Measuring lawyer productivity

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Recently, Carolyn Elefant at Legal Blog Watch summarized an interesting debate over a question that many lawyers will soon be asking themselves. Let’s say your law practice succumbs to the logical and inevitable, stops routinely billing by the hour, and institutes other system(s) of pricing and selling your work. Query: do you still need to docket your time? There are two schools of thought: continue to track your time because it allows you to determine your costs and your lawyers’ profitability and because clients might demand an accounting of the time you spent; or, stop tracking your time because it’s entirely irrelevant to your profitability and it’s none of your clients’ business anyway.

I fall into the latter category, for the reasons provided by Allison Shields in a comment on Carolyn’s post…

Why would a client care about time records or how the work gets done as long as it’s done based upon agreed-upon specifications? Clients only really care about time and time records because they perceive that’s what they’re paying for – and lawyers back that up by claiming that what they sell is time, instead of focusing on the value and the services they provide to clients. Lawyers don’t sell time and clients don’t buy time.

…and Jay Shepherd in a separate post at his blog:

Now folks at other law firms will whine that they need to know how profitable an associate’s work is, and how profitable a particular matter or client is. Without tracking and billing for time, they can’t possibly tell.

Nonsense. Take an accounting class. Profit is revenue minus expenses. The question is whether the firm is profitable, not whether an associate or a client is profitable. The relevant question for a client is whether you’re delivering enough value to the client to justify the best price they would pay. The relevant question for an associate is whether he or she does good work for your clients.

The whining continues: But if we don’t track associates’ time, how do we know if they’re working? After your accounting class, take a management class. You know by managing your associates.

But there’s another important point here, voiced by Doug Cornelius in a further Blog Watch comment:

When you go to non-hourly billing, the time sheets are focused on the internal process and business analysis. You can focus on the efficiencies and inefficiencies of your operations. You can use this data to better target your fee and find ways to get it done better, faster and more efficiently. Putting more money in the lawyer’s pocket.

Generally, I agree with this, though I actually don’t think a traditional time sheet by itself would be the best way to track productivity and efficiency, for a couple of reasons. One, lawyers are notoriously inconsistent docketers — many time sheets are filled out at the end of the day or the week through recollection and guesswork, meaning lawyers overestimate (or, with surprising frequency, underestimate) the number of hours they spent on a given matter. And two, forcing a lawyer to record her time, even if the sheets aren’t used to support invoices, reinforces the importance of “time spent” and encourages the belief that time really is what the lawyer is selling.

But Doug is correct — law firms need ways to measure the productivity of their lawyers, the efficiency of their practices, and the overall effectiveness of their working  days. Firms need lawyer performance metrics — that is, they need to (a) identify a lawyer’s activities and accomplishments that contribute the most value to the firm, (b) come up with ways to effectively measure those activities and accomplishments, and (c) create systems and encourage habits by which a lawyer can improve her performance in these respects. Larger firms would create performance metrics for individual practice groups, or regional offices, not just for individual lawyers. (And firms of all sizes should start with the definitive discussion of performance metrics in the law, John Alber’s July 2005 “Delivering Actionable Information To Front-Line Lawyers”).

Jason Anderman took a good step in this direction with a recent blog post 3 True Outcomes: Sabermetrics for Lawyers? Using Michael Lewis’s baseball best-seller Moneyball as a resource, he kicked off a discussion of legal practice metrics by echoing the concept of the only “three true outcomes” (strikeout, walk, home run) over which a pitcher has complete control. He suggested identifying and measuring the only aspects of a given legal process over which a lawyer has complete control (for example, time spent on a first client meeting, time spent to deliver a first draft to the other side, and revision turnaround time) and gathering them together under a “cycle time” statistic. While he acknowledges there’s more to the process than timeliness — a negligent lawyer who barely reviews documents would have very good cycle time stats — he thinks, and I agree, that it would be a good start.

Jason’s post drummed up a lot of interest when it was featured at Legal OnRamp. From a litigator’s perspective, Patrick J. Lamb agreed that total cycle time from engagement to resolution of a matter would be relevant, and suggested interim steps such as how quickly documents were obtained and examined, how long it took to draft written discovery, and average time of depositions (while noting that these aren’t all under a lawyer’s complete control). Fred Bartlit added measures such as preparation and examination of a two-day expert damage witness and research and drafting of a motion to dismiss. But he also observed that the ultimate metric from any litigator’s (and client’s) perspective is victory — as important as lawyers’ productivity and efficiency are, they’re secondary to the outcome. (See Ronald Baker for more on client-focused productivity metrics.)

What all this illustrates is yet another aspect of law firm business that needs to be re-examined and adjusted in light of new marketplace realities: how to measure a lawyer’s value to the firm. Pretending that billable-hour totals can pass for a productivity metric (as some firms still believe) won’t work anymore — firms are going to have to identify reliable lawyer performance metrics and, more importantly, figure out ways to help their lawyers improve the performances that those metrics reflect. Time spent on a task can be an acceptable piece of the puzzle, so long as everyone understands it’s only a piece and not all that big.

