Issue 19, Summer 2007

www.idaabbott.com
 

The theme of this issue is how lawyers' perception of time is harmful to the profession and what can be done to repair the damage. We discuss how one firm has eliminated the billable hour as a performance measure and how another firm is helping lawyers learn to think differently about work and time. We also discuss the movement away from lockstep promotion and compensation to an individualized merit-based system by examining one firm that has done it and another about to make the switch. This issue also highlights four law firms that have been recognized for innovative approaches to law practice management.

  

CONTENTS OF THIS ISSUE

True or False: You Are What You Bill

New Approaches to Time and Performance

InnovAction Award Winners

Interesting Reports

 

 True or False: You Are What You Bill

Lawyers are an unhappy bunch. Their dissatisfaction with law practice is well documented. 1  A recent poll in Britain, where law firm profits are soaring, 2 found that one-fourth of 2500 lawyers surveyed, including one-third of non-partners and 20% of law firm managing partners, wanted to leave the legal profession. 3  One undeniable reason for this unhappiness is the ever-increasing numbers of hours lawyers must devote to client work. But the amount of time lawyers must spend at work is only part of the problem.

Lawyers' distress also derives from the single-minded focus on hours billed as a measure of lawyers' worth. This mindset has a corrosive effect on the way lawyers view themselves, their profession, and their lives. Measuring their contribution, value and compensation on the basis of hours produced is de-motivating and demoralizing for lawyers. For law firms, the result is an erosion of commitment, learning, and trust.

Growing condemnation by lawyers and clients of the reliance on billable hours is leading some firms to re-examine the way lawyers work and to search for alternative ways to measure lawyers' performance and productivity. Four firms that are making this effort are featured below.

Billable Hour: Background

There is nothing inherently wrong with billing by the hour for legal services. Hourly billing originated in the 1950's and 60's when keeping track of hours spent on legal matters was seen as a way to determine which of a lawyer's cases were more profitable than others. Timekeeping gradually became fairly common, but the practice picked up in earnest after 1975, when the fee schedules routinely used by lawyers were adjudged to be antitrust violations. 4  The growing use of computers also made it easier for firms to prepare and send out bills (and for clients to evaluate bills) based on the simple formula that multiplied the number of hours recorded by the lawyer's hourly billing rate.

Soon, however, firms realized that the formula allowed them to maximize income by increasing hours and/or rates. Rates were somewhat limited by clients, but firms could exert control over lawyers' time by increasing the hours they were expected to work. Firm expectations for lawyers climbed from 1500 to 1700 billable hours a year in the 1970s to 1900 in the 1990s, to 2000 hours and more today. This rise in hours and income has been accompanied by a rise in dissatisfaction, especially among associates. 5  What had begun as a simple accounting technique designed to increase income by recording time has turned into a monster that is driving lawyers out of the profession and threatening to undermine the sustainability of modern law firms.

I Bill, Therefore I Am

The fixation on billable hours has damaged the way lawyers view their work and themselves. As professionals, lawyers are highly skilled, with specialized expertise and obligations to both clients ands society. In law firms, what they produce and sell are services intended to solve complex problems, advocate for and protect clients' rights, and seek justice. They do this in a high-pressure environment that is marked by hard work and intellectual challenge.

Most lawyers who enter private practice are highly motivated to succeed and feel proud of what they do. Their legal work is intertwined with their social and personal identities. They are driven by a desire to achieve and by a belief that the work they are doing is intrinsically worthwhile. Even those who enter law practice primarily for financial rewards expect that their legal work will contribute in some significant way to their personal fulfillment.

That motivation is destroyed when lawyers' performance and to a large part, their careers, are determined by the number of hours they bill. Evaluating lawyers on the quantity of time billed instead of the quality of their performance, work product, and client relationships, undermines their identity as professionals. Instead of highly skilled experts with unique talents, lawyers feel like fungible "billing machines" that are producing and selling hours – not services. Associates come to consider law practice a job, a simple trade of time for money, rather than a profession or career, which invokes far broader commitments and responsibilities to clients, firm and community.

The Psychological Effects of Believing that Time Really Is Money

When Benjamin Franklin commented that "time is money," he could not possibly have foreseen that this equation would be taken so literally or that the effect would be so harmful. But the dominance of billable hours has had precisely this result. Because each hour has an assigned monetary value (the lawyer's billing rate), time and money are literally the same in lawyers' minds. With this mentality, since all time is potentially billable, and maximizing income requires working as much time as possible, time spent on non-compensable work is disfavored, and any time spent not working is deemed trivial and a sign of laziness or lack of commitment.

