According to the Legal Trends Report for 2021, your firm’s utilization rate allows you to assess the workload and productivity of your firm. It’s one of the most crucial KPIs for legal companies to monitor.

Utilization, Productivity and Profitability are the terms that often confuse. In this article, we’re going to discuss Utilization & its importance for law firms.

We’ve already discussed Profitability (How Law Firms Should Calculate Their Profitability?) in one of our earlier posts.

We’ve tried to make it easy for you. So, let’s get into it without any further delay.

1. What is Resource Utilization?
   It is a term used to describe the percentage of an employee’s available time that is used for billable tasks.

   Mathematically,

   Utilization = Actual Number of Hours Worked (by the resource) / Total Available Hours

    Utilization % = Utilization x 100

2. How is Utilization Calculated?
   Since it’s a Mathematical aspect, to understand it better let’s play with some numbers.
   • 2.1 Basic Mathematics behind Utilization
     • Suppose Will Smith is an associate at your Law Firm. The firm follows 8 hours of schedule per day.
     • On a particular day, Will entered the timesheet for just 4 hours.
     • Meaning, he’s utilizing just half of his available hours.
     • So, his Utilization is 50%
   • 2.2 Little More Mathematics
     Let’s see how this mathematics works for 4 key resources at any law firm.But, before that we need to have the information about available hours, that is as follows:

     Available Time (Per Resource)
     Per Day: 8 hours	Per Week: 40 hours	Per Month: 160 hours (approximately)

      

     Resource Name	Actual Working Hours	Utilization	Utilization %
     Will Smith	2 hrs	0. 25	25%
     Peter Parker	4 hrs	0.50	50%
     David	8 hrs	1.00	100%
     Gordon	6 hrs	0.75	75%
     Stacy	12 hrs	1.50	150%

3. Why is Utilization Important?
   • Identifying Under and Over Utilized Resources
   • Ensuring the Right Work Allocation
   • Employee Satisfaction and better work-life balance
   • Improving Productivity and eventually Profitability
   • Managing the Projects Better
   • Data-Driven decision making not based on just an opinion

   An interesting fact about Utilization:

   According to Gartner researcher Robert Handler, if any resource utilizes 70-80% of their allocated time, is the ‘Sweet Spot’. If team members spend more than 80% of their time on billable work, they are ‘Less Productive’ and generally termed as Underutilization. Though, it seems to be Overutilization, which is not true mostly. Because it’s a cost in terms of mental state and employee satisfaction. So, the project managers need to make sure that their team aren’t overworked during the process.

How can Legalxgen help you with the Utilization?
In a few cases, low utilization rates have been discovered due to a lack of adequate technology for capturing billable time. Billable time is frequently not captured, or if captured, never makes it onto a bill, as a result of not having a strong practice management solution in place. Thus, having low utilization rates may be a sign that the firm could use better technology.

And this is where LegalXGen comes to rescue your law firm with its all-in-one law practice management software because we never forget, Time is Money!

Hard to believe? Take the FREE DEMO now to find out how they might help your business become more profitable.