David Abrahams FCA is the former Finance Director & COFA of Matthew Arnold & Baldwin LLP and more recently of Howes Percival LLP. He may be contacted at David@DRABS.co.uk or though your usual Baskerville Drummond Contact.
In his recent post Richard Wyatt outlined all the challenges facing management teams in addressing poor time recording discipline and the financial implications if that does not happen. He rightly points to the ‘double discounting’ impact of under recording and then under billing what has been recorded.
Having reasonably successfully addressed this issue in two large regional firms I would like to offer up some thoughts. I say ‘reasonably successfully’ because it requires a permanent cultural shift, a change in mindset, induction training that has to happen the day a fee earner starts with firm and the retraining all existing fee earners. This has to be continually reinforced. Whilst lawyers appear to cope well with changes in law and terminology there, they find it much harder to cope with required changes in behaviours and language. I guess we all face that challenge to some extent.
What is the real problem?
Before trying to solve the problem, we need to consider why time gets under-recorded. Amongst many, the usual, and often inter-connected, excuses I have come across include:
- “I’m on a fixed fee so it doesn’t matter.”
- “I can’t bill it.”
- “The matter took longer than it should have done and the client won’t wear it.”
- “I had to do the work of a more junior fee earner.”
- “I had to read into the file as I was taking it over from someone else.”
- “I had to do in-depth research on a point of law that I did not already know.”
- “I’ve been told by the partner responsible not to record it.”
What then is the common theme here? It is relatively simple. There is a mindset ingrained in all lawyers (probably since the day that they entered the profession as a paralegal or trainee) that Chargeable Time = Billable Time. Well here’s the key message. IT DOESN’T. That psychological connection has to be broken.
This is the big shift needed and this has to be lived and breathed from the very top of the firm for it to work. The expression “Chargeable Time” must be expunged from the firm’s vocabulary.
In its place you need to use the term “Matter-Related Time” as well as its counterpart “Non Matter-Related Time” which replaces the old Non-Chargeable analysis. It is so easily explained. You are either working on a file or you aren’t. It is as simple as that. No grey area at all. If you work on a file, then record the time. End of subject.
That means changing the old terminology on all reports and ideally within your firm’s time recording and practice management systems and dashboards. Never again refer to Chargeable Time in presentations, correspondence and HR systems setting targets. If you like, make it a “swear-box” item as an additional fund raiser for your chosen charity. Ensure it is built into all induction programmes and especially for lateral hires.
I cannot pretend that this is easy since the old terminology has been around for too long but this change, like any change-management programme, must be led from the top and will take time and perseverance. Once the benefits start to flow through and be seen then this approach more readily becomes part of the firm’s culture.
There are some side issues we need to cover off. This is not intended to be an exhaustive list.
1. Utilisation will increase as this cultural shift takes place and the understanding of capturing Matter-Related time is implemented. There will be much greater accuracy in fee-earners’ reported ‘busy-ness’. That means there is less danger of a fee earner being overloaded with work if their stats have previously shown them as under-utilised.
2. Recovery rates may decrease in the short term. However, billing (and profit) is likely to increase slowly but surely if greater attention is paid to the following points:
a. Accurate narratives of work done.
b. Utilising all aspects of the firm’s time-recording system to distinguish between work done that is within the scope of the matter as defined in the Letter of Engagement, and work done that might be termed ‘Builders’ Extras’. Most decent TR systems allow for Phase/Task differentiation. Exploit the system which you operate, to the fullest extent.
c. Anyone who has engaged a builder-decorator to do a specific job for a fixed price and the scope of that job changes while they are on your premises knows full well that they will get a variation order in one form or another, and a bill for the ‘extras’. Why are they so much better at this than we are? Often there isn’t time to issue a new Letter of Engagement (LoE) but you are obliged to communicate with your client on fees and updated estimates. A quick email should suffice to put the client on notice. All too often this is overlooked and needs to be built into the psyche of client handling. That said, if you cannot easily identify the time relating to those ‘Builders’ Extras’ you have little chance of billing it, but if you can, then have a sensible dialogue with the client using the information to hand. Make sure your matter time analysis reports extract all the relevant information. Make your technology work for you and not the other way round.
d. Provide soft-skills training in client handling and fee negotiation. Empower staff. In one firm I successfully reduced the time write-offs that I had to personally sanction by empowering and encouraging fee earners to have a dialogue with the client about the over-runs. Why are we great at negotiating for our clients but less confident when negotiating with them? I made constant reference within that firm to the L’Oreal brand theme to adopt the approach of ‘Because I’m worth it’. As fee earners gain confidence in this, they will increasingly protect the firm and get closer to their billing targets. Partners themselves often need coaching in these negotiation skills as much as more junior fee earners. Do not overlook this and encourage your partners to recognise for themselves when they might benefit from some coaching.
e. Develop dashboards, such as those generated using the KATCHR system, that can push ‘traffic-light’ based data to team leaders to see at a glance which of their fee earners are falling below a required time-recording metric rather than just a sea of data. Invest time with those who need coaching to understand fully why this might be. Provide mentoring more than criticism.
f. Address fully, and robustly, any recurring instances of the last excuse I mentioned above. All partners need to buy in to this change. No partner or senior fee earner EVER should tell another fee earner not to record time. That must be considered as unacceptable behaviour.
3. Pricing fixed fee work can be more effectively undertaken if it is based on greater accuracy of the costs of doing similar work. Look carefully at the mix of work on those files and fee earners and dig deep into the processes to see what streamlining or process re-engineering can be achieved. Is case management used across the practice even on time-based work? On large matters with significant under-recoveries consider a ‘post mortem’ review by an independent partner to learn the lessons for the future. Why was time spent that could not be recovered? Was it internal inefficiency or poor pricing in the first place? There will of course always be some time that cannot be recovered especially if there is a change in fee earner along the way.
4. Review LoEs for fixed fee work to make it abundantly clear what the basis of the fixed fee is. I know this may sound obvious but it is not always the case. For example, if you write wills for a fixed fee then make clear that the fee is based on no more than (say) two iterations of the draft will other than for typographical errors. If the client wants to change something mid-way through the process and leave a further specific legacy, then that comes as a ‘Builders’ Extra’! Similarly, do not agree to draft a lease on a totally uncapped basis. Make it dependent on the other party responding promptly and limit the number of iterations within the fixed fee. Keep the door open to bill more time when it is appropriate to do so.
5. All support staff working on a file should record time to it, other than for routine transcription. If a secretary or equivalent is involved in work adding value to the process such as court bundling or similar, then that time belongs on the file.
6. On time-based matters do not forget the last half hour. That last half hour is the file closure, acknowledging to the client that the matter is closed and sending the file to storage (physical or electronic). Build that last half hour into the final bill as ‘anticipated time’ if your system allows that process; just don’t forget to bill it. This will reduce the final time write-off as the file goes through closure process. Just work out what all those half-hours amount to in lost billing if you think this is not worth the effort!
- Change the terminology across the firm and people should improve their time recording habits if they are well led. Think Matter-Related Time and expunge Chargeable Time from the vocabulary. Break the psychological link between Chargeable and Billable time.
- Continuously reinforce this change in terminology.
- Review your time recording systems to ensure you are getting the best from them. Don’t assume you are, since many have unexploited features that you may not be aware of.
- Ensure you capture the ‘Builders’ Extras’ and then look to bill them.
- Review the Letters of Engagement for the basis of fixed fees.
- Invest in client handling (Soft) skills training. Empower your staff.