Lawyer productivity metrics will have to move away from the effort-based measures of the past (e.g., hours billed) towards metrics that focus on accomplishment, usually measured against a series of predetermined criteria. Firms that have decided to move away from lockstep compensation for associates have already committed themselves to going down this path anyway. It’s yet another perfectly ordinary aspect of running a business that lawyers have shied away from, but just as there’s a process revolution coming to the law, a productivity revolution is now also well underway.

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6 Responses to “Measuring lawyer productivity”

  1. Doug Cornelius

    Jordan -

    Spot on. Just because you don’t need to track time for billing does not mean that you shouldn’t be measuring productivity.

    I saw an excellent presentation on a law firm’s use of six sigma principles to increase their productivity in handling particular types of transactions. They could easily see the inefficiencies and areas for improvement. They tracked the time spent on various aspects of the transaction and who was doing what work. In the end, they could see a better allocation of resources, better outcomes, and an increase in profitability for that type to transaction.

    They key was not merely tracking the time spent, but to categorize how that time was spent. The ABA task code are a useful paradigm, but not useful for measuring productivity.

  2. Free Legal Documents

    Thanks, Jordan. Deborah Gordon at Seyfarth Shaw in Chicago (http://bit.ly/auVVW) is one of the law firm leaders in pushing Six Sigma and process improvement. She’ll actually sit down with a client and ask the question, “How can we reduce your legal bill?”

    When I show WhichDraft.com’s free contract assembly website to lawyers, the common first reaction is, “You’re going to put me out of business.” I try to emphasize to them that there are so many potential clients who can’t afford us right now, that they have a chance to greatly grow their business by being more efficient. There was a recent post on TechCrunch (http://bit.ly/4kCHE) about the radical increase in productivity for software engineers over the last 10 years due to reuse of shared code libraries and open source software. If you think about it, there’s no reason that lawyers can’t do the same.

    Jason Mark Anderman
    jason@whichdraft.com
    twitter.com/JasonAnderman

  3. James G. McConnell

    Lawyers will always need time records for the following reason: at some point in your career you are going to be challenged by a client contending you have not devoted sufficient attention to the client’s matter, or by an opponent seeking sanctions for your inaction on discovery requests from the other side. Without contemporaneous time records, you will be hard put to prove that you did the work you say you have done on behalf of the client or in response to the opposing counsel’s discovery requests. No matter what happens regarding billing methods, the management of junior attorneys and the law firm, and the measurement of lawyer productivity, the lawyer’s own best self-defense mechanism is a contemporaneous diary of the time devoted to each client and matter every day you are working.

  4. Martha

    I love Jay Shephard’s admonition to take an accounting class and a management class and I think he really hits the proverbial nail right where it lives: there are more efficient and profitable ways to track efficiencies and profitability than the traditional law firm model. The old methods actually encouraged inefficiencies and waste. A new model that measures price, volume and quality against resource cost really trims the equation down to the right size and ties cost to value.

    The problem is that lawyers are not accountants or managers. Teach them to fish (i.e. properly value and manage the work and resources) and maybe they will feed the entire firm for the year using alternative methods.

    Thanks, as always, for the great post.

    Martha

  5. Allison Shields

    Great article, Jordan!

    I don’t agree with the previous commenter that contemporaneous time records are the best way to show that you did work for a client or responded adequately to discovery demands from opposing counsel. After all, there should be telephone calls/messages, emails, letters, notes and other documents that would be evidence that work was performed.

    Whether you have devoted ‘sufficient attention’ to a client’s matter isn’t a function of the number of hours billed, nor do I believe that a client cares about the time records. Clients who question whether you’ve devoted sufficient attention to their matter aren’t questioning your time keeping – they’re questioning your performance and/or the outcome, which means you’ve fallen short in some other way, failed to implement effective client selection procedures, or failed to maintain the relationship properly.

    It’s time lawyers stop using time as a measure of value and timesheets as a management tool. I posted on these issues some time ago in “Are Timesheets Really an Effective Management Tool?” and and “Do You Need Timesheets to Determine Profitability?”here: http://bit.ly/nkc4R and here: http://bit.ly/vldkh

  6. Gary Luftspring

    Jordan, the billable hour will still have to be tracked by litigators in jurisdictions where costs are awarded. At least in Canada costs are awarded on the basis of time spent and hourly rates. Even in class action proceedings where a % arrangement is in place the court has supervisory jurisdiction and will use the time to measure reasonableness on the basis of what multiple of time is being requested. Courts have developed elaborate rules in order to monitor the reasonableness of the time for particular tasks but nonetheless docekted time is for the most part accepted as legitimate and appropriate as a starting point for cost assessment.

    Moreover I agree with Doug. Even in professions where there is a long history of fixed fees such as engineering and architecture, they track time in order to measure their own efficiency and as a tool to coming up with the appropriate fixed fee. The measuring of how long things take to do efficiently will always be an important component of pricing a service. The problem that will arise is that for a number of tasks the cost of delivering that service even efficiently in a particular jurisdiction will be out of whack with the price for which the service can be provided elsewhere. Welcome to globalization of the profession.

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