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    In this blog we will share our thoughts on timekeeping, industry best practices and how technology can help improve the process.

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Results of New Law Firm Timekeeping Survey

By, Adam Smith Esq.

Last month we made an online survey available on the topic of timekeeping practices sponsored by Adam Smith, Esq., and Smart WebParts.  The survey was also publicized through other venues, and ran for three weeks from mid-May through early June.  155 of 211 respondents (73%) completed the survey, which professional researchers deem a “robust” completion rate.  Of the respondents, 86 were partners, 72 were associates, and 51 were senior staff at firms with titles such as CFO, CIO, Executive Director, Head of IT, Head of KM, and many Director-level positions.

Besides looking at the aggregated results, we also analyzed subsets of (a) all partners; and (b) partners with an hourly billing rate in excess of $500.

The results were not only fascinating, but a eye-opening in terms of the amount of “leakage” as well as sheer overhead involved in tracking time.

Here are some more details on the results.  Please feel free to contact us if you’d like more information.

  • The average “leakage,” that is, lawyers and other timekeepers failing to report all billable time, ranges from $20,000 to nearly $40,000 annually, per individual.
  • The “overhead” costs of keeping time are very heavy, with a mean 3.1 hours/month per individual devoted to filling out timesheets. The mean billing rate of respondents was $438/hour, indicating an imputed cost of $16,294 per person per year.
  • Clearly, significant efficiencies could be gained if streamlined time entry systems were available.
  • Surprisingly (not!), lawyers hate timekeeping–“the bane of my existence” and “the worst part of law firm life” were representative comments.
  • Given these premises, and lawyers’ recognition of the need for accurate timekeeping, they would be eager to explore alternatives that invite greater accuracy and, most importantly, would be easier to use.
  • Even if you think AFAs (alternative fee arrangements) are the wave of the future, the need for accurate timekeeping doesn’t disappear. Indeed, the more critical and complex it becomes to be able to project profitability of a matter under AFAs, the more important accurate and “real time” hours tracking becomes.
  • The billable hour is, at root, a “cost-plus” system, meaning that any amount billed (and collected) embeds a built-in profit. AFAs, by contrast, carry no such guarantee; that’s why knowing the firm’s costs, in as close to real-time as possible, is even more important under the AFA model.
  • A chronic source of mistrust between clients and law firms is skepticism (openly expressed by clients and tacitly acknowledged by lawyers) about the accuracy of timekeeping. Any tool that served to convincingly increase the accuracy of this very fundamental metric could only be welcome as a step towards closing that gap and reducing challenges to firms’ bills based on posited inaccuracy.

For those of you, like us, who care about survey methodology and data integrity, here’s some additional information and more detailed findings.

  • By number of lawyers, responding firms ranged from fewer than 100 to more than 1,000. The mean number of lawyers at respondents’ firms was 494, or approximately equivalent to #82 in the AmLaw 100.
  • Hourly billing rates for respondents ranged from less than $250/hour to more than $750. The mean hourly billing rate among respondents willing to report their rates was $438.
  • Not surprisingly, the plurality of respondents reported being in Litigation/Dispute Resolution (64 respondents). Other practice areas included Corporate/Transactional (53), Intellectual Property (21), M&A (9), Real Estate (12), Tax (7) and General (37).
  • Among all respondents, 60% reported “reconstructive” timekeeping practice. That is, they entered their time at the end of the day or days later by looking at emails, phone logs and appointments. 38% reported that they enter their time contemporaneously as it happens. Less the 2% reported that they worked with their assistant to prepare time records.
  • A majority (54%) reported preparing their timesheets daily. A third (34%) of respondents reported preparing timesheets twice a week or weekly. The remainder (21%) reported doing so twice a month or monthly.
  • One-third of respondents reported that their firms request timesheets daily. 44% do so twice a week or weekly. 22% expect timesheets monthly or twice a month.
  • The mean time to prepare timesheets each month among all respondents was 3.1 hours, though this ranged from 0 – 2 hours (40%), 3 – 6 hours (39%), 5+ hours (37%).
    • These percentages largely held for all partner responders.
    • For those partners with billing rates in excess of $501/hour, there were variations from the total respondent base and total partners: 0 – 2 hours 25%, 3 – 5 hours 50%, and 5+ hours 25%.
  • Nearly half (47%) of all respondents reported that their timesheets are “accurate over time – it all evens out.” 18% reported that ther timesheets are “somewhat accurate – I guess a little [inaccurate].” 2% reported that their timesheets are “not very accurate – I guess a lot [inaccurate].” A third reported their time sheets are “100% accurate by day.” (One has to wonder whether the reported degree of accuracy might be greater than reality.)
  • When asked how much time they leaked (that is, time they failed to report) in a week, the mean response for all respondents was 85 minutes, or 1.4 hours. Total responses ranged from 0 hours to 5+ hours. 6% reported that they were “unsure.”
    • Projected annually this could total between 50 – 70 hours, depending on the number of days worked in a year. (As with the questions about accuracy, it’s more likely than not that leakage is underreported.)
    • With a reported mean hourly rate of $438 among all respondents, annual leakage could conservatively cost a firm between $21,900 to $30,660 per individual.
    • Results from both the “all partners” subset and the subset of partners with billing rates in excess of $500 were generally similar to all respondents. For this latter group, annual leakage could conservatively total between $25,000 to $35,000 per individual.

We hope you find these results interesting; we certainly did, and we are happy to share them in that spirit.

If you haven’t done such a study at your firm–or haven’t done it recently–we suspect it could be equally eye-opening to get a rough estimate of the combined costs of (a) leakage; and (b) imputed overhead absorbed by timekeeping, across all timekeepers in your organization.  Remember that samples are fine; you don’t need an exhaustive canvassing when you’re just trying to come up with an order-of-magnitude number.  

If these expenses are sizable, and we’d be surprised if they’re not, you might want to see what measures you could take to cut them down.  It may seem mundane stuff, but the revenue from additional time properly captured falls straight to the bottom-line:  And nobody has to work harder to get there.

Again, if you’d like to follow up or have questions, please contact Jane Stanton at Adam Smith Esq. or Todd Gerstein at Smart WebParts.

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