May 30, 2007
Handling Complexities of Law Firm Leverage
To understand how the economics of your particular law firm are changing as related to staff leverage, compute and track more than one leverage number:
- Snapshot leverage: The snapshot metric consistently measures the ratio of associates to partners at the same time of year to determine the direction of movement in leverage, i.e., calendar quarter, end of year. For this purpose, the only adjustment should be to convert “part-time” associates to full-time equivalents.
- Performance leverage: The performance metric converts all counts from the end of period numbers to full-time equivalents for the period. For example, a new associate hired at mid-year and in training for three months would be .25 percent of a full-time associate for the year, whereas under the snapshot measure, the associate would count in full.
- Hours leverage: Hours leverage, like the snapshot metric, is a period computation. In this case, the ratio being computed is the ratio of associate hours to partner hours. This computation is self-adjusting for part-time and recently hired fee earners and also is impacted by utilization. Underutilization lowers the ratio and improved utilization increases leverage without any increase in operating cost.
Why is leverage an important management tool? Without leverage, partner income is limited to the income-producing “work” capacity of the partners. Leverage increases partner income by shifting a portion of the income-producing capacity from the work done by the partner to the work that the partner can achieve through “delegation and supervision” of others.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income contact Juris National Sales Center: 877/377-3740, e-mail info@juris.com or go to www.Juris.com.
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Filed under Leverage by Tom Collins
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