I am the owner of a six-attorney firm in the western suburbs of Chicago. There are five full-time associate attorneys working with the firm. Two have been with the firm over fifteen years, two over ten years, and one seven years. All are being paid salaries in excess of $100,000 per year and none are even close to generating $300,000 or more in working attorney fee collections per year. Their billable hours are dismal as well. While I have a 1200 annual billable hour expectation none are meeting that expectation. My income is suffering as a result. In addition to salaries they sometimes receive a discretionary bonus. I am at my wits end. What are your thoughts?
First of all I think that a 1200 annual billable hour expectation is too low and should be more like 1600 annual billable hours. For years the national average annual billable hours reported in surveys has been 1750 and this was the expectation for many firms for many years and still is for many firms. In the past few years, due to lack of work and other factors, some firms have lowered the annual expectation minimum to 1600. Litigation firms, especially insurance defense firms, currently have minimal expectations ranging from 1800 to 2000 hours. Firms that represent individual clients such as general practice firms, family law firms, and estate planning/administration firms currently have minimal expectations ranging from 1400-1600.
It looks like you are not enforcing the 1200 annual billable hour expectation that you have. However, you need to look into your situation and determine the reasons. It could be that they are not putting in the work because the firm does not have enough work for them to do. Look into the following possible causes of their low billable hours and take corrective action:
An approach that many firms are taking is to incorporate performance bonuses such as the following to motivate additional production. Usually these are on top of a base salary. Here are some examples:
Some firms have lowered base salaries when incorporating new performance bonus systems when the current expectation is far below expectation. Other firms are terminating under-performing associates.
Many firms are finding that many associates in small firms that have salaries of $100,000 or more are content and are not motivated by the bonuses available to put in the time to earn the bonuses. Work life balance is more important that earning additional income. The bonus systems work better for associates that are still hungry or have lower base salaries.
Firms that have had the most success in getting associates past the “entitlement mentality” are those that incorporate goal setting, accountability, and individual twice a month coaching meetings with associates in addition to the performance bonuses.
John W. Olmstead, MBA, Ph.D, CMC
I am the owner of a five attorney personal plaintiff firm in Wheaton, Illinois. Our practice is in its 25th year of practice and we are 100 percent concentrated in personal injury. Over the years we have been very successful but over the last three years we have been struggling and revenues and profits have been flat. It is getting harder to get good cases and harder to settle and move the cases that we have. We need to approach our business differently. I would appreciate your ideas and thoughts:
We are hearing this question quite often and have provided some thoughts in past blogs and articles.
The majority of our PI law firm clients are advising that they are having to work much harder at getting clients and investing more heavily in marketing – both time and money. PI firms were feeling the most of these challenges before the recession. However, the recession may accelerate the pace with which law firms reevaluate existing processes and consider new business models. PI firms may want to begin by:
1. Develop a firm strategic plan and individual attorney marketing plans which include aggressive network/contact plans for past clients, attorney referral sources (non PI attorneys), attorney referral sources (other PI attorneys), and other referral sources.
2. Evaluate the feasibility of adding an additional practice segment to reduce the level of risk in the case portfolio and reduce cash flow variability.
3. Reduce case portfolio risk and improve case profitability by implementing a case intake system whereby all new cases over a specified level of projected case value are reviewed and approved by the partnership (or a client intake committee) in order for the case to be accepted by the firm. In other words – don't let one attorney expose the entire firm to either excessive levels of case risk or case investment (time and client cost advances) without other partners having a say on the matter.
4. Analyze the profitability and return on each case and ascertain what can be done differently on future cases. Metrics might include effective rate, return on LOADSTAR, dollar case profit after allocation of all appropriate firm overhead, etc.
5. Review and measure present marketing investments (time and money) and determine what is working and what is not. Reallocate resources if appropriate.
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John W. Olmstead, MBA, Ph.D, CMC