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.