Performance measurement in law firms has come a long way from the once common practice of weighing files and assessing the "due care, skill and judgement" involved in managing matters. From there, our seemingly revered 'time costing' and hourly billing systems have become common place.
Surely there has to be more to the topic of 'performance measurement' than merely 'rates' and 'leverage'?
Surely, the topic of value billing and the call to 'kill the billable hour' must be incorporated into our thinking in terms of managing our performance! Surely, our balanced scorecard, environmental footprint and 'health' measures around succession, inter-generational change and all manner of client measures must also be considered!
So, why is there so much debate (dare I say confusion!) about where the billable hour is headed for the legal profession and how the whole performance management topic is going to play out in coming years?
The answer is simple! There is confusion in the market because we are confused! And, it’s not all our fault! Our clients are confused as well!
What Managing Partners & CEOs Measure
Ask any Managing Partner or CEO of a law firm about how they manage their firm and you’ll hear lots of words about talent management, client focus and growth. Yet, just under the surface, and more likely the conversation that they’re having back at the office, you’d be hearing about billable hours, charge-out and realised rates as well as lock-step, partner profitability and client profit. This is the real performance management focus of firms.
What Clients Want
Conversely, ask our clients what they want and they’ll tell you, almost universally, that they want “value”, “certainty” and anything that removes them from the vagaries of the anachronistic ‘billable hour”. They even tell us that, quite clearly, in just about every tender that they issue that they want firms to offer "innovative" pricing models. But, mostly, they stick with what they know (and what we know!) – they continue to buy legal services in six minute blocks. So, we keep managing our firms that way as well!
It may not be sexy. It may not even be efficient. But we all understand it! And that’s the answer! Surely, that’s why the billable hour remains at the core of how firms manage their performance.
But, as noted, there must be so many more dimensions upon which we could base our measures of efficiency, effectiveness and plain old ‘value’. I’ve listed some of those in the fourth paragraph.
So why too, just like the billable hour, do so many of those other performance dimensions get put aside?
Why do they get left either unmeasured or relegated to some poor Marketing or Finance staff member to ‘own’ them for the business?
Reality will Prevail!
The answer to that’s an easy one as well! We leave these things, largely, unmeasured because they are hard to measure! Sure, we all have green footprint policies, double-sided printing and other tangible environmental initiatives. They’re great conversation starters with our Gen X-ers and even with our clients. But, do we truly performance manage our firms and measure success on the basis of those measures? Of course we don’t!
The same is true for succession management and the other 'soft' items as well. We know that they're there! Our clients know that they're there! But, until we truly start to value those things, we'll continue to relegate them to the back of our performance reports (the front pages taken up, of course, with production, billings and collections statistics.
And that really brings me to the point of this article – there is a place for theory and academic discussion, but reality will always prevail!
But, just because we find things to be hard to measure or some of the profession are struggling to give the topic air, should we dispense with the discussion?
Imagine where we’d be as a civilisation – as a species -- if the scientific and medical advances of the last centuries had been lost, opportunistically, because we found it all too hard to have the discussion -- simply because we just focused on the easy things!
Just because the topics are hard and there’s no discernible ‘right’ answer, doesn’t mean that we shouldn’t have the discussion.
The reality is that all of these things are important and, as the old adage goes, ‘all things in moderation'! Their time may come but, for now, the billable hour remains as the pre-eminent performance tool for managing efficiency, effectiveness, resourcing, costing, pricing and profit in law firms.
Long live the billable hour!
What is your view?
The views expressed in this article are the writer's own and not those of ALPMA! The writer even concedes that some of the material presented may even be somewhat ‘tongue in cheek’!
About our Guest Blogger
Steve Sampson is the General Manager of Hunt & Hunt, and a past President of ALPMA. Steve’s initial focus when he
joined the firm in 2008 was on financial and other operational matters. He is now focused on developing the firm’s abilities to engage with and service its clients as well as building its capability to attract, retain and develop partners and staff.
He will be chairing the Performance Measurement Round Table at the ALPMA National Summit, with a panel including Dr Neil Oakes (FMRC Legal), Justin Bender (CFO - Herbert Geer) and Bruce Humphrys (HopgoodGanimLawyers). Check out the full Summit program.