The Starbucks Effect: Losing Profitability Six Minutes at a Time
At VANTAGE 2017 Orlando, Cory Branden with Peer Monitor presented about trends and the true cost of lost productivity:
Productivity. It’s a subject that we seem to be talking about all the time over the last few years. Firms want to find a way to utilize the lever and spur greater profitability, while corporate legal departments are interested in it and other law firm efficiencies for the benefit of their total spend.
I thought I’d put a little different perspective on it and analyze it from the ground up.
In 2017, the average lawyer tracked in Peer Monitor is working one-tenth of an hour less every day than they did in 2015.
Yes, I’m only talking about an average of six minutes a day lost over the last two years, but it’s lost every day and by every
lawyer. What starts as a seemingly insignificant amount of time compounds daily and can have a considerable impact
on profitability.
How much of an impact? Well, let’s see …
SOURCE: PEER MONITOR
The average lawyer hourly worked rate in Peer Monitor is $475. There are (for these purposes) 253 working days a year in
the US. For the rest of 2017, if each lawyer continues to work a tenth of an hour less per day compared to 2015, on average,
each lawyer would lose just over $12,000 in productivity compared to the level of just two years ago.
For a 200 lawyer firm, that’s around $2.4 million in lost productivity.
It’s the “daily coffee” effect. If you buy a Starbucks® coffee daily, it seems like a small cost. What’s five dollars for a boost to
your day? But when you buy a Starbucks coffee every single day at a cost of five dollars, the yearly cost becomes over $1,800.
It’s also interesting to note that this loss of lawyer productivity is not really specific to a certain segment. Rather it is being evenly spread across all segments, with the Am Law 100 being the sole segment showing a bit of a bounce back in daily productivity per lawyer this year; however, the segment is still trailing 2015 levels.
Even looking more granularly at the lawyer title level shows that only associates have increased the number of hours worked per day since 2015, albeit just .02. All other titles – equity partners, non-equity partners, of counsel, and senior/staff counsel – have declined in the number of hours worked per day since 2015.
The spread between the various segments in the number of hours worked per day per lawyer is also intriguing. Thus far
in 2017, on average, Am Law 100 lawyers work .27 hours more per day than Am Law 200 lawyers, and .48 hours more
per day than midsize lawyers. This difference equates to 68 and 121 hours a year respectively!
All of this being said, the balance of capacity and demand is always a juggling act, with uncertainties in the market and
shifting staffing models at the forefront of the equation. As we continue to move forward, I am eager to see what, if any,
changes are made by firms to start to address productivity and overcapacity issues within the industry.
Until then, I’m just going to enjoy my Starbucks coffee.
