Presented on April 27, 2007 Law Firm CFO Conference

Transcription

1 Understanding the Importance & Power of Legal Surveys Presented on April 27, 2007 Law Firm CFO Conference

2 Introduction & Presentation Objectives Importance of Participating in Surveys Legal Considerations The Power of Understanding Benchmarking Statistics Case Studies Law Firm Statistical Survey Billing Rate & Associate Salary Survey Best Practices

3 Types of Surveys Financial Surveys Analyze Revenue Drivers/Costs/Profits Analyze Capital/Borrowing levels Target audience Controller up to the MP Benchmarking predominantly at the Firm level Specialty Surveys Billing Rates - by Timekeeper and Years of Service HR-related issues, Compensation and Staffing Client Satisfaction Surveys Strategic Surveys - Internationally-focused firms Target audience is more directed and will vary by firm Benchmarking predominantly at the Office or Practice level (Office or Practice group leaders)

4 Importance of Participating in Surveys Allows Firms to Understand its Place in the Market Comparison to Peers Comparisons to Aspirational Firms Enables Firms to Make Strategic Decisions Expansion into New Cities/Practices Mergers or Business Decisions Helps Firms Understand their Weaknesses Revenue Drivers Costs Profitability per Partner Their Footprint

5 Determining Which Survey(s) to Participate Identify the benchmarking needs of the people within your firm Understand how to get the firm buy-in to affect change Understand the statistics provided to the participants Know your peers & competitors, and find out what they are doing ( pack mentality) Cost to Participate (in one, or multiple Surveys) (continued on the next page)

6 Determining Which Survey(s) to Participate (cont d) Understand the types of comparisons available with each Survey Firmwide vs. Office-level geographic comparisons Practice group comparisons Custom peer group comparisons Assess the timing of participation Availability of staff resources Time investment to collect the data When is it due? When are results published? What are the timing needs of the firm?

7 Understand the Reliability of the Survey Results Reputation of the Survey Vendor Motivation to get in, or expand within, the industry Accounting Firms Big Banks Legal Software Companies Experience of Company Conducting the Survey(s) Adaptability to Market Changes Data collection efforts for multiple surveys Fresh questions that are top-of-mind to legal executives Data Validity Checks

8 Understand the Reliability of the Survey Results Consistency of the Participant Base Minimizes interpretation issues in completing the submission Minimizes the interpretation issues in reviewing results Motivation of Law Firms to Participate If results are published, your response can help with your own recruiting efforts If results are not published, there is no motivation to exaggerate actuals

9 Criteria for Participation Legal Considerations

10 Compliance Both Parties Whose responsibility is it to comply with Federal Antitrust Laws? Survey vendor Law Firm Survey Participants

11 Anti-Trust Considerations To Prevent Sharing of Fee-Based Information (to Satisfy Safe Harbor Rules) Conducted by a third-party Data must be at least 3 months old Minimum of 5 firms in a group PwC also Extends these Considerations Outside Counsel Provides Opinion Information not shared within Firm Participant Anonymity No financial forecasts Participation Disclaimer

12 PwC Surveys - Participation Disclaimer The PricewaterhouseCoopers Law Firm Surveys results are highly confidential. They are intended for the internal business management of participating law firms, and to support internal benchmarking and decision-making. As such, all data contained in the reports are to be made available only to partners and designated employees of your firm, and should not be made available to any third parties. PricewaterhouseCoopers does not condone the use of this data by participants in a court of law or any public forum that would either make the information available to non-participants or identify or embarrass participating law firms to other participants or nonparticipants.

13 Case Studies

14 Law Firm Statistical Survey Ways to Benchmark your Firm Aggregate Firm Locally/Regionally/Nationally Select Firm criteria (eg., profitability or dispersion) Peer Firms Individual geographic office Focus of participation is on managing expenses Employee Costs Administrative staffing ratios Non-compensatory expenses Detailed expense benchmarks

15 Analysis of Your Firm s Expenses 24 Law Firms with >450 Attys Firmwide (non-nyc) Total Exp./Lawyer : $214k Group Median: $222K Employee Costs/Lawyer : $100k Group Median: $101K Other Costs/Lawyer : $114k Group Median: $124K Administrative Staff/Lawyers: 1.22 Group median: 1.04 (Your Firm +90 Staff) Office Operating Costs/Lawyer: $17k Group Median: $12.8k Secretaries/Lawyer:.56 Group Median:.52 (Your Firm +20) Photocopying & Stationery Net with client reimbursement = 0 Finance/100 Lawyers: 10.7 Group Median: 9.8 (Your Firm +5) Office Furniture/Fixtures Depreciation + Interest expense on Purchased Assets (Your Firm + $8,300/Lawyer Office Ops. Staff/100 Lawyers: 27.1 Group median: 16.2 (Your Firm +55)

