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Capacity Planning For Law Firms

We have all experienced this: sometimes we have too much work to do and sometimes we don’t have enough.  Individuals, teams, departments and entire organisations experience peaks and troughs of activity.   Although this appears an immutable law of working life, it need not be the case. Avoiding, or at least minimising, the sometimes wild swings between too much work and too little is possible by implementing a capacity planning scheme.

So what is capacity planning and how does it work?


Capacity Planning Defined

The 6th edition of the Association for Project Management’s (APM) Body of Knowledge (BoK) repeats the standard definition of capacity planning as

the maximum amount of work that an organisation is capable of completing in any given period

To implement capacity planning properly organisations need know and understand their effective capacity.  That is to say, how much real work can be done in a typical day, bearing in mind the usual constraints.

Lets assume that in most professional service environments somewhere between 4 – 6 hours of client focused work is considered an averagely productive day for front line professionals. So the purpose of capacity planning in law firms is to make sure that all fee earners achieve at least 4 – 6 hours of client (chargeable) work per day, every day.  


Capacity Planning Model

To plan and manage capacity effectively, organisations need to:

  1. Estimate demand accurately
  2. Translate demand into capacity requirements
  3. Estimate existing and future capacity
  4. Identify any gaps between demand and capacity
  5. Take steps to bridge any gaps identified.

Steps one and five are (or should be) most often done by senior management, and I will refer to how this can be systemised a little later.

Steps 2, 3, and 4 are often left to middle management staff, and project management staff in particular.  I think the crux of the whole process is step 3.


Estimation (again)

Estimating is a recurring theme in project management.  Projects require someone – the project manager – to be looking ahead.  In truth, detailed (or reasonably detailed) estimates will need to come from those actually doing the work.  A project manager can prompt, cajole and advise about estimates but ultimately those engaged on tasks are best at estimating future performance.

This is something I touched upon in a previous post about implementing an earned value management-like system (EVM) in law firms.  Determining whether projects are on schedule requires that estimates of future work be made (ie the amount of work which can be done, time needed to do it and cost of doing it).

In my previous post I showed how legal project managers use estimates help manage matter costs and schedules.  They can also use estimates help with capacity planning too.  I think this this is another example where full-time legal project managers can really show their worth.


What data needs to be collected for capacity planning?

Project managers need to:

  1. Assess the skills and experience required to execute work properly and productively (bearing in mind the nature of the work involved)
  2. Identify who has the right mix of skills and experience to do the work
  3. Assess whether those best placed to do the work can take the work on now or at some point later (if later this needs to be at a time which not disruptive to the project as a whole).

Hence legal project managers should have, readily to hand, a list of skills and experience for each member of the team.

To align the skills and experience with project need, project managers need to know who can take on the work during any given period.  To do this properly, a calendar needs to be created indicating confirmed (chargeable) work for each team member over a reasonable time period.


What is a reasonable time period?

For the purpose of capacity planning, many organisations work on a rolling look-ahead of 3 months.  Capacity is estimated 3 months ahead, on the understanding that the figure for next month is quite accurate, month two somewhat less so and month three least accurate of all.  Each month the capacity estimates are updated.

Capacity planning is usually best done initially at a departmental level.  If done consistently and universally, estimates can be aggregated together to provide a high level organisational view of overall capacity.


Plugging the gaps – Portfolio Management

As noted earlier, organisations (and / or departments and teams) need to assess demand and be prepared to plug any gaps between demand and capacity.

The top-down approach to gap-plugging is most likely to be successful if derived from a Portfolio Management process.  Portfolio Management refers to systems and processes which allow senior management to take a bird’s eye view of all project based work and base decisions on analysis of that work.  In other words, it is a high level planning system.  As such, it allows organisations to be proactive rather than reactive.  I should emphasize that high level capacity planning is just one aspect of a good portfolio management system.


Plugging the gaps – Resource Scheduling

The bottom-up way of plugging the gaps is by good resource scheduling. It’s all very well knowing capacity, but the key to effectiveness is proper deployment of the resources which make up that capacity.  Essentially, making sure the right people have the right work at the right time.  Resource scheduling is another fundamental concept in project management and would be another job for your local legal project manager.


Becoming more proactive

Traditionally, I think many law firms have operated on the basis that if they get new work for which they do not have the right capacity (or even sometimes the right skills at all), they will simply hire new staff as quickly as they can to move things along.  The problem with this approach is that it is reactive, and clients are likely to notice a dip in service levels somewhere along the line.

Good capacity planning can help avoid this and other symptoms associated with a poorly organised law firm, such as rushed work resulting in poor quality or padding out the time it takes to complete work.

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