Workforce planning for a modern world

Pinsent Masons Case Study

Workforce expenses are often the largest cost within a business, especially for companies that are service providers. That means your workforce is the main source of your revenue, as you essentially sell the expertise of your people.

When you are a fast-growing law firm like Pinsent Masons LLP, understanding the implications of planning your workforce can help you make informed, timely decisions and help you successfully manage growth. Pinsent Masons team have experienced this first-hand.

We’re an international law firm based in the United Kingdom, with offices throughout Europe, the Middle East, Africa, Asia, and Australia. When I describe us as “fast-growing,” I mean it: We’ve effectively doubled the number of our locations in the past five years, and we’re expanding still”.

To achieve growth, projected costs need to be weighed against expected revenues. It requires you to model the full business impact of opening a new location or adding a practice area. Each location presents different considerations. It’s a detailed, complex exercise which would benefit from modern collaborative planning processes.

It’s a people business

It’s safe to say that budgeting and planning in a law firm like Pinsent Masons is all about people. The finance team starts the process alongside the HR team, which supplies critical information on the entire workforce—about 3,500 partners, employees and freelance legal professionals. All this data is imported into the Clear Plan model-  built on the award -winning cloud-based Adaptive Planning platform - which includes assumptions for costs (salary, benefits, office, support and service expenses) and the base hourly rate that revenue-generating employees are charged out to clients.

From this baseline, more granular planning around important aspects of running the firm can be created. One aspect is capacity modelling, which includes the amount of expected revenue from every billable fee earner over the course of the next quarter or year. This is a collaborative process involving business leaders and finance managers in each practice area and geography. The process is iterative and involves a lot of input and feedback from finance, business leaders and the board of directors.

Another primary focus is employee turnover. In Pinsent Masons LLP, business finance managers will sit down with their partners to quantify joiners and leavers in the team. This allows them to project how these will impact expenses and revenues. Historic data can provide you with some fairly solid projections about employee retention and leaving rates. However, some employees will leave unexpectedly, so it’s important to work that into the model as well. Additionally, the business operations team keeps track of costs of support staff who are critical to operations, but don’t generate billings. All this has an impact on the overall workforce plan.

Managing business growth and analysing costs

The expansion over the past five years has also helped Pinsent Masons become adept at understanding what to expect when opening a new office or introducing a new practice area. Typically, expenses during start-up are modelled higher, with lower revenues as the project comes online. Their start-up model looks three years into the future and splits the ramp-up into commonly seen phases. The goal for every location or practice is to achieve full capacity and completely predictable costs.

This experience allows them to identify and diagnose revenue gaps between locations. Using their Clear Plan model helps them understand why one location’s costs are higher than the norm, or whether it may be overstaffed or understaffed. In short, it enables them to get a sense of what’s actually happening in the business.

Excel Spreadsheets vs Adaptive Insights Business Planning Cloud

Before implementing the Clear Plan model on the Adaptive Insights Business Planning Cloud , Pinsent Masons team was struggling with the tasks outlined above. They used Excel spreadsheets to develop budgets and forecasts. This meant spending 70% of their time entering and verifying data, and only 30% viewing and interpreting it.

Today, the reverse is true. They now spend 7 out of 10 hours gathering insight from data. One major improvement is the ability to model what-if scenarios to anticipate the impact of changes in charge-out rates on recovery rates (or the percentage of total billed revenue they can collect and retain). Changing the levers to compare various models and scenarios used to be nearly impossible but now has become easy.

Furthermore, cash flow forecast can be particularly complicated for law firms as employees get paid on a consistent basis, but revenues are often delayed due to lengthy invoicing and remittance timelines. Reconciling cash in and cash out was a headache in our spreadsheet days; now cash flow forecast modelling has become infinitely easier, as its largely automatic.

Pinsent Masons Profit & Loss model is based on a departmental view, but cash flow is modelled on a geographic basis. With their Clear Plan model they can easily incorporate exchange rates across currencies, which is particularly important in the UK when trying to navigate currency exchange variations with the Euro and US dollars. A modern planning environment - like those Clear Plan provides -  makes these once difficult tasks much simpler and largely automatic.

All this leads to extremely valuable insights that help with identifying the true drivers for the business—insights that help make faster, more informed business decisions. By integrating Pinsent Masons workforce plan, with their budget, revenue forecasts, and corporate financial plan, it helps them determine where to expand to next; when and how to staff new locations, what practice areas to grow, and more.

“Key to our success, was the UK Adaptive Insights partner Clear Plan, which acted as a trusted advisor to ensure a seamless implementation.”

Learn more about Clear Plan and how they can help your company scale and improve your workforce planning.