legal services bulletin feb 2013
TRANSCRIPT
Legal Services BulletinJanuary - February 2013
COMMENT FEATURES: see overleaf
ADMINISTRATION COSTS
the enemy of profit?
NON COMPLIANCEcan you tackle breaches through
more effective procurement?
Apologies for the lengthof this issue’s Comment,but three New Year legalsector surveys caughtmy eye, each of whichemphasises the need forfirms to adopt, orcontinue with a focus oncost reduction andprocess improvementduring 2013.
Firstly, the publication of the The LawManagement Section (LMS) Annual Surveywhich examines the financial health of lawfirms across the UK.
Practice fee income increased by 3.6 percent in 2012, compared with more modestgrowth of 1% in 2011 and average net profitper equity partner climbed from £112,549 to£114,853, a rise of 2 per cent.
And finally, BDO found that almost half of lawfirm partners think they should be paid morethan they are currently.
69% of partners expected average profit perequity partner to increase over the next threeyears.
BDO goes on to suggest that suchexpectations will drive further merger and
Jason AdderleyT: 0121 602 1445M: 07824 449 577E: [email protected]
The Editor
Jason Adderley is a consultant Partner with ERAspecialising in managing programmes of work forlegal and professional services firms.
He has 18 years experience of working withsolicitors and other professional consultants as aclient and as a service provider.
£114,853, a rise of 2 per cent.
Naturally at ERA, our prime focus is on twoof the other measures in the survey. Forinstance the number of support staff per feeearner remained steady at 0.61 and themedian spend on non-salary overheads perfee-earner was £37,992 compared with£37,831 in 2011, a nominal increase of 0.4per cent.
Naturally, this real terms fall in costs is to bewelcomed – but at ERA we’d view anythingbut an actual reduction in non-salaryoverheads as a failure.
Hot on the heels of the LMS report, legalmarket management recruitmentconsultancy Totum found that a fifth of firmsexpected to increase salaries for businesssupport professionals by more than 3% in2013. Hardly a record breaking year, butnevertheless another upward pressure oncosts.
expectations will drive further merger andacquisition activity in the forthcoming year,concluding that “if the majority of partnersthink they should be paid more, then the onlyway to pay more is if the firm generates moreturnover and more profit.”
Of course, at ERA we don’t necessarily agreethat turnover growth is the only way.
Cost reduction and process improvementmay not be as exciting as merger andacquisition, but our evidence suggests aproperly managed programme is a sure-fire way of converting costs into profits.
www.expense-reduction.co.uk
THE ENEMY OF PROFIT?
Otterburn Legal Consulting (OLC) recently found thatlaw firms with fewer secretaries and reducedadministrative costs are more profitable.
Intuition would doubtless lead most Finance Directorsand Practice Managers to the same conclusion.However, OLC were also able to put some figures totheir claims.
Firms with less than one secretary for every two feeearners reported a gross profit margin of 52% setagainst a margin of 44% for firms with a higher ratio.
As firms grow, it’s often a temptation to perform ashort-term fix by scaling up administrative andsupport staff rather than stepping back to reviewprocesses and assess the options for automation oroutsourcing. Such inertia can lead to a medium andlong term drift downwards in the ability of firms to billthese costs back to clients.
If admin is the enemy of profit, then time is often theenemy of change. Here’s a simple example:
We’ve recently embarked on a multi site review ofcleaning for a law firm. Our aim, naturally, is toreduce costs and maintain or enhance the quality ofservice provided – we’ll also consolidate the number
BUYING COMPLIANCE
Not many of the COLPs and COFAswe’ve come into contact with have theluxury of additional resources to dealwith the compliance demands ofOutcomes Focused Regulation.
Some of the simplest infringementsare also those that are easilyoverlooked, such as referencing anincorrect or outdated complaints bodyrather than the Legal Ombudsman inclient-care letters or terms ofbusiness.
Given the broad scope of applicationsfor the Bribery Act, firms must alsoensure compliance duringprocurement exercises – particularlywhere suppliers may also be clients ofthe practice.
ERA provides opportunities to ensurecompliance through its transparenttendering processes and ongoingsupplier audits.
Jason AdderleyT: 0121 602 1445M: 07824 449 577E: [email protected]
PRACTICE TIPS
DATA LEAKAGEDoes your firm encrypt or remove photocopier or printerhard drives before scrapping or upgrading machines?Each image printed remains on the hard drive of themachine, so you should plan to prevent data leakage.
DON’T BE A MUG – BRING A MUGThe Times reported that Speechly Bircham used 317,500paper and plastic cups each year. Since introducing abring-your-mug—to-work scheme the firm has made ahuge dent in an annual bill of £14,355 for cups.
service provided – we’ll also consolidate the numberof contractors involved and systemise contractmanagement going forward to minimise the burdenon Practice Management staff.
This is a subject we’ll return to later this year todiscuss systems and outsourced solutions forPrint, IT and elements of Facilities management.
Why ERA?
For contingency projects we billyou for 50% the hard cashsavings you actually receive.
Often our work will evaluate andimprove business processes andreduce administration. These softsavings are yours to keep withour compliments.
We’re so confident of our abilityto provide you with profitableresults (that maintain or enhancecurrent service or product quality)that if we fail to achieve hardcash savings you will pay usnothing at all.
#1Transparent Fees
www.expense-reduction.co.uk