This mindset creates the illusion that time is a commodity that can be bought or sold almost like cash. This "commodified" view of time extends into lawyers' personal lives. If all hours have the same monetary value, there should be no difference in the value of time spent at work and time spent on other pursuits, such as going to a picnic, a birthday party or a concert with family and friends. But since only work time is compensated, time spent on other things may appear frivolous or wasted. Even when they are away from work, lawyers feel the stress of lost time and therefore lost income. A parent attending a child's piano recital for two hours may worry about the "lost opportunity cost" of that time and feel that such lost time has to be justified. Lawyers have even reported thinking about what billable rate would be appropriate for coaching their children's soccer games. 6 

When faced with a choice about how to spend their time, many lawyers become conditioned to choosing work. They do not invest time in building and maintaining relationships with friends and colleagues. They take little time for reflection or relaxation. They develop a sense of detachment that can result in a profound sense of isolation, alienation, and loneliness.

The psychological effects of the obsession with billable hours undermine lawyers' commitment and motivation, inhibit associates' learning and development, and create friction between partners and associates.

  • Associates define their commitment by hourly requirements. When associates see themselves as employees who trade time for money, they define – and limit - their commitment in terms of the hours they owe the firm. Instead of feeling engaged in the intellectual challenge of solving the client's problem, they calculate how many hours an assignment will "give" them. It is not unusual for an associate to decline an assignment because "I have already met my hours requirement for the period," or to refuse to participate in important firm events because "I need to bill 10 more hours this week."
  • Hiking compensation often de-motivates associates. Associates enjoy the financial benefits of high compensation, but resent the firm for using money to manipulate them. For example, by tying bonuses to incremental increases in hours above the minimum "target," firms reinforce the feeling that associates are instruments the firm employs to increase its profits. At some point, the feeling that they are merely "billing machines" leads to cynicism and loss of self-respect, and decreases engagement in their work.
  • Associate learning and development suffers. Lawyers come to a firm expecting personal attention, interesting work, and on-the-job training. But when the only things that get rewarded are those that can be billed, partners and associates resist non-compensable activities, including informal day-to-day mentoring and training. Instead, firms offer associates formal mentoring programs and CLE classes, which are insufficient substitutes for one-on-one, real-time learning opportunities.
  • Associates are set up to fail. Because associates are highly paid, partners expect a great deal from them. To partners, few demands are unreasonable when they are paying associates so much. But since partners do not take the time to teach associates the skills, characteristics, behaviors, and practices of excellent lawyers, associates feel professionally stymied and consider partners' expectations unfair. When associates cannot perform to expectations, the outcome is friction between partners and associates.
  • Partners withhold good work. The challenging "stretch assignments" that associates need in order to develop their skills are frequently withheld from them. Sometimes it is because clients instruct firms not to give work to high-priced but inexperienced associates. More often, however, it is because partners hoard the work to meet their own billable hour requirements.
  • Mixed messages about time expectations lead to distrust. Many firms profess that they want associates to spend time in activities that promote professional development, provide pro bono services, build client relationships, and help support the firm (e.g., committee work). But when it comes to their evaluations and bonuses, promotion and compensation decisions frequently contradict these assertions. Instead, firms focus on hours billed and hold up as role models the partners who bill the highest number of hours each year.

The Result: Lawyers Want Out

Long term law firm success depends on lawyers who are prepared to link their future to the firm. But few lawyers today are willing to sacrifice their lives to a firm, one billable hour at a time. What lawyers are rejecting is not the hard work or long hours per se, but the dehumanization that results from what they perceive as selling hours for money. Lawyers seek a sense of wholeness; they want to lead lives of meaning, connection, and moral purpose. Law firms can – and should - provide work environments where lawyers can find that kind of life. But this is possible only if they stop thinking about billable hours as the primary measure of success.

Bold new ideas are desperately needed to find ways for law firms to look at professional success more broadly and to restore the intrinsic value of legal work as a source of intellectual and professional satisfaction. The firms highlighted below are taking steps in that direction.


1 See, e.g., Carl Horn III, LawyerLife (Chicago, American Bar Association) 2003

2 Alex Novarese, "Profits at U.K.'s Top 50 Law Firms Hit Record Levels," Legal Week, July 20, 2007, http://www.law.com/jsp/LawArticlePC.jsp?id=1184869657030

3 Frances Gibb, "One in four lawyers wants to change jobs," www.TheTimes.com, July 2, 2007

4 Huseyin Leblebici, "Determining the Value of Legal Knowledge: Billing and Compensation Practices in Law Firms," in Laura Empson, ed., Managing the Modern Law Firm (Oxford, Oxford University Press) 2007.

5 Ibid.

6 Jeffrey Pfeffer, "Why Free Agents Don't Feel Free," www.CNNMoney.com, March 15, 2007

 

 New Approaches to Time and Performance

It is heartening to find law firms that are committed to changing the way lawyers are valued. Below are examples of how firms are eliminating billable hours, changing the way lawyers perceive time and performance, and moving from lockstep to merit-based systems.

