Fee-earners at SME law firms don’t cover their costs until November 29.
Research by the Law Society in their annual financial benchmarking report, has found that just over 90% of the fees generated by fee-earners at small and medium sized law firms were used to cover their costs. In other words, during a calendar year fee-earners at these smaller law firms wouldn’t earn enough fees to cover their costs until November 29th, which in the words of the Law Society suggests, “there are indications some firms are struggling”.
It wasn’t all bad news though. The report also illustrated that a law firm of 20 fee-earners, with a charge out rate of £175, recording the average of 1,100 chargeable hours in a year, could improve profitability by almost £40,000 with just a 1% improvement in productivity. This increase represents just one additional six minute unit per fee-earner per day.
Where do fee-earners at law firms find that additional 1%?
Finding six billable minutes per day, per fee-earner, might sound like a tough ask for many smaller law firms. After all, fee-earners are some of the busiest individuals in the professional services world. Nonetheless, despite common misconceptions, the Law Society also found that it was rare for fee-earners to record more than four chargeable hours a day, leaving them with a lot of time spent on more administrative tasks.
If a study conducted by Samsung is anything to go by, a proportion of this time, is likely to be lost to a rather unusual suspect – technology. In 2017 Samsung found that 91% of workers at SMEs lost time when they had to come to the rescue of their colleagues who had fallen foul of IT issues. What’s worse, they discovered that 63% of these individuals were spending between 15 and 45 minutes every day helping their colleagues.
All in all, this means that across the course of a year, it is likely that many law firms, who need to find an increase of just 1% productivity from their fee-earners, are losing days, if not weeks, to issues with their IT.
Turning 15 – 45 minutes into just 6.
Given the above, it’s fair to suggest that law firms should be aiming to reduce the time fee-earners spend on IT issues, so they can spend it on billable hours instead. They need to save up to 45 minutes per day, and bill clients for just six of those minutes, but how?
Law firms should start by simply asking their fee-earners, what problems are getting in their way. What issues do they have with technology that costs them time? Who is asking them for help and what issues do those people need help with? Almost all law firms that ask these questions, will find that there are some glaring inefficiencies with the existing technology within their office.
Perhaps, it’s something large, like recurring downtime, but it might be something small. For example, it might be difficult to transfer phone calls, with individuals regularly dropping them, wasting time calling the customer back, apologising and restarting the conversation from where it left off. Individuals might need to wait a long time to access or download online resources, or their systems might require updates during the working day. It might be something you’re used to dealing with, but haven’t addressed the root cause of yet.
Law firms should look to create an environment in which their employees can be honest and open with their feedback without fear of reprisal. We know such a small increase in productivity is all we’re after, so employees should be encouraged to share their ‘niggles’ – those issues they may deem too small or insignificant to even raise. After all, whilst it may be something small that costs just a couple of minutes per day, when extrapolated out across the entire company, over the course of a year, the time soon stacks up.
Ensure hardware isn’t going to cause a problem.
Employees should be able to provide good feedback in relation to the issues that cause them problems, but feedback of this nature is very reactive. Reacting to and solving issues is good, as it allows you to save the time required to increase that productivity, but it will only get a company so far. To really ensure a business pushes on in this regard, they must be proactive and to do this, they must plan for the future.
Law firms in particular will have a great deal of IT assets throughout their organisation. Whether it be computers, laptops, mobile phones or the hardware that makes up the network, there will be a lot of key components involved, that your fee-earners rely on everyday to make your organisation money. Even if you’re utilising cloud computing, there will be an element of physical hardware somewhere in the business. The productivity of your fee-earners is directly influenced by the performance of that hardware, so if it is under performing, so too will the fee-earner.
One easy step to ensure that this isn’t the case is to frequently review the life span of hardware, making sure, you don’t exceed it where possible. Depending on the hardware, the usage and how well it’s looked after, kit will tend to last for three to five years. After this time performance will start to drop and in the worst case scenario, it might stop working all together.
Replacing hardware frequently can be costly, so it’s best to stagger it around the business. Don’t buy new hardware on a set date every three to five years, but stagger it around the company and schedule physical upgrades around a five year cycle. Ultimately, you don’t wait for your fee earners to complain about their slow laptop. You want to replace it before it gets to that stage, so you’re not hindering their performance.
Find out more: Managed IT Support from Acronyms.
Be prepared for the worst to happen.
If COVID-19 has taught us anything, it is that the proverbial does, on occasion, hit the fan. It might be extremely rare, but it can and does happen. Those law firms that have fared the best during this pandemic, are those that were prepared for it. Did they know that a virus was going to spread around the globe? Or course not! However, they did expect something to go wrong, so when it did, they weren’t left wondering what to do.
Disaster recovery and business continuity planning should be a large focus for law firms and for the most part they are. However, consideration is rarely given to technology. When businesses were forced to work remotely in March of this year, many legal practices were left wondering how their staff could do so in reality. At the same time, so was every other business in Europe that had failed to prepare. This resulted in a shortage of laptops, which inevitably caused problems for many businesses adjusting to the demands of remote working.
A disaster, severe outage or regular downtime is a big limiter on your fee-earners. If in March you had to buy them a laptop so they could continue working, only to find out there weren’t any, their productivity took a hit. With their costs theoretically not covered until November this could have severely impacted on the profitability of the entire business. It isn’t always big things though that can cause these issues. What if your fee-earners couldn’t access the data they needed easily, didn’t have telephone numbers or email addresses they required or had to spend more time helping colleagues with their issues? The six additional minutes per day they require, would be growing, not decreasing.
Given that as discussed around 90% of the fees earned by fee-earners in legal firms go to cover costs, these big events, or ‘disasters’ could have a huge impact on the success of your business. Your legal practice should be prepared for these events and similar circumstances such as cybercrime, so in any eventuality the productivity of your most crucial employees doesn’t take a further hit.
Find out more: Disaster recovery services from Acronyms.
Invest in new technology where possible.
The legal industry is one of the oldest in the world, and is nothing, if not adaptable to change. It has survived for hundreds of years, because it has changed with the world around it and the development of new technologies. Those law firms that continue to flourish will be those that adapt to change the best and continue investing in new technology.
Cloud technologies present the industry with huge opportunities. From cloud-based practice management software to means of file transfers and client portals, cloud-computing can speed up traditionally slow administrative tasks, whilst remaining secure. Self-service functionality for clients, can not only reduce the time spend by employees chasing clients, but improve customer service, with many individuals used to performing simple tasks themselves, as shown by the boom in mobile and internet banking.
Law firms will naturally be keen to stick to their traditional roots. It promotes heritage and exudes confidence from clients that require the utmost in reliability and service given the nature of the business. However, it shouldn’t be protected at the cost of progression. A successful practice will keep one eye on the future, and will always be looking for new ways to improve the productivity of their law firm.
Improving productivity can often seem like an insurmountable task, that’s hard to measure, but this is often because companies are looking to make big, drastic changes. That just isn’t required. Look for the small opportunities across your law firm, tweak them and continue to improve. A change needn’t be large, to have a huge impact. Just six minutes a day, is more than 25 hours a year, which is time your fee-earners should be using to increase the firm’s profitability.