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The Operating Leverage Calculator

Built by Craig Miller

What one hour of delegated associate work earns once the partner's review is counted as real delivery time, which of your inputs move that answer most, and what AI changes. It opens on the worked example from the source paper. Put your own rates in and every figure updates.

Benchmark scenario

Illustrative
Average: benchmark values
Billing rates
£/h
£/h
Fully loaded costs
£/h
£/h
Delivery and volume
%
%
£
hrs
ExtensionsNot in source
hrs
%
AI scenarioIllustrative
£
%
%
Net contribution / hr£197With AI: £171
Leverage multiplier L0.55×With AI: 0.48×
Per senior review hour£985With AI: £1,427
Total over 1,000 hrs£197,000With AI: £171,200

Each associate hour earns £197, which is 54.7% of what the same output earns done by the senior. Each senior review hour carries £985, or 2.74× a senior hour on their own work. Delegation pays when the freed senior time is sold or spent winning work. The AI scenario costs £26 per hour more than it saves.

MeasureBaselineWith AI
Per associate-output hour
Senior review hoursr20%12%
Collected revenueq(Rj + rRs)£333£290
Direct delivery costCj + rCs + a£136£119
Net contributionrevenue − cost£197£171
Contribution marginNC ÷ revenue59.2%59.1%
Against a senior doing the work
Senior-only contributions(qRs − Cs)£360£360
Leverage multiplier LNC ÷ senior-only0.55×0.48×
Delegation gainNC − senior-only−£163−£189
Senior capacity
Contribution per senior review hourNC ÷ r£985£1,427
Senior-hour leveragevs one senior hour on own work2.74×3.96×
Firm view incl. redeployed timep = 0%£197£171
Firm-view multiplierfirm view ÷ senior-only0.55×0.48×
Break-even review levelwhere NC = 0Profitable at any levelProfitable at any level
Over 1,000 associate hours
Total contributionn × NC£197,000£171,200
Total delegation gainn × gain−£163,000−£188,800
Senior review hours usedn × r200120

What drives the answer

Measure for charts 1 and 3:

1.What moves the answer most

Each input moved 10% down and up with everything else held. The longest bars are the inputs worth getting right first.
Input 10% lowerInput 10% higher

Centre line: now £197

2.Where the money goes

From what the senior earns doing the work, step by step, to what delegation earns per associate-output hour. Read it top to bottom.
TotalAddsTakes away

3.Where delegation pays

Review burden across, realisation down: the two levers a managing partner moves day to day, and how they interact.
Above zeroBelow zero
Review 0%, realisation 100%: £150150Review 10%, realisation 100%: £192192Review 20%, realisation 100%: £234234Review 30%, realisation 100%: £276276Review 40%, realisation 100%: £318318Review 50%, realisation 100%: £360360Review 60%, realisation 100%: £402402Review 0%, realisation 95%: £138138Review 10%, realisation 95%: £177177Review 20%, realisation 95%: £216216Review 30%, realisation 95%: £255255Review 40%, realisation 95%: £294294Review 50%, realisation 95%: £333333Review 60%, realisation 95%: £372372Review 0%, realisation 90%: £125125Review 10%, realisation 90%: £161161Review 20%, realisation 90%: £197197Review 30%, realisation 90%: £233233Review 40%, realisation 90%: £269269Review 50%, realisation 90%: £305305Review 60%, realisation 90%: £341341Review 0%, realisation 85%: £113113Review 10%, realisation 85%: £146146Review 20%, realisation 85%: £179179Review 30%, realisation 85%: £212212Review 40%, realisation 85%: £245245Review 50%, realisation 85%: £278278Review 60%, realisation 85%: £311311Review 0%, realisation 80%: £100100Review 10%, realisation 80%: £130130Review 20%, realisation 80%: £160160Review 30%, realisation 80%: £190190Review 40%, realisation 80%: £220220Review 50%, realisation 80%: £250250Review 60%, realisation 80%: £280280Review 0%, realisation 75%: £8888Review 10%, realisation 75%: £115115Review 20%, realisation 75%: £142142Review 30%, realisation 75%: £169169Review 40%, realisation 75%: £196196Review 50%, realisation 75%: £223223Review 60%, realisation 75%: £250250Review 0%, realisation 70%: £7575Review 10%, realisation 70%: £9999Review 20%, realisation 70%: £123123Review 30%, realisation 70%: £147147Review 40%, realisation 70%: £171171Review 50%, realisation 70%: £195195Review 60%, realisation 70%: £219219Review 0%, realisation 65%: £6363Review 10%, realisation 65%: £8484Review 20%, realisation 65%: £105105Review 30%, realisation 65%: £126126Review 40%, realisation 65%: £147147Review 50%, realisation 65%: £168168Review 60%, realisation 65%: £189189Review 0%, realisation 60%: £5050Review 10%, realisation 60%: £6868Review 20%, realisation 60%: £8686Review 30%, realisation 60%: £104104Review 40%, realisation 60%: £122122Review 50%, realisation 60%: £140140Review 60%, realisation 60%: £158158100%95%90%85%80%75%70%65%60%0%10%20%30%40%50%60%Senior review per associate hour (r) →Realisation (q)

Cells in £ per associate hour. Every cell sits above break-even (NC = 0), so there is no line to draw. Outlined cell: your inputs.

4.Benchmarks and the AI effect

Contribution per associate-output hour for the three illustrative benchmarks and your inputs, done by the senior, delegated, and delegated with the AI scenario.
Senior does itDelegatedDelegated with AI

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Your three presets, and a link that opens the calculator with them loaded, ready to pass to a partner or your finance lead. Submitting saves your current inputs to the Average preset in this browser.

Confirm your email and you go straight to your saved scenarios and the share step.

