Why timesheets rule but chargeable hours suck

16 06 2011

There was something deliciously ironic about me trying some new time recording software this week. It’s many years after I left life as a private practice lawyer but I can still remember that huge sense of freedom at escaping the tyranny of the timesheet. The feeling of being able to work on what mattered most and be judged on results rather than be measured purely on how much time I had spent working on client matters was incredibly liberating.

The IT director proudly unveiled the firm's latest timerecording application - robust, wireless and mobile, it represented the future of the firm's management information system

Subsequent conversations with other in-house lawyers validated that I was not alone in those feelings.

After I moved in-house a huge number of conversations with peers included the words  “….. and no-more timesheets”, with knowing glances being directed at any private practice lawyer in the room.

But within a few years, I was voluntarily tracking my time as an inhouse lawyer. Admittedly at the time it was a pretty crude mechanism - I tracked data in hour long blocks in an Excel spreadsheet over a period of months, but it did the job.

I’d been inspired to do this after reading Drucker’s book “The Effective Executive” (well worth a read) in which he makes the point that an individual can’t maximise their effectiveness unless they know where they spend their time.

In practice what it meant was that I could have much more informed discussions with my major stakeholders around how best to allocate my time to achieve organisational objectives. It allowed sensible and transparent choices to be made around different priorities (if I support this deal and this HR project, the position paper on IPR ownership will need to wait until next quarter, or we’ll need to resource things differently) which I believe kept me more aligned with the company and led to some very productive conversations.

On the other side of the fence, I’ve written a fair bit around what I believe the problems with charging by the hour are, not least the impact this has on the firms as well as how it affects the client relationship. My mind often turns to a partner I know who runs a management consultancy business, who almost immediately on taking over the department abolished time-based billing. Profitability increased along with client satisfaction and employee retention.

However, to my mind there’s a critical distinction between tracking time and charging purely based upon time. The most obvious point is that as knowledge workers, typically the cost of labour is one of the largest components of the cost of providing a legal service. Without knowing what the cost is, running a profitable firm (file, project,team, department etc) is nigh on impossible.

It’s also important to understand cost in other areas too. Law firms often talk about the challenges of calculating return on investment for marketing events such as seminars and events, but when looking at how business development budgets are prioritised and spent, much of the focus is just on the hard cash being spent on venues and collateral, rather than the cost of the people involved in preparing and administering the event.

For example, having a top partner at a City law firm prepare for, attend and follow-up at a seminar overseas which takes him or her out of the office for a couple of days is a significant cost which can be accurately measured but is often overlooked.

The other non-chargeable area that it’s important to track is product development. As law firms begin to think more about efficiency and identify some more standard, repeatable services (some firms have been doing this for years) which are nicely packaged for clients at a set price, they usually “get” the idea that the service becomes increasingly profitable as volume of sales increase. The documents needed for the service are all ready and the people involved get quicker and more skilled at providing the service as they get more experienced. But often any upfront development cost in creating the service (market research, pilot projects, legal research, designing template documents) is lost because it is recorded under a general non-chargeable code. This makes comparing the return on investment for the project challenging and without an idea of these sort of development costs for previous legal products, makes forecasting and budgeting for future product development more difficult.

So back to my current quest. I was inspired to revisit this after reading tweet from a contact saying he was trying a web-based package called timerescue. This was a million miles away from the clunky, manual time recording systems I’d used in law firms (when I first started practice it was a paper timesheet pad) – running in the background and capturing application use, automatically learning behaviour and applying tags. All in all, a fairly sophisticated tool, with some nice web-based analytics to use to understand the data.

However, while I’m a big user of many cloud services, I wasn’t entirely comfortable with sending some of this data (document names, email titles) to a company I knew little about, so after a very short trial, I binned it. I then installed a similar piece of software locally, called Manictime. I liked this a lot, but it led to stability issues, so now I’m back to a more traditional system called Grindstone2.

The application is, of course, irrelevant other than it needs to be quick and easy to use, and provide the data in a format that’s useful.

The key point I wanted to make is that while the market may be (thankfully) steadily moving away from time-based billing, there is much to be said for the discipline of recording your time.

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7 responses

16 06 2011
Nick Mayhew

Hi Mark. As you know I abandoned hours billing in 90% of cases years ago and have not looked back. I still keep the timesheet and you are spot – cost is what it’s for, and transparency and opportunity cost.

Love the post. Very evolved you are Luke.

16 06 2011
Julian Summerhayes

Mark

Time recording is an internal metric. It is stuck in the time and motion period and I fear that we shall see it persist. Lawyers by and large are wedded to it because it gives them security. The acid test is always ask the client how much the job is worth once you have explained to them what is (actually) involved. There should be no more than a 10% differential apropos the client and the lawyer. If there is then you have to wonder if the firm is acting for the right client or the client is instructing the right firm. There should be much greater synergy rather than the mentality of acting for anyone and everyone.

Time sheets suck your soul. They leave your best work behind and you become a glorified pitcher and closer. I should know, I was one. Lawyers then get obsessed with the numbers and not on how they have superpleased the client. So much for the mantra clients first.

Let’s continue to look for that crack to chip away at. Sooner or later the wall may just wobble towards value – value in abundance.

Julian

16 06 2011
Kim Archer

Dear Mark,

Agree with all mentioned. One point particularly resonated with me as I have managed substantial R&D programmes (prior to moving to manage a law firm), with the challenge of costing research. Your point about recognising and accounting for development time when building a new service ‘product’ is going to be more and more important. Law firms, to my knowledge, have not traditionally reserved for R&D, allowed for innovation time, or focused objectives on the same. With many new commercially driven entrants to our market, we will be competing with organisations who recognise the value and cost of new product development and will price and drive volume accordingly.

I have been following your news/comments for some time and find them quietly reassuring. Logical, rational and commercial in what can be a most challenging environment.

Thanks,

Kim

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