Leverage drift

The difference between the fee-earner mix a matter or engagement was priced on and the mix delivered, at cost rates per grade. Partners doing associate work is the commonest form, and it costs the difference between the grades' cost rates on every hour. Read with hours, because the partner who did it in half the time broke even.

DefinitionThe difference between the fee-earner mix a matter or engagement was priced on and the mix delivered, at cost rates per grade. Partners doing associate work is the commonest form, and it costs the difference between the grades' cost rates on every hour. Read with hours, because the partner who did it in half the time broke even.

Cost rates, not charge-out

Profitability at charge-out measures what was billed. Drift is a cost finding.

Per matter, then per practice

Three partners are usually the pattern behind a practice's number.

How it is computed

Hours delivered by grade compared with the hours by grade in the budget the fee was priced on, valued at cost.

Example

A matter priced at 20 percent partner time was delivered at 45 percent. Fees were as quoted, and margin fell from 38 percent to 19.

Where it goes wrong

Judged on fees billed against quote. The matter came in on budget and lost half its margin.

Articles that use this term

Board and management reporting · Consulting and advisory

Utilisation and realisation on five consultants: the whole arithmetic on one page

The complete utilisation and realisation calculation on five consultants, small enough to check by hand: available and chargeable hours from the roster and time entries, utilisation, fees billed on each consultant's hours from bills allocated by engagement, chargeable hours at standard rate, realisation, the two fixed-fee engagements that have overrun and the share of each consultant's hours on them, the four quadrants, and the identity that hours and fees sum to the firm's, so a reader can reproduce every figure and then run it on their own practice management exports.

17 Sept 20263 min read