How Efficient & Productive is Your Firm?

We recently released our 2021 Efficiency and Productivity Reports which highlight the number of hours charged to clients, as well as the revenue produced, by various personnel within firms. This data is often utilised by firms to assess excess capacity amongst its resources, as well as set salaries and performance targets, finetune budgets and forecast revenue for the year ahead.

At Rob Knights & Co, we define these two terms slightly differently to the broader profession. For us, efficiency represents the number of hours charged to clients as a percentage of hours worked, for example, 800 hours charged based on 1,950 total hours equals an efficiency rate of 41%. In respect of productivity, this is the revenue produced by individuals based on their hourly charge rate and their hours charged, for example, 800 hours by a charge rate of $300 equates to $240,000 contributed to productivity.

Historically, the aim was for professional personnel to charge around 80% of their time, however these days we know actual results are often well below this. Some firms have more recently spoken of a scaled approach to efficiency targets depending on the staff member’s seniority with the likes of managers expected to charge less hours, compared to supervisors, and then the less experienced personnel of seniors, intermediates and graduates. Likewise, the goal was for partners to charge around 65% of their time, with current values generally not comparable with such values. Firms also reference the standard recovery rate of 3 times salaries; again a target that is currently not being achieved.

Thus, for those firms setting efficiency and productivity budgets for staff, who may be struggling to achieve such targets, or where a firm would benefit from comparing its current results, these reports will enable you to evaluate whether your budgets are fair and thereby work towards ways to improve the performance of individuals within your firm or the broader firm as a whole. These two reports document all of the actual values achieved by hundreds of personnel during the 2021 financial year.

Leading into this reporting period, we were keen to see how, if at all, these benchmarks were influenced by the impact of COVID across the various regions of Australia. There was one school of thought that the efficiency and productivity of personnel within firms based particularly in NSW and VIC, who have been most impacted by restrictions and lockdowns, could be lower than prior years, as a result of personnel struggling to work from home. Conversely, for those personnel who have thrived whilst working from home, there is the potential that their efficiency and productivity could be elevated by comparison.

In reality, there is a mix of these finding, some highlights of which include:

• Suburban firms were those most impacted in respect of their efficiency during the prior year
• VIC practices, not surprisingly, experienced the most significant drop in efficiency
• Firms with fees ranging from $1 – $2 Mill and $6 – $8 Mill, like so many other benchmarks, reported the most significant declines in efficiency
• We also need to be mindful of the variances between ‘total’ hours and ‘available’ hours amongst these KPIs
• Conversely however, all regions reported an increase in productivity for the period
• Average productivity by State declined in NSW and QLD firms, whilst the remaining key States reported improvements
• Our smallest ($500K – $1 Mill) and largest ($8+ Mill) of firms each reported average productivity declines, whilst the remaining firms all improved for the period
• Recovery rates maintain the status quo more recently experienced across firms more broadly.

For those firms interested in receiving the very latest efficiency and productivity results for comparison against its firm’s performance, participation remains open, or reports can be purchased as a non-participating firm. Click here to register or for more information.