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The Limits of Efficiency in a Law Firm

"Lawyer billing is a calculation performed to measure the productivity of a law firm, measuring how much a firm has billed and how many lawyers have contributed to generating that billing"

In 2016, the highest number of billing by attorney from a firm in Spain yielded a result of 431.000 euros. Four years later, this figure had already risen to 547.000 euros. In just four years, an increase of 27%. What does this figure mean and why should we pay attention to it?

The billing per attorney is a calculation performed to mediate the productivity of a law firm, measuring how much a firm has billed, and how many lawyers have contributed to generating that billing. The same calculation can be performed, in a more technical way, if the data observed is the average value of the hour billed by the firm and the average of the hours billed to clients by each lawyer.

In addition to the growth experienced in this indicator, there is another trend to take into account. The firms with the best figures in this indicator have had a higher growth in this ratio than the firms with a lower figure, according to the data published annually by the sector's press.

To delve into the effects of this increase in productivity, we have to look at the two parameters affected. One has to do with the type of work that is done. Another, with the hours dedicated to those jobs. The strategy of each firm makes it possible to improve on this indicator (which ultimately improves the firm's profitability and profit) in one or both of the variables. In the job type variable, the limits are set by the market with the amount of work available and what you are willing to pay for each type of work (the greater the value generated for the client, the greater the willingness to pay higher prices). In the second variable, the one related to the hours, everything related to the Talent management in the signatures. And relating the two factors, the market establishes how it wants professionals to provide this serviceHence the difficulties in establishing internal limits in everything related to the integration of professional and personal life.

There are two other factors that may intervene in the increase experienced in this indicator: the technology, which optimizes many routine processes and work of the lawyer, and the support professionals, which free up hours of work for lawyers by performing tasks much more efficiently.

Each variable generates its own stresses, to take into account when managing a firm. Trying to exclusively search for only the work with the highest value can lead us to enter a market niche where there is not so much cake for so many competitors. Excessively increasing hours spent with clients can lead to loss of talent. Focusing exclusively on technology can lead to addressing only highly standardized issues. And a disproportionate increase in support professionals reduces the margin if we fail to scale costs well.

So far, firms with a high number in this indicator have shown to manage these tensions well and their results show it. Efforts to retain the best talent increase year after year, not only from the salary improvement, also with learning y participation in commissions that manage to capture your professional interest. And it is possible that this will be the great challenge of the coming years, attracting and keeping good professionals, aligned with the firm and satisfied with the work they do..

This management has been complicated by remote work, initially forced in March 2020, and optional in subsequent months, which will have to be incorporated into the already complicated management of all the elements mentioned above. The undeniable positive effects short-term (eliminating travel time) make it difficult to see clearly the possible negative effects in the medium and long term in the culture of the firms and in factors such as learning between lawyers, teamwork or productivity with which this article began.

It is time to precisely define the strategies.

Image by Miguel Ángel Pérez de la Manga Falcón

Miguel Angel Perez de la Manga Falcon

Business consultant in law firms and professor of management of professional services firms at the University of Navarra. Member of the Academic Council of Fide.

Article originally published in the Blog Fide in the withfideinitial

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