Is your staff saying they are too busy, have too much on their plate, can’t possibly handle another responsibility? Well, before you rush to hire a new staff person, you may want to look at your current employees’ productivity and its impact on your revenue.
One benchmark we analyze on financial review calls and strategic planning calls with Members is revenue per person on the payroll. We look for a minimum of $130,000 per person annually – this includes everyone from the receptionist to the attorneys. Of course, part-time employees count as a fraction of a full-time employee. Let us know if you want the exact formula for calculating the number of people on your payroll.
We often see the revenue per person on the payroll for law firms range anywhere from $80,000 to $250,000 – both the bottom and top end of the scale are a red flag and prompt a conversation about the cause and impact on the health of the business.
If your revenue per person is under the benchmark, it could be caused by:
- Inefficient Systems: Your systems for producing the work aren’t effective or being followed on a routine basis. Your staff may very well be busy, but it’s not a productive type of busy. Your systems need to improve and your revenue needs to increase in order to justify having that number of staff.
- Your fees are too low: This may mean that your staff is honestly busy, but it isn’t reflected in your numbers, because you and your staff are producing too much work for the money you’re getting paid. Before hiring anyone, increase your fees and see what impact it has on your bottom line.
- Untrained Staff: You may either have a lot of turnover with untrained staff or you could be adding a new service to your business that hasn’t been fully implemented.
- Wrong people on the bus: Your staff may not be in a position that takes advantage of their interests or their strengths. They may not be that busy and it could be time to reshift and reorganize those job descriptions. Is it just a job for them OR is it a career and they honestly care about the business and the families you help? Also look at their strengths and whether they’re in the right position to take advantage of them, there could be an opportunity to move them to a different position where they can be more productive. As Jim Collins explains in his book Good to Great, you have to get the right people on the bus and in the right seats, and the wrong people off the bus so that it will move in a positive direction.
If your revenue per person is hovering around $200,000 or more, you are taking some risks. Your office has systems in place and is operating like a well-oiled machine. Your employees are juggling a ton of balls and don’t have time to stop and think about the details or ways to improve what is currently in place. It could be time to hire a new staff person. Take out your organizational chart, talk to your current employees, and determine what the job description for that new hire will look like.
If you don’t make another hire, beware of:
- Systems falling apart: If you lose a key employee unexpectedly (they get sick, have an accident, move to a new city, have a baby), you won’t be able to continue at the same pace. Everyone is already operating at breakneck speed – they can’t possibly fill in for that missing employee and get all of their own work done as well. Balls will be dropped, clients may have to wait too long and get upset, all costing the firm referrals and money.
- Burnout: If everyone is consistently working overtime, 50 – 60 hours a week, how long can they sustain that pace and how long will it take before they look for another job?
If your staff isn’t productive, remember that you, as the business owner, are responsible for the leadership role in the firm and holding your staff accountable. You aren’t just an attorney meeting clients, you must have a vision for the firm with an organizational strategy that takes into consideration your short-term and long-term goals.
Lillian Valdez
Practice Building Consultant
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com