16 Analysis of Your Firm s Expenses 24 Law Firms with >450 Attys Firmwide (non-nyc) Total Exp./Lawyer : $214k Group Median: $222K Employee Costs/Lawyer : $100k Group Median: $101K Other Costs/Lawyer : $114k Group Median: $124K Administrative Staff/Lawyers: 1.22 Group median: 1.04 (Your Firm +90 Staff) Office Operating Costs/Lawyer: $17k Group Median: $12.8k Secretaries/Lawyer:.56 Group Median:.52 (Your Firm +20) Photocopying & Stationery Net with client reimbursement = 0 Finance/100 Lawyers: 10.7 Group Median: 9.8 (Your Firm +5) Office Furniture/Fixtures Depreciation + Interest expense on Purchased Assets (Your Firm + $8,300/Lawyer Office Ops. Staff/100 Lawyers: 27.1 Group median: 16.2 (Your Firm +55)

17 Analysis of Your Firm s Expenses 24 Law Firms with >450 Attys Firmwide (non-nyc) Total Exp./Lawyer : $214k Group Median: $222K Employee Costs/Lawyer:$100k Group Median: $101K Other Costs/Lawyer : $114k Group Median: $124K Administrative Staff/Lawyers: 1.22 Group median: 1.04 (Your Firm +90 Staff) Office Oper. Costs/Lawyer: $17k Group Median: $12.8k (Your Firm +4.2k) Secretaries/Lawyer:.56 Group Median:.52 (Your Firm +20) Photocopying & Stationery Net with client reimbursement = 0 Finance/100 Lawyers: 10.7 Group Median: 9.8 (Your Firm +5) Office Furniture/Fixtures Depreciation + Interest expense on Purchased Assets (Your Firm + $8,300/Lawyer Office Ops. Staff/100 Lawyers: 27.1 Group median: 16.2 (Your Firm +55)

18 Analysis of Your Firm s Expenses 24 Law Firms with >450 Attys Firmwide (non-nyc) Total Exp./Lawyer : $214k Group Median: $222K Employee Costs/Lawyer:$100k Group Median: $101K Other Costs/Lawyer : $114k Group Median: $124K Administrative Staff/Lawyers: 1.22 Group median: 1.04 (Your Firm +90 Staff) Office Oper. Costs/Lawyer: $17.2k Group Median: $12.8k (Your Firm +4,400/Lawyer) Secretaries/Lawyer:.56 Group Median:.52 (Your Firm +20) Photocopying & Stationery Net with client reimbursement = 0 Finance/100 Lawyers: 10.7 Group Median: 9.8 (Your Firm +5) Office Furniture/Fixtures Depreciation + Interest expense on Purchased Assets (Your Firm + $4,700/Lawyer) Office Ops. Staff/100 Lawyers: 27.1 Group median: 16.2 (Your Firm +55)

19 Office Operating Expenses per Lawyer Your Firm Value Rank Group Results 1st Quartile Median 3rd Quartile Photocopying $ 3, $ 4,142 $ 1,982 $ 514 Stationery, printing, supplies and binding 3, ,884 2,467 2,030 Small office equipment (non-is related) Facilities management/sub-contracted services 2, ,342 2,365 1,177 Office furniture & fixtures depreciation 8, ,087 5,200 3,190 Interest expense for purchased assets (non-is related) 4, ,616 2, Maintenance and repairs to office equipment (non-is related) , Rental of office furniture & fixtures 1, ,021 1, Administrative dues/education , Administrative travel, meals and accommodations Overtime parking and taxi charges , Overtime meals for administrative staff Automotive expenses Non-lawyer hiring expense Office coffee, soda, parties, etc. 1, Moving expenses for administrative inter-office transfer Gifts, flowers for employees Plants - rental and care Other , Subtotal $ 24,705 4 $ 29,390 $ 19,800 $ 19,649 Deduct: Client reimb. of hard & soft disbursements 7, ,189 6,050 3,868 Total Office Operating Expenses $ 17,205 8 $ 24,839 $ 12,800 $ 15,975

20 Dollar Impact of Changes Reduce Administrative Staff by 50 Fully loaded savings: $3.5 million Per Partner (200 partners): $18k Reduce Office Operating Costs to Median Group Level Savings: $2.0 million Per Partner (200 partners): $10k Total Increase in Partner Profits: $28,000 per Partner

21 Billing Rate & Associate Salary Survey plus Ways to Benchmark Your Data: Locally/Regionally/Nationally; Int l offices Practice Focus Practice Focus by Geographic City/Region Select Firm Criteria Profitability Peer Firms Focus of participation is on Rates

22 Understanding Your Choices Ways to Benchmark Your Firm s Rates By Office Location without regard to practice group with or without regard to size or type of office By Practice Group without regard to office location with or without regard to size of practice By Location and by Practice Group By Profitability of Law Firm with or without regard to office location with or without regard to practice By Peers or Competitors with or without regard to office location with or without regard to practice Source: PwC 2006 Billing Rate & Associate Salary Survey+