(a) Eliminating Billable Hours. Tucker Ellis & West LLP, http://www.tuckerellis.com, a firm of 130 lawyers in Cleveland, Los Angeles, and San Francisco, has eliminated billable hour requirements. The four year-old firm wanted associates to be driven by the desire to excel, not by the need to bill hours, so they decided not to use hours to measure lawyers' performance or value. Instead, associates are evaluated on their demonstrated excellence as lawyers, including their work quality, skills, work ethic, professionalism, and dedication to clients, the firm and the community.

Tucker Ellis & West is unique in the individualized way lawyers are treated. The firm's "Standards and Expectations" and "Guiding Principles" state plainly what is expected of all firm lawyers. These documents clearly and unequivocally reject billable hours as an appropriate tool for measuring lawyer excellence.

By eliminating billable hours, Tucker Ellis & West has been able to emphasize learning, professionalism and community in many ways, including the following:

  • The firm has rejected lockstep in favor of individually tailored associate development and advancement. Associates are evaluated and promoted on the basis of personal skills, talents, and accomplishments. One of the firm's lawyers serves as the Director of Career Planning and Development. He meets at length with every associate and counsel once a year to draft their individual development plans. The Director and department heads use the plans to see that associates receive the kind of work opportunities they need to achieve their stated expectations and goals. The plans are reviewed the following year to measure the lawyer's progress and set new goals.
  • Partners explicitly commit to take responsibility for the professional growth and development of associates. How well they do this is a significant factor in partners' compensation.
  • Partners and associates commit "to mentor and be mentored." Lawyers are expected "to set aside short-term individual self-interest" for the greater long-term goals of transferring knowledge and building relationships.
  • The firm encourages alternative billing arrangements. They see this as a way to promote efficiency and mentoring. When their fees do not depend on hours billed, they have no incentive to maximize hours and no disincentive to train associates.
  • Partners do not receive origination credit. Instead, the firm institutionalizes its clients. They encourage partners to introduce clients to other lawyers in the firm in order to promote expansion and continuity of client relationships.

Has this been a successful experiment? If associate retention proves anything, then the answer so far is yes. In 2006, the firm had 88 associates and counsel and their attrition rate was 7% (compared to the national law firm average of 19%).

(b) Workshops to Change the Way Lawyers Perceive Time and Performance. Through the UC Hastings Center for WorkLife Law (www.worklifelaw.org), Joan Williams, Linda Marks and I have been working with Fenwick & West LLP, www.fenwick.com to educate the firm's lawyers to think differently about how they view time and work. We have created a series of workshops designed to ensure that lawyers' performance and contributions are valued on their merit, regardless of the number of hours they work. The firm wants to support its part-time policy so that lawyers who work reduced hours are treated fairly, receive developmentally appropriate work assignments, and progress steadily within the firm. The workshops look at the standard expectation that lawyers should be available at all times to work on legal matters, and how stereotypes and implicit biases lead to discrimination against lawyers who work part-time. The workshops explain how to value lawyers for their talents and contributions, not just the hours they produce; provide practical techniques and tools that help teams function effectively when members work varying schedules; and teach lawyers working on reduced hour schedules how to do so successfully.

(c) Stepping Away from Lockstep. Howrey & Simon, www.howrey.com, recently announced that it was abandoning lockstep for associates and moving to a merit-based system for advancement and compensation. The announcement was met with a surprising amount of criticism. But Howrey is not the first firm to do this. In fact, in 2001, Blackwell Sanders Peper Martin, www.blackwellsanders.com, not only adopted such a system, they wrote a book about why and how they did it. (Peter B. Sloan, From Classes to Competencies, Lockstep to Levels, Kansas City, Blackwell Sanders Peper Martin LLP)

Blackwell Sanders' experience proves that a merit-based system has substantial benefits. The firm replaced lockstep with a "levels" system in 2001. Associates progress along four levels based on their performance, as measured against clearly defined competencies. The firm reports that the levels system is a good recruiting tool because it differentiates Blackwell Sanders from other firms. It is also a good management tool, elevating associate productivity and performance because it requires partners to supervise and manage associates more closely. Promotion to partnership occurs when associates are ready for it, not within a fixed time frame. Several associates have moved into partnership faster than they would have on a traditional lockstep track.

Since the level system began in 2001, Blackwell Sanders' annual associate attrition has been reduced by half. At 330 lawyers, the firm falls into the mid-size category (250-500 lawyers). Firms in this group have the highest rate of associate attrition: 20% per year. But in 2005, Blackwell Sanders had only 12% attrition (14% for men and 10% for women). In 2006, its attrition rate was 11% (12% for men and 10% for women). In today's competitive market for associate talent, such low attrition, especially for women, is remarkable.

