In my recent Law Management Section webinar "Using Financial Efficiency to Reduce Costs and Increase Profit" I asked the audience how many chargeable hours per year their firm expects from its fee earners. Over 75% of the audience indicated that their target was over 1000 hours per year.
This was entirely consistent with the results of yet another benchmarking survey which showed that in provincial firms the targets for fee earners average approximately 1100 chargeable hours per year, but that the actual hours achieved are typically around 80% of this target. This provoked significant thoughts about the meaning of targets – are they aspirational or are they imperative, and would fee earners know the difference?
Aspirational or Imperative?
This reminded me of a situation where one of our clients was operating both kinds of targets simultaneously. Due in part to the pressure of work, he had allowed himself to become rather overweight and so had agreed with his wife that he would target of weight loss of one stone in three months. In fact he fell a couple of pounds short of this but still managed to lose 12lbs and everyone was delighted that he looked and apparently felt so much healthier. This target was clearly aspirational.
At the same time everyone in his firm was operating to targets for both chargeable hours and billing and we had calculated that in order to pay partners drawings the billing had to be at least 95% of target. This target was clearly not aspirational but an economic imperative – and yet there are significant numbers of fee earners who felt that despite falling short of target they had actually done quite well. Not surprisingly some of the partners were less happy.
I spent some time going through historical surveys to see whether the levels of performance against targets have varied over time-and the answer seems to be that significant underachievement is a regular feature. This poses the question whether the targets being set are realistic or whether there is a tolerance of underperformance – or whether, perhaps, firms fail to communicate properly the underlying rationale behind the targets. After all, if we end up in a situation where only just over half of a fee earner’s time ends up being chargeable, we have to question whether all of the resources in the firm are really required.
I also took part in another webinar (this time in the audience) covering performance management in a range of professional services and was impressed by a perhaps subtle, but to my mind important, change of emphasis. The essence of the presenter’s point was that we should recalibrate the way we express performance to highlight the amount of time which is UNPRODUCTIVE rather than the amount of time which is PRODUCTIVE. His point was that if we set someone a target to make 90% of their hours chargeable, if they achieve 88% (i.e. a 2% shortfall) it seems as though they almost got there. However if we express it by saying that their target is to have no more than 10% of their time non-chargeable, and they end up having 12% non-chargeable (the same 88% chargeable), then they can be seen to have wasted 20% more time than was allowed for. In terms of presentation this is much more significant and allows the firm's management to focus more attention on what went wrong.
It has been apparent to us for some time that the two key metrics which most determine firms’ profitability are utilisation and realisation – i.e. how many hours we are able to charge for and how much we are able to charge for them. We have seen a number of examples in recent months of slippage in both utilisation and realisation rates, and in some cases it is clear that not only the fee earners, but sometimes the partners are not conscious of the consequences of the shortfalls. There have clearly been some failures in communication.
Perhaps a change in focus towards highlighting the potential costs of unproductive time might increase the awareness of how damaging it can be and ensure that individuals and firms can reduce waste and increase their productivity.