23 Understanding Floating Bar Charts First Quartile Median Third Quartile Group 1 Group 2 Group 3

24 Case Study #1 Focus is only at the Office level only Your Firm is a 700 attorney, AmLaw 100 law firm based on the West Coast. You have a Washington, DC office with approximately 60 attorneys. Which comparisons are the best for your firm? Comparison Group Information Group Abbreviation AmLaw 50 Lgst Firms Lgst DC-based Large DC NPs Med. DC NPs Number of Members Size Range of Group Members Maximum No Maximum No Maximum No Maximum No Maximum 75 Minimum No Minimum Average Size of Member Source: PwC 2006 Billing Rate & Associate Salary Survey+

25 Partner Standard Rates quartile values, 1/1/2006 $700 Equity Partner Average $580 Non-Equity Partner Average $560 $650 $540 $520 $600 $500 $480 $550 $460 $440 $500 $420 $450 AmLaw 50 Lgst Firms Lgst DC-based Large DC NPs Med. DC NPs $400 AmLaw 50 Lgst Firms Lgst DCbased Large DC NPs Med. DC NPs Your Firm AmLaw 50 Lgst Firms Lgst DC-based Large DC NPs Med. DC NPs 1/1/2006 1st 1st 1st 1st 1st Value Quartile Median Quartile Median Quartile Median Quartile Median Quartile Median Equity Ptr. Avg. $ Non-Equity Ptr. Avg. $ All Ptr. Avg. $ Source: PwC 2006 Billing Rate & Associate Salary Survey+

26 Case Study #2 Focus is on your Corporate Practice, using various types of Comparisons 1. Large National Corporate Practice (w/o regard to location) 2. NYC Corporate Practice (w/o regard to size of practice) 3. LA Corporate Practice (w/o regard to size of practice) 4. National Corporate Practice of Large Firms (>450 attorneys) (w/o regard to size of practice or location) 5. National Corporate Practice of the AmLaw 100 Firms (w/o regard to size of practice or location) Comparison Group Information Group Abbreviation Corp Lg Prac Corp NYC Corp LA Corp Lg Firms Corp AmLaw Number of Members in the Group Defined Size Range 1 of Group Members Maximum No Maximum No Maximum No Maximum No Maximum No Maximum Minimum No Minimum Average Size of Group Members Source: PwC 2006 Billing Rate & Associate Salary Survey+

27 Partner Standard Rates quartile values, as of 1/1/2006 Equity Partner Average Non-Equity Partner Average $640 $560 $620 $540 $600 $520 $580 $500 $560 $480 $540 $460 $520 $440 $500 $420 $480 $400 $460 $380 $440 Corp Lg Prac Corp NYC Corp LA Corp Lg Firms Corp AmLaw $360 Corp Lg Prac Corp NYC Corp LA Corp Lg Firms Corp AmLaw Corp Lg Prac Corp NYC Corp LA Corp Lg Firms Corp AmLaw 1st 1st 1st 1st 1st Quartile Median Quartile Median Quartile Median Quartile Median Quartile Median Equity Ptr. Avg $ 540 $ 567 $ 525 $ 625 $ 592 $ 570 $ 515 $ 585 $ 545 $ 553 $ 495 Non-Equity Ptr. Avg $ 440 $ 490 $ 442 $ 550 $ 520 $ 495 $ 455 $ 495 $ 466 $ 483 $ 435 All Ptr. Avg. $ 480 $ 557 $ 496 $ 618 $ 581 $ 547 $ 489 $ 565 $ 513 $ 526 $ 490 Source: PwC 2006 Billing Rate & Associate Salary Survey+

28 Best Practices Top 10 AmLaw 100 Firm; 1,000 Attys Partner Champions of a Change in Rate Structure Previous Broad differences in rates across offices; Now: Smaller differences (national rate) Implementation Time: 2-3 Years Custom Groups AmLaw 25 and AmLaw 50 By Office and by Practice Group Takes the politics out of choosing the peer firms Same predetermined list used across cities/practices Rate changes were summarized from results; No actual reports distributed

29 Best Practices Top 50 AmLaw 100 Firm; 1,000 Attys Significant Practice Group Leader Involvement Previous Management Group had a significant involvement Implementation Time: 2 Years, and growing Custom Groups All Peer Firms By Office and by Practice Group Practice group knows who can be in the group eliminates firms not viewed as peers Summary Report on rate changes sent to each Practice Group leader, in addition to actual benchmarking reports.

30 Best Practices Top 100 AmLaw 100 Firm; 600 Attys (Principally based in non-top tier market) Manage rates strictly by office, not by practice group Management committee determines comparison groups. No practice group leader involvement. First recommendations summarized and distributed to office managers. Practice group leaders can make changes. Standard Groups By Office

31 Opportunity for Questions and Comments

32 Contact Information Gregg Sincoff Managing Director, PricewaterhouseCoopers LLP 300 Madison Ave., New York, NY Laurie J. Lieb Director, PricewaterhouseCoopers LLP 1850 N. Central Ave., Phoenix, AZ