The maths

Three formulas carry the model. The line under each one works it through with the inputs above, so every figure on this page can be checked by hand.

1. Net contribution per associate hour

NC = q(Rj + rRs) − (Cj + rCs + a)

What one hour of associate output earns after paying for the associate and the partner's review of it.

0.9 × (£250 + 0.2 × £600) − (£90 + 0.2 × £180 + £10) = £197

2. Leverage multiplier

L = q(Rj + rRs) − (Cj + rCs + a)qRs − Cs
  • L = 1: delegation earns the same as one senior hour.
  • L > 1: delegation earns more than the senior doing it.
  • L < 1: review, pricing, realisation or staff cost make delegation weaker on this test alone.

£197 ÷ (0.9 × £600 − £180) = 0.55×

3. Contribution per senior review hour

NCr against qRs − Cs

What each hour of partner time earns when spent supervising, against the same hour spent on the partner's own work. This is the capacity view of leverage.

£197 ÷ 0.2 = £985 against £360 on own work, so 2.74×

Show the detailed derivations

Revenue and cost, before realisation

Gross revenue = Rj + rRs
Direct delivery cost = Cj + rCs + a

Partner review is counted as real delivery time, not ignored. Profitability models should include quality review, coordination and rework.

Contribution margin

Margin = q(Rj + rRs) − (Cj + rCs + a)q(Rj + rRs)

The share of collected revenue left after the associate's cost and the partner's review time. Overhead is not allocated.

£197 ÷ £333 = 59.2%

Delegation gain

G = [q(Rj + rRs) − (Cj + rCs + a)] − (qRs − Cs)
G = q(Rj − (1 − r)Rs) − (Cj − (1 − r)Cs) − a
  • The associate brings in revenue at Rj.
  • The firm gives up the senior billing the unreviewed share, (1 − r)Rs.
  • The firm still pays for the review, rCs.

£197 − £360 = −£163 per hour

Senior speed (extension)

Senior-only = s(qRs − Cs), L = NCs(qRs − Cs)

s is the senior hours needed to produce one associate-hour of output. The source fixes s = 1. A faster partner bills fewer hours for the same work, so s = 1 overstates the senior-only case.

s = 1: senior-only £360, L = 0.55×

Capacity-adjusted leverage

Team contribution = n[q(Rj + rRs) − (Cj + rCs + a)] − Cs,base
Per senior hour = n·NC + senior direct contribution − senior fixed costsenior hours committed

The calculator uses the simplest case: no fixed senior cost and no senior direct work, which reduces to NC ÷ r. The headcount ratio n : 1 says less than this.

1,000 hrs × £197 = £197,000 using 200 senior hours

Break-even review level (corrected)

NC = k + r·m, k = qRj − Cj − a, m = qRs − Cs
m < 0: r < k−m, m > 0: r > −km

NC is a straight line in r. If billed review earns more than it costs (m > 0), more review raises contribution. If review is written off, m = −Cs and there is a real ceiling.

The source gives r < (qRj − Cj − a) ÷ (Cs − qRs) without flipping the inequality when the denominator is negative. The form above corrects that.

k = £125, m = £360: Profitable at any level

Firm view with redeployed time (extension)

NCfirm = NC + p · max(s − r, 0) · (qRs − Cs)

Freed partner hours, s − r, are worth something only if they are sold. p is the share redeployed to billable work.

£197 + £0 = £197 (p = 0%)

AI scenario (extension, illustrative)

r′ = r(1 − ΔR), Cj′ = Cj(1 − ΔC), a′ = a + AI

The same formulas run with r′, Cj′ and a′. The junior billed hour is held constant. Under strict hourly billing, AI that cuts junior hours also cuts revenue, which this does not capture. Cutting billed review time does cut revenue, which is why AI can lower contribution.

r′ = 12%, Cj′ = £72, a′ = £25: NC = £171, L = 0.48×

Assumptions in the source model

  • Each associate-output hour carries r hours of senior review. Both are billed at standard rates and collected at the realisation rate q.
  • Realisation is the same for junior and senior time.
  • Costs are fully loaded hourly rates, charged only for hours used. Fixed senior cost (Cs,base) and overhead are excluded, so every output is contribution, not profit.
  • The senior-only comparison assumes one senior hour produces the same output as one associate hour.
  • Other direct cost a covers software, contractors and matter expenses per associate hour.
  • Freed senior capacity is given no value in L or the delegation gain.
  • Rates and costs are flat. No volume discounts, matter-type write-downs or utilisation limits.

Extensions and benchmarks

  • Senior speed (s), review billing and redeployment (p) are not in the source. Defaults (s = 1, billed, p = 0) leave the source result unchanged.
  • Break-even is solved with the correct sign; the source formula is flagged above.
  • AI scenario values are illustrative, not from the source.
  • Weak, Average and Aggressive benchmarks are illustrative. Average equals the paper's worked example. Weak assumes written-off review and poor realisation; Aggressive assumes premium rates, light review, a faster partner and half the freed time resold.
  • Saved presets live in this browser only. The save-and-share step gives you a link that opens the calculator with them loaded.

Formulas

Collected revenue
q(Rj + rRs) [rRs dropped if review not billed]
Direct delivery cost
Cj + rCs + a
Net contribution (NC)
q(Rj + rRs) − (Cj + rCs + a)
Contribution margin
NC ÷ collected revenue
Senior-only contribution
s(qRs − Cs) [source: s = 1]
Leverage multiplier L
NC ÷ senior-only contribution
Delegation gain
NC − senior-only contribution
Senior-hour leverage
(NC ÷ r) ÷ (qRs − Cs)
Firm view per hour
NC + p·max(s − r, 0)·(qRs − Cs)
Total contribution
n × NC

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