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Twenty-one per cent slide in partner profits last year prompts radical plans to boost performance
Lovells has unveiled radical plans to help boost profitability after profit per equity partner (PEP) plunged 21 per cent at the City firm in the past financial year.
The initiative, launched by Lovells managing partner David Harris, includes the introduction of a new financial system to measure the profitability of matters and clients or client portfolios.
The move marks a major shift in the way the firm reports financial information internally to partners; historically, Lovells has focused entirely on turnover and utilisation rates. The statistics will be distributed to partners annually, although they may request the information more regularly. At the start of the month, Lovells circulated the data for the past financial year to partners.
Lovells hopes that focusing more on profitability will encourage partners to work on more lucrative deals, as it will help identify types of work that the firm should consider moving away from.
However, sources at the firm, denied that this was an exercise to negatively weed out unprofitable partners.
One Lovells partner welcomed the move, saying: "It will encourage partners to work in a more profitable way and will show if someone is terminally unprofitable."
The plan is the second stage of an initiative launched in February 2003 to reduce lock-up, which has since been reduced by more than 20 days. On 1 May 2005, the firm's lock-up was only six days below the target of 110.
Lovells is also considering introducing annual reviews for all partners. Currently, partners are reviewed annually for the first three years and thereafter every two. The firm will also be requiring partners to produce personal business developments to supplement those for their practice areas.
As first reported on www.thelawyer.com last Wednesday (6 July), Lovells' turnover dropped by 3 per cent to £366m in 2004-05, while average PEP slumped from £541,000 to £427,000.