Profitability
Improvement
The limited
availability of associates and the mobility of partners are driving up the
costs of operating law firms. Many market segments cannot absorb the
resulting rate increases. Law firms must reconcile the need for greater resources
with a traditional hourly billing model, tied to expense structures and
delegation practices that need updating.
|
|
re-casting
rate architectures
|
|
|
re-building
leverage
|
|
|
responding
to requests for proposals
|
|
|
pricing
complex work
|
|
|
developing
non-hourly pricing
|
|
|
identifying
non-traditional expense reductions
|
|
|
developing
work intake and allocation protocols
|
For further information
on Profitability Improvement, contact Richard
Stock at rstock@catalystlegal.com
(416) 367-4447, extension 1.
Articles on Issues
Affecting Profitability
"New Ways to Keep Client
Costs Down"
Lexpert, Volume
8, Issue 1, October 2006
There is a measurable
difference in the world view of law firms and of law departments when it
comes to pin-pointing the sources of friction between them. Corporate and
institutional law departments must identify the best configuration of
increased volumes, targeted leverage, and expense reduction as a way to
reconcile cost reduction in legal fees with increased profitability for law
firms. Three case studies suggest that adjustments to law firm business
models and to law department buying habits do contribute to mitigating much
of the friction in the economic portion of the relationship between law
firms and their clients.
"The Psychology of Hourly
Rates"
Lexpert, November
/ December 2005
Workload
re-distribution and rigorous workflow management in law firm practice
groups will allow hourly rates to de-compress. Up to 30% of work done by
many partners could be delegated to junior partners and senior associates.
With more than 90% of all legal work billed on an hourly basis, law firms
have much work left to do in over-hauling rate structures, work intake and
allocation protocols, and in customizing their pricing in relationships and
service-sensitive areas of practice.
"Delegation as a
Partnership Skill"
Lexpert,
September 2005
Effective delegation of
legal work by partners is essential to ensure associates become technically
proficient. Enough delegation will create a need for partners to secure
more work from colleagues and accelerate initiatives to secure more work
from clients and prospects.
"A Closer Look - Five Steps to Better
Profitability"
National, January
/ February 2004
Five steps to improve
profitability are to: (1) focus on finding out the requirements for the top
25 clients in the firm and the top 5 clients for each partner; (2) quantify
and describe the billable work for each category of law and revise work
intake and allocation protocols; (3) ensure cash in is 90% of standard
rates for an average of 1,600 hours per fee earner; (4) reduce
infrastructure and staff costs; and (5) review the rate architecture for
the firm.
"The Pricing Puzzle"
National,
December 2003
There is elasticity in
billing rates across clients in the same reference market. Some clients
will gladly pay up to 20% more for the same work done in one firm compared
to another. Special relationships between partners and clients will enhance
or inhibit pricing increases. The article raises questions to help firms
find the right answers.
"We're Busy, But We Could Be Busier"
Lexpert,
September, 2002
Looking at trends and
averages for activity levels camouflages the systematic problems affecting
many law firms across the country. Six problems are presented. Several
initiatives are then proposed as a partial antidote: cross-border clients,
pursuit of clients in unstable economic sectors, multi-year agreements with
select clients, reduced infra-structure costs, and a re-consideration of
the business model.
"Choice Determines
Direction"
Lexpert,
February, 2002
Seven initiatives are
available to law firms to change their business model: a critical mass of
work from preferred counsel, small and client-specific legal teams,
significant delegation by partners, use of qualified paralegals, case plans
and budgets, lower production costs, and less reliance on the hourly
billing method.
|
