Evaluating Law Firm Efficiency: Balancing Costs, Roles, and Value
Discussion on how law firms assess the value of employees, from lawyers to paralegals, and the impact on hiring decisions and firm efficiency.
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Law Firm Management
Added on 09/27/2024
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Speaker 1: I mean, you have this system where you have people that could jump on this kind of stuff. I mean, there's always lawyers, there's paralegals assistants. How do you keep track of how much value per person is coming in, or particularly per lawyer coming in, to justify hiring more or the overhead cost of having somebody? How do you calculate their rate, and to you, to the public, and all that kind of stuff?

Speaker 2: There's so many ways to go about doing that, and one simple, simple way that I don't use, but I see a lot of firms use, is what is your book of business? How many clients can you bring in? Can you cover your own salary at least, and can you cover some of your paralegal salary? That happens when larger firms, some firms who have wanted to acquire us, they would ask those questions as well. If you're able to bring in this consistent kind of a revenue, then we're able to put a much higher cost, buy you out, and then you're able to service our firm completely. But I don't really like to think about it that way, because I feel like it's flawed in so many sense, because what you do as an attorney, as a partner of the firm, whether you're an attorney, or paralegal, or receptionist, the value you can contribute far exceeds just cases and process. I'll give you an example. If an employee at the firm is doing cases, is a case manager, but they're also the office manager, let's say they're cleaning up the entire office, buying all the supplies, making sure everything is in order, or if they're the accountant at the firm, they're doing all the bill keeping, well then that's actually multiple roles, right? And so you kind of have to evaluate what are all the things that they're able to contribute. And everyone is different. Some people might be a great account person, and really bad at being a receptionist. So you don't want to hire that person to do the reception jobs, as well as case management. And case management, some people are good writers, some people are good organizers, some people are good just talking to people. So you need to find out what their best specialty is in the firm, and then help do things that way. Last year, we hired one of our senior partners in the firm to help process all the cases. When we hired her on, we told her, you don't have to bring in a single case. Your entire responsibility is just to mentor everybody else. Make sure everybody else is equipped, is relaxed, is encouraged, and you're able to give them feedback and correct them, and help them become better, and just process cases. That's all you have to do. And that's one way to look at it, because that is important to the firm, and so you can do it that way. Looking at just dollar and cents doesn't strictly match how I do it at the firm, but I know a lot of people do that, right? Yeah.

Speaker 1: I mean, I saw this video online about this one business guy, I think it was Alex Ramosi, made like $100 million. I mean, he's in the process of selling certain services, and products, and online marketing, all that kind of stuff. But he was saying, you got to kind of think about the main, like how much your firm makes, this has to have what your firm makes, and their business makes, and the main employee that brings in per case, this should be like 20% of that. So essentially, if you want to pay them $10,000, your firm should be grossing like $50,000, and that's what the best, most efficient companies do. If anything, the efficient companies get 99% of the value. This is not including overhead, and other kinds of overhead, other employees, and all that kind of stuff. So then it's like calculating, well, if I bring an associate in that is like $100,000 employee, which is more like $8,500 a month, and then it's like, okay, I got to make five times that potentially, and it's like, okay, those numbers. I'm like, is that too much, too little? So how do you just make things make sense at the end of the day to make sure you're making a good income in addition to support the staff and everything?

Speaker 2: I would really stay away from these type of formulas. There's so many, and it's just not ... Use it as a reference point. For example, if you are going from a solo from zero to three, that equation just doesn't work for you because let's say you're going to hire a receptionist, and that receptionist is making $15, $20 an hour. If you're going from solo zero to three, then that $15, $20 an hour is going to save you potentially three, four hours a day. You hire them for four hours, hopefully they can save you five to six hours, and is your four, five to six hours only worth $120? Probably they will save you a lot more, and it's up to you as the owner, as the manager to see what that role plays. That should be the core focus point. If their monthly salary, let's say, is $5,000 a month or $10,000 a month, well, what kind of value are they able to relieve for the entire company, and is it worth it for everybody else? If the answer clearly, without even thinking, is a yes, for sure, no doubt, then go for it. Even if, let's say, you pay them $10,000, and they don't bring in $10,000, or they don't bring in $50,000 worth of value, why let that equation limit you? From zero to three is one huge transformation, and then from an employee of a small team, three to 10, that's another big transformation, and then from 10 to 30 is another system-wise transformation, and then from that point on, 30 to 100 is relatively the same. Once you hit 100, then it's a big change, but then it's from 100 to 300. Largely speaking, for most immigration firms, it's between the zero and 100 mark, and so a lot of solos get to three, and they're very happy, and so it depends on where you want to be, right?

Speaker 1: I've seen people- Can we disagree? Is this lawyers, associates, or does it include other staff, paralegals, and assistants?

Speaker 2: Yeah, all employees, not just attorneys, but a lot of immigration firms, when they run essentially, they don't have receptionists or paralegals, right? They just purely have other attorneys, and that's one type of method, right? So you have three attorneys, and that's it. You don't have receptionists because they don't get the job done like the attorneys, and so it's much better to have partners. So I've seen so many different types of structure.

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