Delegation game

A fundamental question which partners and qualified staff in any firm must address is: what percentage of your professional day is spent on things a more junior person could do?

Research has shown that in a typical firm the answer would be between 40% and 50%. If this was happening in one of your clients’ organisations it would probably have a drastic effect on gross margins and ultimate profitability. You’d tell them, I hope, that they were inefficient, unit costs were too high and that they should organise themselves to delegate the work better.

It’s the same for firms themselves: underdelegation could be reducing real returns. Partners, as we know, are relatively more expensive than managers. In the first table (opposite), the partner’s return on fees is far less than the manager’s. But, because profit shares fall below the line, gross margins do not reflect this and it is therefore largely ignored.

If partners are spending up to half their time on work they ought to delegate, what more valuable activities are they neglecting as a result?

First, they will not be fully servicing existing clients on a proactive basis – an essential component of client retention. Second, they may not be looking after employees, encouraging their development and devoting sufficient time to controlling overall assignment profitability – a key to staff retention. Finally, but perhaps most importantly, they will not be allocating enough time to do the marketing tasks which bring in the quality new business essential to long-term survival.

The neglect of marketing

In many firms, it is this latter function that seems to be the most neglected when partners are too busy with hands-on work. Is it because they find it the most uncomfortable to do, so it goes to the bottom of the pile?

However good their technical and interpersonal skills, even if partners do allow some time in their daily routine for marketing most will only achieve minimal success. They have to delegate as much work as possible to do more of this sort of activity. Having an individual marketing plan of both activity and hours will be of invaluable assistance.

The effects on the firm and staff of underdelegation are numerous. First, it makes the cost of delivering service to the client much higher than is necessary. Even in these days of increased competition, many firms still allocate resources in the same way they did in the 1980s and expect the same returns. Clients are becoming like customers and firms must adjust their unit costs to meet market expectations and maintain margins.

Too little delegation can run the risk of creating a stalemate. Senior people are prevented from paying enough attention to some of their important tasks, especially the speedy turnaround of assignments. Meanwhile, those more junior do not get the chance to develop their skills and potential.

If this situation is allowed to continue, staff who are capable of taking on greater responsibility and producing good work under supervision will very rapidly get so demotivated and demoralised that they leave to work elsewhere. Senior people who are spending half their time on lower level work will also leave to seek new challenges.

Every firm should analyse why staff choose to seek work elsewhere. Research indicates that the desire for better, more demanding work is usually high on the list of reasons for departure. Poor delegation is therefore one of the root causes of high staff turnover.

Chargeable hours

Cutbacks in staffing levels during the recession changed work patterns, putting high ‘chargeable hours’ at the top of the priority list. The long-term effect of partners and senior staff continuing, even now, to cling on to chargeable hours like a comfort blanket can be very damaging.

But such an unsatisfactory scenario is rife in many practices and little notice is paid to overall assignment profitability. Understandably, people worry what they will they do with their time and how it will affect their future security if someone more junior can do their work. This applies at all levels.

Employees are also afraid that the junior they delegate to will take too long on the work and won’t be able to produce the quality expected.

This can be solved through better management and training.

Unfortunately, many partners are not trained how to supervise and some subconsciously dislike the responsibility, especially when they may be accountable for mistakes. Past problems with employing lower level staff and delegating to them can cloud judgement about what is needed for the future. Hence the ‘it’s better to do it myself’ syndrome.

This is not an easy problem to solve in the very short term and may require a good deal of perseverance and accountability from all concerned.

At partner level, if you have not already done so, introduce a two-tier system for charge-out rates: a lower fee for compliance work (audit reviews or tax computation preparation) and a higher one for special client work and advice. Then use it as a guide to monitor how partners divide up their time.

This will both reduce the misleading write-off of time and show up how much is spent by partners at the lower rate. They should be doing 60% to 75% of chargeable hours at the higher rate – and that ought also to be part of their annual targets.

Time control

Leverage is one key to improving profitability. Firms have got to monitor the ratio and number of hours partners work on their own clients. If it is too much, then that is yet another indication of too little delegation by the partner concerned.

Partners should be judged by the number of hours they control. This can be both a sign of good delegation and better use of time. In the examples shown (opposite), although A has far fewer chargeable hours than B, A is controlling far more hours and seems to be using his time to bring in more business. Who is making the more valuable contribution?

Firms should also start to develop a costing system to measure the true profit on each client assignment – not one that just records whether time has been over or under recovered at selling price. If this was the measure of performance rather than chargeable hours, then partners would ensure the most cost-effective person was on the assignment while still maintaining the technical quality and service.

Firms should also put in place better hands-on training, appraisal and after job evaluation systems to ensure staff are reaching their full potential as quickly as possible.

They must also improve the supervision skills of seniors and managers to ensure that staff are given time to understand what they are doing and why they are doing it. Encouraging constructive feedback after each assignment is also a critical process. Do not blame juniors entirely for poor performance. Poor supervision is still a major cause of failure to meet standards.

Peer reviews of files for technical and compliance issues are now commonplace in all firms. But how often do you look at them from the point of view of pure efficiency and staff effectiveness?

If you were to select a number of files and analyse who did what and whether someone with a lower qualification could do the tasks, you would see some of the real problems associated with man management in professional firms today. The initial allocation of staff to an assignment is a key component of the delegation process but it is one which is often overlooked and undervalued as a method of ensuring that jobs are run on the basis of optimum return and quality.

Flexible employment strategy

Finally, staff selection policy is vital. Firms should make greater and more effective use of para-professionals – people more interested in a job than a career. However, this practice should not operate as a substitute for taking on and developing fast-track graduates.

The increasing use of IT will also mean the delegation of work to operative-type staff, releasing the more qualified workers to carry out the complex and difficult tasks.

Firms must look again at how they organise both themselves and their assignments so that the key measure of performance becomes chargeable hours. Partners who run a client care programme, win new business and supervise more will make better returns. And firms ensuring the correct delegation of skills will find they retain more staff and achieve better profitability.

Stephen Raznick is a partner in SR Associates which specialises in giving practical help to professional firms

DELEGATION CHECKLIST

– Stop clinging to ‘chargeable hours’ as the only measurement of good performance

– Introduce a two-tier system for partner charge-out rates: a lower fee for compliance work (audit reviews or tax computation preparation) and a higher one for special client work and advice

– Monitor how partners divide up their time, particularly how much is

spent at the lower rate which should be no more than 40%, and make this part of annual targets

– Monitor the ratio and number of hours partners spend on their own clients and how many man hours worked by others they control

– Develop a costing system to measure the true profit on each client assignment to ensure the most cost-effective, but best-qualified, person is on each assignment

– Use peer reviews of files to analyse if you are getting staff allocation right staff

– Put in place better hands-on training, appraisal and after-job evaluation to ensure staff reach their full potential quickly

– Improve the supervision skills of seniors and managers

Make better use of para-professionals but not as a substitute for fast-track graduates

TANGIBLE RESULTS

Above: the partner’s return on fees is less than the manager’s. But, because profit shares fall below the line, gross margins do not reflect this and it is therefore largely ignored.

Left: A has far fewer chargeable hours than B. A is controlling far more hours but bringing in more business.

Who is more valuable?