By Legal Futures Associate BigHand

Is your law firm burning cash? Don’t be fooled by high revenue numbers!

Maximising law firm profits today requires more than raising fees or even retaining and winning new clients. Despite their apparent success, firms can still haemorrhage money if they lack a strategic approach to resource management.

Lawyers are your firm’s most valuable asset, but not if they’re overworked, underskilled, or assigned to the wrong tasks. Below, we look at how effective resource management and balanced lawyer utilisation can help your firm attract and retain talented lawyers, tackle new matters efficiently, and finally turn high revenue into healthy profits.

Underutilisation and attrition strangle law firm profitability.

While some practice areas are drowning in work (and carrying the firm revenue and profit growth), others have lawyers miles away from hitting their chargeable targets. Firms may try to patch the gaps in utilisation with secondments and other projects, but without legal resource management technology, it’s difficult to truly know where legal talent, skills and cross-practice opportunities lie.

The result of underutilisation of fee earners, and effectively carrying resource, is a profit killer in itself. Disproportionate work allocations can cost even more when an overworked or underutilised lawyer makes the decision to leave a firm. The impact can reach up to $500K owing to:

• Attracting high-quality talent requires competitive salary offers, potentially inflated by agency placement fees.
• Productivity often declines during the typical 3-month notice period for a lawyer’s departure.
• Billable hours remain low as new hires undergo orientation and assimilation into active case work-time you cannot bill to clients.
• Time investments continue as new hires forge and cultivate client relationships. Senior partners spend high-value hours ensuring a smooth transition and nurturing client relationships for continuity.

Each unbilled hour stealthily erodes the firm’s profit margins. In addition to this, resignations can unsettle remaining staff, with thoughts about career fulfilment lowering morale and potentially driving additional exits.

Resource management rescues law firm profits.

A legal resource management solution is like an X-ray for your workforce, helping to identify situations that compromise profitability and spot opportunities for improvement. Backed by data, resource managers can reduce attrition and improve utilisation rates with a plan that includes:

Data-driven work allocation and balanced workloads.

Resource management software collects data about each lawyer’s skills, experience, and workload across all practice groups and regions. This data provides insight into fact-based decisions for optimal workload allocation, staffing, headcount, and recruitment strategies.

The system identifies underutilised associates and overworked individuals at risk of burnout, helping partners find the right people to work on their matters at the right time. More effective lawyer utilisation maximises billable hours and creates a more balanced work environment that boosts lawyer engagement and well-being. It also strengthens profitability. Even a modest 1% productivity increase per lawyer can lead to a significant increase in profitability.

Reduced associate “ring-fencing.”

“Ring-fencing” occurs when partners hold onto an associate’s time for potential matters that have yet to materialise. Stuck waiting for uncertain work, associates are restricted from increasing their billable hours on confirmed projects.

Resource management software breaks down ring-fencing behaviours with features that clearly show associate’s forecasted capacity, against their real-time tracking of actual workloads, expertise, skills, and preferred project types. The system analyses data on career development and capacity to shortlist the best-matched associate for each matter. A human layer is then applied, where partners will choose from the most ideally suited associate available.

Partners focused on higher-value work.

The software can also account for the nuances of internal and client relationships. For example, matching a client with a lawyer with whom they’ve had a positive experience can improve client satisfaction and retention.

Partners can be assured the most suitable person is matched with the client resulting in them being relieved from micromanaging matters. Where partners are responsible for allocating work, resource management technology will take away the legwork of searching for the best match.  Both factors enable partners to spend more hours on higher-value, billable work.

Increased oversight that improves timekeeping accuracy.

A closer review of utilisation rates will inevitably lead to conversations with fee earners who aren’t closing time or meeting targets. Nearly half (47%) of law firms say missing and late time entries and poor-quality timecards have an impact on profitability. Increased oversight that drives more accurate timekeeping will pay off through improved profitability.

Resource management as a client service tool.

Seventy-six percent of law firms surveyed confirm that clients want more financial transparency. Clients want to know who is working on their matters and the experience they bring to the table.

Resource management software lets you easily demonstrate the depth and breadth of your talent pools. Clients can feel confident that lawyers with the most relevant skills and experience staff their matters. Optimised resource allocation also helps your firm avoid unnecessary costs that impact client satisfaction. Happier clients are more likely to recommend your firm to others and return for future work.

Get in touch with me today for a free health check on your current resource management strategies and discover how the right tools can help you maximise profit margins. If you are in the UK, please join us at the upcoming BigHand Conference to hear directly from our clients (your colleagues) about how resource management software helps them boost profitability.