Whether you’re starting a new law firm or expanding, analyzing the costs and benefits of taking on new staff can help keep you on track financially. Let’s take a look at a few best practices for costs/benefits analysis.
Before you commit to hiring new staff, you should brainstorm the costs of doing so. Some of the most common and expected costs are:
- Recruiter fees
- Training costs
- Relocation costs
There are other costs that you may not have considered such as the cost of new equipment—laptop, mobile phone and even the cost of a desk and chair. You should also consider if adding a new employee will require you to get more office space and increase the cost of leasing. Also, think about what it will cost to keep valuable new hires. Eventually, you will need to give raises or your skilled employees may decide to go elsewhere. And don’t forget about those ongoing costs such as subscription fees or other annual costs. These recurring costs must be included in your cost estimates.
When you’re brainstorming how you might benefit from hiring a new employee, you must analyze both tangible and intangible benefits. Let’s take a look at a few examples:
- Increased revenue. Hiring an administrative assistant might free up attorney time so that they can focus on billable hours. Also, hiring a new associate could allow your law firm to take on more cases.
- Expand services. Closely related to increasing your law firm’s revenues, adding another associate with skills in a different practice area could allow you to offer a wider variety of services to clients.
- New ideas. Bringing in people with fresh perspectives is an intangible benefit that can greatly improve your law firm. Fresh perspectives can help you solve problems that have been plaguing your law firm.
- Promote valued associates. If you’re a small law firm with experienced associates, hiring new associates may allow your experienced staff to take on more responsibility.
Try to think of as many benefits as possible then assign a monetary value to benefits and costs.
Counting The Money
As you examine your costs and benefits, assign a monetary value to both. For costs, this should be relatively easy with a little research. But for benefits, you will need to think about what each benefit is worth. For example, how much is it worth to have an administrative assistant if it allows associates to bill more hours? Don’t skip this part because an accurate assignment of monetary value will give you the information you need to determine if hiring a new employee is really worth it. Once you’ve assigned all costs and benefits a monetary value, add it up. If the benefits are worth more than the costs, it just may be worth the effort to hire a new employee.
Doing an accurate costs/benefits analysis of hiring new employees will help you make better staffing decisions in the long-term.