The Evolution of the Law Office Infographic

The founders of Smart WebParts have been in the legal industry since the 1970s.   Collectively, we’ve got a lot of history under our belts.  Last month we got nostalgic and created the “The Evolution of the Law Office” infographic. We hope you enjoy it.  What do you remember?

Report: Alternative Fees Continue Snail-Paced Assault on Billable Hour

.by Jennifer Smith
Wall Street Journal Law Blog

Despite all the hoopla about hourly billing going the way of the Edsel, law firms and their corporate clients have been much slower to adopt alternative billing arrangements than many had predicted, according to a new survey.

Loyal Law Blaggers will recall that use of flat rates, contingency fees and other alternative fees is on the rise and continues to grow—an uptick triggered in part by the economic downturn and client pressure to reduce legal costs.

But many in the legal world are just dipping their toes into the alternative fee pool, instead of opting for a full-tilt cannonball immersion, says a new report by ALM Legal Intelligence. It was released Tuesday in conjunction with the legal technology company LexisNexis, which this week is also launching a new data-driven consulting service for in-house lawyers.

The ALM report surveyed 141 in-house law departments and 194 law firms on their use of—and satisfaction with—alternative billing arrangements.

It found that most law firms continue to rely on traditional billing for the majority of their work, and law firms are on whole less delighted with alternative fees than the corporate law departments they serve. Still, alternative billing arrangements are not going anyway anytime soon, and that could force wider shifts in the legal industry, the report warned:

If law firms and legal departments continue migrating away from the billable hour model, both sides will need to embrace profound structural changes, such as training legal staff to manage matters within a budget while keeping an eye on profits.

Lawyers and corporate clients have  different reasons for embracing alternative fees, the report said:  legal departments like the cost savings, efficiency and ability to map out how much they will be spending, while law firms use alternative fee arrangements to attract and/or keep clients or narrow the gap between the billed cost of a matter and the amount they actually end up collecting.

Other highlights from the report:

• ”The Billable Hour Still Drives the Boat,” it says, and many law firms remain much more comfortable with the status quo. Just 6% of law firms surveyed said they used AFAs for more than half their legal work in 2011, and only 12% of law departments reported using them for work assigned to outside counsel.

• Bidding and reverse auctions, once a rarity in the legal world, are on the rise. One-fifth of law departments reported using them for high-volume and repetitive work, while just over one-third of law firms said they had participated in those processes.

• In-house law departments and outside counsel are at least in agreement on their favorite types of alternative fee arrangements. The top three: flat fee (89% of law departments like them, and 93% of law firms); blended rate, where  all lawyers on a matter charge one agreed-upon hourly rate (47% of law departments, 89% of firms); and capped fee (57% of law departments, 83% of firms).

LexisNexis® Law Firm Billable Hours Survey

LexisNexis®  just published it survey on law firm billable hours for the small firm segment.  The survey was conducted in May of this year and included nearly 500 responses.  Survey participants ranged from sole practitioners to 20+ attorney firms.

Besides demographic data, the survey asked two key questions:

  • How many hours on average do you work per day?
  • How many hours on average do you bill per day?

The survey reported the following results.  “The average for all 499 respondents: The average hour worked on a daily basis was 9 hours; whereas the average hours billed on a daily basis was 6 hours.  The 33% difference in hours worked vs. hours billed can be caused by a number of factors:

  • Not utilizing and/or leveraging staff for non-billable functions
  • Inefficiency of managing and billing client work
  • Goodwill issues such as: Lawyers spend some of their time engaged in networking, business development and other non-billable activities – particularly when business is slow.  Some lawyers believe they cannot bill all clients for all hours worked so they purposely “discount” the actual number of hours worked in order to keep clients happy.

According to the survey, we found that attorneys were not billing all the time they worked. There are opportunities to increase billing efficiency whether by improving capture techniques or delegating non-billable tasks to others.

To get a copy of the full survey report  click here.

Clients falling back on ‘safe’ hourly rates

Clients are requesting, yet rejecting, innovative fixed-fee arrangements, lawyers at the NSW Practice Management conference heard last week.

