In early December, I was talking to a law firm senior associate about his successes for the year and goal setting for next year and made the obvious comment about the rush to get in hours for the year. He responded, “Oh, I hit my hours last month so now I can coast.”
I don’t know what is worse — the fact that my airline status progress resets at zero on Jan. 1st or that law firms’ most insidious scorecards do the same thing. The worst thing about the legal profession is the hourly bill. And the worst part of the hourly bill is the artificial metric that has very real consequence for both lawyers and their clients when Jan. 1st rolls around.
There is no other business in the world that defines success not by the service delivered to clients but the relatively meaningless metric of how busy you are. We all know the hourly bill disincentivizes efficiency and puts the wrong kind of pressure on law firm lawyers (mostly associates). It encourages law firms to work, not work smart.
Contrast that to the vast majority of law firm clients who more often than not started planning for the next year soon after Labor Day (yes, that holiday that is only eight months away). Sure, budgets weren’t finalized sometimes until late October, but most of the work was done months ago.
There is a practical and simple reason for this: Reacting to the world is not a good business strategy. Businesses have to be proactive, issue spot, make assumptions and act on those assumptions, go back and test those assumptions and then adapt. Law firms too often make the mistake of doing too much reacting and not enough testing, measuring and changing plans mid-course. While there are many obvious excuses for not adopting alternative to the hourly bill, those arguments create bad economic incentives — incentives that do a disservice to law firms.
The hourly rate creates impediments to delivering great value and service to the client, and it has an even greater problem. It forces firms to wait until the end of the year, and most often well into the new year, to make substantial and important changes to how they deliver service to their clients.
I asked a law firm leader last fall how the firm was going to deal with compensation issues around origination and the hourly bill scorecard. His answer? “We can’t do anything until the first of the year.” Now it is the first of the year, and everyone is getting back to work. The hourly bill clock has already started, the plans are in place and it is already too late for the law firm to change its practice.
Clients plan for the future; law firms wait for the past to catch up to them. The excuses get made and the hourly bill lives on and the complaints from both sides continue. The best law firms make changes, not excuses.
This post originally appeared on Bloomberg BNA’s Big Law website on January 7th.