“What Billable Hours
should your employed lawyers be doing annually?”…with its myriad
variations, a very typical phrase popped into search engines by thousands of lawyers
a year around the world. It certainly gets interested lawyers to my website and
blog, unless I’m drastically misreading Google Analytics.
In the last few weeks my interest has been piqued by
separate reports from clients in different firms that they attended seminars
put on by a “leading” Australian law practice management training organisation
in which the presenters mentioned that firms should be trying to achieve an
average of 1000 “billable” hours a year from their fee earners.
Two people from separate firms had scanned and sent me their
written notes from their attendances for my interest and feedback, so it’s
unlikely they both got it wrong, especially as a third confirmed it after seeing my draft of this post!
To briefly digress, on the point of getting things wrong,
there was an interesting article in a major legal publication out of New
Zealand a month or so ago, relating to the perceived oversupply of lawyers,
that reported the annual legal services market in NZ at $2.9M…a unfortunate
error, but drastic enough for any attentive reader to see quickly that the reasons
for poor per partner returns on average in NZ legal practices did not lie
there! An inconspicuous correction appeared in the following month’s edition
moving the bar (pun intended) up to $2.9 Billion!
Back to the heart of poor profitability in Australian (and
New Zealand) legal firms…
For a fairly mainstream full-time team member 1000 hours a
year works out at roughly 4.3 hours “billable” hours a day, after proper
allowance for public holidays and statutory annual leave.
Let’s assume for just a moment that the presenters did mean
actually billable, and in all likelihood collectable…I fervently hope so!
Let’s also assume that the average employee they were
referring to is employed by a firm to work just the 38 hours a week of the
National Employment Standards in Australia...or 7.6 hours a day average.
One has to ask some variation of this question, depending on
one’s upbringing, circumstances and audience…”What the heck are these people
doing with the rest of their days?”
For twenty-six years now I’ve been helping Australasian firms
improve the profitability of each of their “fee-earners” by working together to
create individualised customised KMSWorkPlans™, and the typical average work
day of the thousands of lawyers working under the KMS system is split up
between ClientTime™ and FirmTime™ such that the average part of the day
expected to be billable is above 6 hours a day for “average” team members.
Please leave aside for a moment any issues above how firms
handle pricing of legal services. This
not a discussion about the death, survival, or otherwise of the “billable hour”
as a pricing mechanism.
What human and other resources you bring to effectively
doing work for the current clients, and work for the firm so you continue to
have enough of the right kinds of clients in the future, is what we’re considering
together here.
To be conservative on the numbers let’s use the example of a
junior lawyer with a notional charge rate of $250/hr (ex-GST of course) to see
where firms would lose so much Revenue if they accepted that 1000/hrs a year of
“billable” client file input was acceptable.
Lawyers properly implementing a WorkPlan™ that they had
helped design, and that required them to attend to client file work even 6
hours a day on average, will be around $100,000 per annum more productive from
the ClientTime™ part of their average days.
They’ll also get a lot closer to using the FirmTime™
component of their days productively as well.
Now here’s the, very obvious, “Win-Win”.
Happily-occupied team members, consistently getting a higher
volume of file work, improve their legal skills much faster, with proper
training and supervision, than their under-utilised, bored, disillusioned, or
angry, peers.
The firms that employ them generate considerably more
revenue and can invest more aggressively in remuneration above market
expectations, assisting in keeping good people and in attracting others from
their competitors.
Even after that investment real profit per Principal is
seriously impacted…upwards.
Whether you expect an individual lawyer in your firm to as a
daily average work 7.5 hours “full-time”,
or 9, or some other total number,
1000 hours a year of client file time is going to make it extra-ordinarily
difficult to maintain financial health, and achieve the levels of excellence
you desire across the board.
I can "hear" some readers thinking...to keep everyone properly busy with a “healthy backlog” of
client file work…doesn’t that require a lot more new work to be coming into the
firm?
Sure does…unless you’re keen on establishing a “razor-gang”!
It might even require well-informed, well-planned, Business
Development consistently for ever into the future…but that’s another important
story indeed, for another day.
