringing in new business

Regulatory update and outlook SRA AR Phase 3 Provision of banking services VAT on disbursements pkf-francisclark.co.uk

Contact Andrew Allen Andrew.Allen@pkf-francisclark.co.uk

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