Reduced work days in a law firm with no pay reduction...brilliant productivity improvement strategy or downright scary?

Readers will have noticed a lot of chatter in the Profession of recent times about firms introducing reduced days in the working week, without reduction in pay, reporting improving mental wellbeing, leading to massive increases in productivity.

I admit to being fascinated!

Team members matter, and they’re all that matters, so their mental wellbeing is hugely important. No argument there from me.

My concern is that a law firm that is not financially healthy cannot look after its people long term, simply because it isn’t viable and without significant well-informed changes won’t be around long term.

Knowing how few small-medium legal practices actually make genuine profits, and how small profit margins are in those where there are profits, I’m interested in how the numbers stack up.

While huge productivity improvements from improved team member wellness is very appealing as a concept, this question keeps forcing itself to the front of my mind. “How does one get the oft-touted productivity improvements of over 100% from improved peace of mind”?

The well-honed cynic in me, or is it the legal training seeking a bit of good evidence, wonders if the productivity prior to the change in working week was seriously poor, and if so, were there not other answers more useful than increasing already very reasonable pay 20% by lopping a day off the working week?

If we look at very conservative numbers of say 7.5 hours a day worked for 5 days, we have a working week of 37.5 hours, during which an employee’s obligation might reasonably be to deliver, in return for their remuneration and benefits, 37.5 hours of “work”...all work, not just properly invoiceable and collectable work on clients’ legal matters.

Doing only that, effectively, would fit many peoples “very productive” definition.

A four-day week at 7.5 hours a day is 30 hours, so being very productive, or just fully productive, for those 30 hours would require a happier/healthier team member increasing productivity 100% to have been really floundering at just 15 hours for 37.5 hours remuneration in the previous regime.

Working well for 15 hours of 37.5 paid for might represent 40% “productivity”, so perhaps what some firms are reporting seeing is some team members working well now for say, 30 hours of 30 hours, while still being paid for 37.5?

Somehow, I don’t think so!

Remember, that absent big changes in strategy, a firm’s fixed expenses remain just that, fixed, and with remuneration in these trendsetting firms now being “sort of fixed” too, making a profit just got that much harder.

If there are Australian/NZ Professional Indemnity insurers reducing premiums for 4-day weeks, Law Societies reducing practicing fees, landlords reducing rent, providers of IT, legal research facilities etc., it’s a trend I’ve so far missed and will appreciate feedback on from readers.

A couple of other basic questions arise.

If a team member was on a 4-day week already, paid pro-rata, and performing well, will they be given a 20% pay rise, or be offered a reduction from 30 hours to 24 hours, with no drop in pay?

One comment I noticed was that a firm had dropped hours 20% with only a ten percent reduction in team members' fee targets. Logic? If people are going to be happier and much more productive, do we only want that on fees?

It does also again raise this issue of not valuing all work. Why are fees so often such a big indicator of “productivity”?

From some team members, effective supervision, mentoring, observably effective business development, will all be of greater value to the firm than the collectable fees otherwise (hopefully) produced by them directly in that time invested.

A simple example would be effective tutoring of fee-earners in charging fees that better represent the value delivered to the client. The hours invested by the better-trained team members might not increase at all, but the revenue generated will, raising the prospect of an unprofitable firm becoming profitable, viable, and financially healthy.

Profit is not a goal for its own sake, or at any cost, but it’s a very important underpinning of good cash flow, viability, and financial health, particularly where the firm’s own cash reserves, or access to affordable capital, are not enough to ensure it gets by pending its return to profit and later, improved liquidity.

The biggest impediment to law firm profitability is under-utilisation of people resources, and there are plenty of commonly recurring causes of that, and proven fixes.

Any reader interested in getting a much better handle on their firm’s actual profitability compared to the potential profitability of their current resources can reach out for a confidential and obligation-free chat about the KMSProfitGapAnalysis?.