Howrey, a national firm of 630 lawyers, has in place many of the elements that enable Blackwell Sanders' system to succeed. Expectations about associate work quality and performance are set out in the firm's award-winning Howrey Attorney Competency Model, which identifies 16 competencies that the firm has determined to be essential to its lawyers' success. The firm has training academies and an online university, Howrey U, that give associates specific guidance and training in those competencies. Close individual monitoring will be provided by an Associate Career Director who will monitor associates' career management, and by a Supervising Partner assigned to each associate who will be responsible for giving that associate advice, feedback, and appropriate work experience.

 

 InnovAction Award Winners

The College of Law Practice Management 2007 InnovAction Award winners have been announced. The four firms that have been recognized for their unique innovations in law practice management are:

  • DLA Piper US – DLA Piper has created an initiative through which lawyers provide pro bono legal assistance for underdeveloped and developing countries throughout the world. Called "New Perimeter," the initiative enables lawyers in the firm to work on issues in those countries related to hunger, health care, environmental sustainability, economic development, corruption, law reform, and human rights.
  • Holland & Hart LLP – The firm's Holland & Hart Foundation creates and supports charitable and educational endeavors in which present and former lawyers, staff and their families work side-by-side. By working together on individual, group, office-wide and firm-wide volunteer projects, they build strong communities within the firm and strengthen the communities where the firm practices.
  • Mallesons Stephen Jaques – Mallesons, an international firm based in Sydney, Australia, created TalentNet, a comprehensive web-based solution for managing recruitment for legal and staff positions. TalentNet manages all internal and external processes involved in recruitment, removing most of the related administrative overhead while cutting recruiting time in half.
  • Raskin Peter Rubin & Simon LLP – This Los Angeles firm formed the Association of Media & Entertainment Counsel (AMEC) to support the professional development of in-house counsel in the entertainment industry, and established the Media & Entertainment Counsel Award, which recognizes outstanding corporate counsel in the field.

Further information about each of these award-winning projects is posted on the website of the College of Law Practice Management, http://www.innovactionaward.com/awardwinners.php.

 

 Interesting Reports

Catalyst, The Double-Bind Dilemma for Women in Leadership: Damned If You Do, Doomed If You Don't, July 17, 2007. This is the third report from Catalyst about the pervasive and damaging effects of gender stereotyping on women business leaders. It describes the "double-bind, no-win" dilemmas and career obstacles that stereotyping creates for women leaders, and the loss to organizations when they "underestimate and underutilize women's leadership talent." The report also provides action steps that organizations can take to reduce the effects of gender stereotyping in the workplace. http://catalyst.org/pressroom/pressdoublebind.shtml 

Mona Harrington and Helen Hsi, Women Lawyers and Obstacles to Leadership, MIT Workplace Center, Spring 2007. This important study identifies the reasons for persistently low numbers of women partners in Massachusetts law firms. The research concludes that work and family pressures disproportionately impact women to their professional detriment, but that this situation can be remedied if law firms develop flexible, creative ways to enable women to combine law practice with family life. http://web.mit.edu/workplacecenter/docs/law-report_4-07.pdf

The Opt-In Project Report, published May 31, 2007, is the culmination of a year-long series of roundtables sponsored by Heller Ehrman to find effective strategies that will promote retention of women lawyers in the workforce and create greater career sustainability for professional men and women. The report highlights effective practices from law and consulting firms, technology companies, and other industries. http://www.hellerehrman.com/docs/en/The%20Opt%20In%20Report.pdf

Jonathan Lindsey, Lateral Partner Satisfaction: A Decade of Perspective, Major, Lindsey & Africa, 2007. This update to Major Lindsey & Africa's 1996 Lateral Partner Satisfaction Survey describes current factors affecting lateral partner satisfaction and compares its findings with those from the earlier survey. It reports that firms are doing a much better job today than in 1996 in integrating lateral partners into firms, and describes what motivates partners to change firms. By learning about the factors required to satisfy lateral partners, law firms can understand what they must do to keep partners from leaving in the first place – or from leaving again once they lateral in. http://mlaglobal.com/articles/LPSS_133dpiBW-v5.pdf

 

 Articles

I was featured in "Taking the Lead," by Laura McClure, California Lawyer Magazine, May 2007.

My article "New Career Paths for Lawyers," appeared in the June 2007 issue of Law Firm Partnership and Benefits Report. www.ljnonline.com (subscription needed)

 

 Upcoming Programs and Presentations

Hastings Leadership Academy for Women (Session 2), July 19-21, 2007, San Francisco

I will be presenting at the College of Law Practice Management Annual Meeting on September 7-8, 2007, in Philadelphia.

I will be speaking at the Leading Directions in Legal Practice Management Conference sponsored by the Australian Legal Practice Management Association, in Melbourne, Australia, October 26-27, 2007.

 


©2007 Ida Abbott Consulting
email: IdaAbbott@aol.com
web: www.IdaAbbott.com
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