Partner Billable Hours & Staff Billable Hours – What’s The Correlation?

The genesis of this question comes from one of the most hotly debated issues in CPA firm practice management:  Is it better for partners to have high or low billable hours?

Here are billable hour facts for partners in multi-partner firms from The Rosenberg 2012 MAP Survey :  33% have fewer than 1,000 per year; 45% have between 1,000 and 1,300; 10% are in the 1,300s and 12% rack up more than 1,400 billable hours a year.  Overall, partners average roughly 1,100 billable hours a year.

Proponents of high partner billable hours: Partners have high billing rates and their work doesn’t have to be corrected much, if at all.  When partners are highly billable, the firm makes more money, period.

Proponents of low partner billable hours: It’s more important what a partner does with his/her non-billable time than billable time.  When partners spend time in firm management, practice development and staff mentoring, this is more valuable to the firm than doing billable work that can be delegated to staff.  When partners are highly billable, important non-billable activities suffer.  If you want to maximize short term profits, go ahead and have your partners work high billable hours, but this eventually will make the firm less successful, and probably less profitable, in the long term.

I have always favored the low-partner-charge-hours model. To be fair, when we analyze practice management metrics, firms with higher partner charge hours do out-earn firms with low partner charge hours.  I believe that the majority of these firms’ partners work these high hours because they are either (a) intentionally choosing to focus on short-term profits to the detriment of the long-term or (b) have no choice but to work these high hours because they can’t find enough qualified staff.

During a recent discussion of this issue at a conference I was speaking at, someone asked:  “Do firms with high partner charge hours experience lower chargeability from their staff?  And conversely, do firms with low partner charge hours experience higher productivity from their staff?”

If the partners are keeping their own billable hours lower by delegating work to staff, it seems logical to expect staff billable hours to be higher.  So, I decided to analyze the data in The Rosenberg 2012 MAP Survey and see what the correlation is between partner and staff billable hours.

The results are surprising and counterintuitive:  The higher the partners’ billable hours, the higher the staff’s billable hours.  And the higher the staff’s billable hours, the higher the partners’ billable hours.

I think I have an explanation.  Higher performing firms grow faster and their partners are always busy. Partners are always hustling.  The pace of life in these firms is frenetic.  The partners feel that the more they delegate, the more new work comes in.  The number of people in the firm compared to the volume of work that needs to get out the door is highly strained.  All of this translates to higher billable hours for both partners and staff.  This phenomenon more than offsets any reduction in partner billable hours due to delegating work to staff.

So, there’s your answer.