Leverage and the 10-20-30-40 Rule

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Today’s Australian Financial Review Legal Affairs section has an interested article – ‘Junior lawyers bring in the money‘ – reporting what we all already essentially know: that law firms make their money from their junior lawyers.

What spiked my interest in the article was despite reporting the fact that “the conventional profit-driven pyramid model is still the dominant method adopted by most of Australia’s top-tier law firms” the percentages where the work is done has changed over time.

Early in my career we followed what was known as the 10-20-30-40 Rule, whereby [roughly]:

  • 10% of a matter’s work was done at partner level,
  • 20% of a matter’s work was done at senior associate level (there was no special counsel level in those days, but they would be included today),
  • 30% of a matter’s work was done at associate and senior lawyer level (in times when there was a difference between an ‘associate’ and ‘lawyer’), and
  • 40% of a matter’s work was done by the junior lawyers / trainees / graduates / paralegals (i.e., everyone else).

The problem with the metrics in this Rule is that not many clients are willing to pay for the 40% these days.

Which makes the AFR article’s mention that:

…16.6 and 17.7 per cent of lawyers working on ­matters for clients are partners.

interesting and raises a question in my mind:

are law firms recalibrating the leveraging model at the request of clients, or are there other reasons why this change might be taking place? 

As always, welcome feedback from readers.



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