“Time is an illusion.” ― Albert Einstein
You can read almost anywhere in the blawgosphere – the time-sheets, time-tracking, and an entire hourly-based law firm economics is dying-out. Pundits are advocating the change of law firms’ and partners’ focus from the price (especially the one based upon the time-spent) to the value delivered.
Have Law Firms gone beyond the hourly-based economics?
Take a look at quote from the article ‘What the Rise of Pricing Officers Says About Big Law’s Future?’
“…their (Pricing Officers’) tasks are (…) to determine the actual costs to firms of delivering a particular legal service and (…) calculating a price that will deliver to the client a sense of fairness and to the law firm a healthy margin.”
This article also reports that 76% of big firms nowadays employ some sort of a pricing officer. Now, all the aforementioned should signal at least a few things:
- law firms are moving away from the simple hourly-based economy and start to employ more sophisticated, data-backed methods to determine value and calculate a price;
- determining true value is extremely difficult and hence conferred to an entirely new position in a firm;
- value is merely a part of the equation for the pricing officers as they are also diving into the real costs of service delivery, and in that they are relying heavily on the law firm’s own data sources.
Did time-tracking become unimportant for law firms?
Not so long ago, when hourly rates were full-in-charge, it was crystal-clear time-sheets formed the very foundation of the law firm economics.
Nowadays, advocates against the time-based billing are saying the time-spent in general does not present any factor in the firm and partner decision-making process.
In his comment on the article regarding the rise of the Pricing Officers in law firms, Patrick Lamb criticizes the so-called Shadow-hours (the time-tracked for the internal law firm reference, e.g. management reports, decision-making and process improvement).
“The problem with shadow hours is that they are used to judge “value” by comparison to what the client would have paid if billing had been based on an hourly basis.” – Patrick Lamb
Now, while I agreed with Patrick’s observation mentioned in the quote, I did mention in my comment on his article that I still consider time-spend reports a crucial input for law firm partners in their decision-making process.
However, my notion that ‘without the proper time-keeping and analysis all law firms are without a compass’ was met with scrutiny by Patrick and John, who both firmly claimed that ‘in any professional firm time spent has nothing to do with margins nor cost’.
Furthermore, John was very kind to point me to The End of Timesheets, penned by Bernie Lietz, the COO at CDH (Corbett, Duncan & Hubly). Bernie shared his thoughts on why time is not important anymore (at least in the firm he is involved in), and his key points are:
- customers do not pay for the time you spend doing their work;
- inputs do not really matter to customers;
- looking back at billable hours or utilization statistics doesn’t tell you how you are doing for your customers;
- you don’t need billable hours and statistics as the majority information for a performance evaluation.
I should also commend Bernie on all the great points he made in this article. Though, I would argue, he had laid these points only having one side of the equation in mind, and that is the clients. Granted, clients are the most important factor in developing a business model, but hardly the only one.
I could simply go on and on with quoting different sources in this everlasting debate regarding the (ir)relevance of time-spend in a law firm. We do have our thoughts, but before going into these, I would like to invite you to share your experience in your service delivery and revenue model.
Does time still matter to you?
If not, why, and how did you and your firm evolve to render the time obsolete in your service model?
If yes, please let me know what aspect of time is relevant for you, and for what kind of processes (e.g. is it merely for the billing purposes, is it the pricing factor, is it the project-management issue, etc.).
What are your thoughts?
I have also asked this question on Quora, so you can add your two cents there too.
Seems as many advocates try to convince the legal industry time simply does not matter anymore. They indeed do make powerful points, but I just want to make sure that we are not forgetting anything in all the efforts of killing the time-sheets.
In the end of the day, time is a resource, and must play a role in one way or another.
Anything to add?