The Art of Delegating to Increase Revenues
Law firms are unique in that unlike most other businesses which sell a product, lawyers sell time. Their time is, for a better description, “their stock in trade”. Based on this concept, to be profitable and generate sufficient revenues to carry the firm, lawyers should be spending their valuable time doing client billable work. The exception to this are contingency cases and hybrid cases which consist of a part contingency part billable hour retainer agreement. Contingency cases, however, have to be profitable for a law firm also.
With this in mind, the key to profitability and work product efficiency in a law firm is to assign legal tasks to the lowest paid but most qualified person to complete a task. When partners spend their time doing work that an associate or paralegal can do just as competently, and at a significantly lower cost to the firm’s revenues, the law firm benefits.
For example, a partner in an immigration firm charges $450.00 per hour. His associate is billed out at $275.00 per hour and paralegal at $150.00. When the partner is doing work that could be assigned to the associate or paralegal, even though it is at a lower hourly rate, the partner’s time is freed up to work on other files at his higher rate of $450.00 per hour. Consider this illustration:
Senior Partner - 100 hours per month at $450.00 per hour = $45,000.00
Assign 50 of those hours to an associate at $275.00 per hour = $13,750.00
Assign 50 of those hour to a paralegal at $150.00 per hour = $ 7,500.00
Total billed for associate and paralegal $21,250.00
Although the 100 hours per month have now been re-assigned to the lowest paid but qualified staff member to perform the task, the partner is not doing that work at $450.00 per hour. Although that work has now been re-assigned, the partner can now concentrate on another 100 hours of billable client work that can only be done by the partner. The monthly billables and receivable rise exponentially according to the billable hours that are re-directed to lower staff members.
Correctly assigning work to the least expensive but most competent staff member to complete client work increases profitability, productivity and efficiency in the office and enables the firm to increase its profit margin.
Compared to the illustration above, the monthly revenues increase as seen below:
Senior Partner - 100 hours per month at $450.00 per hour = $45,000.00
50 hours associate at $275.00 per hour = $13,750.00
50 hours paralegal at $150.00 per hour = $ 7,500.00
Monthly firm revenues (as compared to only Parnter billables) $66,250.00
Over the course of the year delegating tasks and assignments in this matter, using the example above, will result in $255,000.00 in additional revenue over the course of a year. The profit margin increases by the amount of billable tasks assigned in this way. Poor delegation can negatively affect the bottom line of the firm.
The art of delegating is not an easy task to master. Poor delegation skills can however lead to organizational and time management problems within the firm. The lack of this skill causes lawyers to feel like they are always under pressure running to put out one fire after the next because there is no trust that someone else can do the task as well as they themselves can do it.
Developing delegation skills and mastering the ability to let go of control to someone who is qualified to handle assigned tasks is a necessary evil for control freaks who cannot let go. I can tell you from first hand experience that I have lost many nights of sleep worrying about whether the delegation of a task will result in poor work quality, missed deadlines, unhappy clients, and a tarnished reputation.
In order for downward delegation of tasks to work, you do need to have a comfort level that the assignees of these tasks are competent and diligent about their work, pay attention to detail and follow up and follow through. The answer to that dilemma is that if the staff you have cannot be trusted to do work on whatever level staff they are, then your firm needs to hire new staff.
