A fee budget war story (and more) from the trenches…

Lawyer A worked for over 2 years fairly ineffectively in a field of work in which he struggled to get reasonable file velocity in the moderate level of files he was responsible for, and eventually had to be transferred to another section of the firm, on the same pay, but with the different work type having an inherently lower ability to generate fees, and hence was allocated much lower fee targets.

Suddenly in second month of the new Financial Year the lawyer has a fee share month 400% of current budget…impressive huh?

No, not really…the new team leader in the old team had moved a lot of files formerly under the control of Lawyer A along and got them settled, and funds had been received from Insurance companies, so invoices could be raised against those funds held.

The completed files had been slow to reach settlement, and the lawyer A had not done much work each day while on that team, but had built up a whack of unbilled WIP over the years and many of the files were invoiced with a write up of 25%…so Lawyer A was finally credited with fees shares that should have come into the firm well back in time!

Given that the unbilled WIP balance was north of $400,000, substantial fee shares will continue to flow from that pool for some time. N.B. The newly-minted work being done by Lawyer A can be progressively invoiced every month.

Let’s crunch some numbers…

Even 5.5 hours a day legal work on client files at $365/hour before write-ups or write-downs for 44 weeks a year is around $440,000 X 2 years minimum is $880,000.

An appalling 50% productivity on the target 5.5 hours would still add up…the potential WIP before writing up or down would be $440,000.

Knowing what reasonable average days duration is in these types of matters is important to fee expectations and cash flow projections.?

Two more critical pieces of information must matter to law firm managers charged with looking after clients, in terms of fees invoiced and cash flow, two vital piers in achieving the firm’s business plan such that its people can be well looked after...and the cycle can repeat.

1. Is each proper step in each matter being taken when it ought to be…that matters to clients, and it matters to the firm. Optimise file velocity while ensuring work quality and clients’ outcomes.

2. Do the team members working on this type of work have enough to do, and are they actually doing it in the volume reasonably expected?

“Windfall” good invoicing many months belatedly down the track does not assist with profitability or cash flow in the way it should.

The time to plough the fields, sow the seeds, and water the seedlings is today, and every day of the working week.?

That done, you should have happy clients, and you should have every chance of being profitable and with good liquidity. It’s hardly rocket science.

Robservations…Conversations with team members about what they need to change to meet your reasonable expectations should?never?be difficult conversations. Why not?

Because they are the conversations that you, and they, should be delighted to have because they will result in clarity about what they’re being paid to do to help the firm achieve its business plan that they’re not currently doing.?

They can begin to fix the problems with your assistance, or become focussed on an awareness that they just don’t have what it takes, and would be much happier elsewhere doing something else.

The sooner you identify the problem, and hold the useful conversations, the sooner everyone can move on to where they want to be, and need to be.

Time to consider which pieces of information you need to start holding these types of exciting conversations??

If you already have the information, have you scheduled the time and place for the first critical step in the dialogue that will sort everything out for all concerned?

P.S. Readers who have spotted that the firm could improve the way it allocates fee targets in circumstances such as those in this war story, you’re absolutely correct.?

With matters that take a particularly long time typically, and can only be invoiced at the end, I have seen situations where none of the team members who carried out 95% of the work on the file even worked at the firm when payment was received.?Hardly surprising when the engagement in the matter was 11 years earlier!

Even in quite small firms there are many balls in the air to be managed at any given time, so good processes are needed, they need to be well communicated, and following the processes must be non-negotiable.