Report of the Boston Bar Association
Task Force on
Professional Challenges and Family Needs
FACING THE GRAIL: Confronting the Cost of Work-Family Imbalance
The Effect of Allocating Expenses
on a Per Capital
Basis and Distributing Profits According to Receipts Generated
Revenue Generation
| |
Revenue from Partner Hours |
Revenue from Associate Hours* |
Number of Associates Utilized |
Total Revenue from Partners and Associates |
| Partner Anderson |
$500,000** |
$0 |
0 |
$500,000 |
| Partner Butler |
$500,000 |
$420,000 |
2 |
$920,000 |
| Partner Carlton |
$420,200 |
$630,000 |
3 |
$1,030,000 |
Total Aggregate Revenue: |
$2,450,000 |
Expense Utilization
| |
Revenue from Partner Hours |
Number of Associates Utilized |
Associate Expense (Salary
Expense Calculated at $100,000/Associate) |
Total Expnses Utilized by
Partners |
| Partner Anderson |
$150,000 |
0 |
$0 |
$150,000 |
| Partner Butler |
$150,000 |
2 |
$500,000 |
$650,000 |
| Partner Carlton |
$150,000 |
3 |
$750,000 |
$900,000 |
Total Aggregate Expense: |
$1,700,000 |
Aggregate Profit
Total Aggregate Receipts = $2,450,000
Total Aggregate Expenses = $1,700,000
Total Aggregate Profit = $750,000
* In this hypothetical, the
associate time billed and collected is 1400 hours at a rate of $150/hour.
** Partners Anderson and Butler bill and collect for 1,600 hours at a
rate of $312/hour or 1,400 hours of work at a rate of $357.00 to earn
$500,000.
Who is Profitable?
On an Individual Basis:
Partner Receipts, Expense
Utilization and Profit calculated on individual basis: |
| Partner Anderson |
$500,000 - 150,000 |
= |
$350,000 |
| Partner Butler |
$920,000 - 650,000 |
= |
$270,000 |
| Partner Carlton |
$1,030,000 - 900,000 |
= |
$130,000 |
Total Aggregate Expense: |
$750,000 |
Who is Viewed as Profitable?
Under Revenue Oriented
Firm Compensation Formulas:
Partner compensation formulas that are revenue
("production") based determine compensation (e.g., divide partnership
profit) according to the percentage of gross revenues generated by individual
partners.
In this formula: |
|
Total Aggregate Profit: |
| Partner Anderson receives |
20% of $750,000 |
= |
$153,061 |
| Partner Butler receives |
37.5% of $750,000 |
= |
$281,250 |
| Partner Carlton receives |
42% of $750,000 |
= |
$315,000 |
|