The managing partner of Freehills, Mark Rigotti, shared his firm’s experience of the trend for alternative fee arrangements (AFAs) with an audience of around 20 at his presentation: Challenges to profitability and financial issues.

“[We] lay it out, a smorgasbord, on the table for them and they go for the chicken every time because it’s safe,” said Rigotti (pictured).

Richard Wood, the Adelaide principal of boutique insurance firm Gilchrist Connell, shared a similar experience.

“In every tender … in the last 10 years we’ve been asked to put up alternate fee proposals, which we’ve done, and none have been accepted,” said Wood.

“There’s a lot of hysteria about hourly rates and moving away from it and [I] don’t quite know who’s driving that because I speak to corporate counsel who don’t use them and my insurers don’t use them.”

Rigotti suggested that most general counsels (GCs) have “been brought up on a diet of hourly rates … that’s how [they] think, measure value and compare” and, provided they deliver what their organisation requires, the method is up to them.

“They know they want something different but they’re not sure what they want and if it all gets too difficult they’ll go back to what they know,” said Rigotti.

According to a Mallesons Stephen Jacques (now King & Wood Mallesons) survey of 374 in-house lawyers – 44 per cent of which were GCs –  50 per cent of respondents said fees billed at an hourly rate make up over 90 per cent of their total legal spend.

The survey, released in August last year, showed 66 per cent of respondents were happy with their current billing arrangements and only 29 per cent had reduced their use of billable hours in the past two years.

“You’ll see [from that survey] the top three AFAs were around fixed fees, capped fees and volume-based discounting. None of those are that innovative,” said Rigotti, adding that this indicates clients want certainty and that they were struggling with the difficulty of monitoring AFAs.

Pricing mixed up with sales

Rigotti said Freehills was experimenting with innovative AFAs with a “good client” and that there had been mixed experiences.

“Sometimes they like it, other times they think ‘let’s just get on with it’,” he said.

The firm, however, still captures all the time actually being spent on those jobs, to check wether they were profitable; a process, Rigotti admits, is “probably the wrong way to think about it.”

“It’s having an each-way bet,” he said, adding that the ultimate future is to unlink the sales and pricing conversations.

“Sometimes the fixed price is actually a negotiating piece of work upfront to win the job rather than a fully transparent dialogue with the client to appropriately price what they expect. If you could reach that [open and transparent] nirvana I think that’d be fine [but] quite often it’s mixed up with the sales proposition.”

In another fee experiment aimed at articulating the value of legal work, Freehills asked a client to pay what they believed the firm’s advice was worth.

Without negotiating any price upfront, Freehills gave the client a print out showing how much time it had spent on the matter and the client came back with 95 per cent of what was on the hourly timesheet.

“It put us at risk … but it allowed us to zero in on that the five per cent [which] was down to things they didn’t really need because they had in-house capabilities on particular parts of this contract. Normally that would be hidden in a discussion ‘oh the bill’s a bit high can you do something about it, can you bring it down?’.”

The New Normal – Alternative Fee Arrangements and Project Management for Lawyers

Frederick J Esposito, Jr.
ABA Law Practice

The big question many law firms ask is how many other law firms are actually achieving profitability by using AFAs? According to the recent Altman Weil 2011 Law Firms in Transition survey, alternative fee arrangements (AFAs) are used by 95% of all participating firms, and by 100% of firms with 250 lawyers or more. Also, the amount of non-hourly billing in 2010, measured as a percentage of revenue, increased in 58% of all participating firms, and in 81% of firms with 250 or more lawyers. Two-thirds of law firms reported their use of AFAs is primarily in response to client requests, while only a third offer AFAs proactively as a means of creating a competitive advantage.

There is no question under the “new normal” that clients are interested in AFAs, but trends would suggest that hourly billing arrangements are not going to phase out completely. While there are arguments about the pros and cons of AFAs versus hourly billing arrangements, the issue comes down to clients perceiving a widening gap between the amounts they are charged for legal services and the value of the services provided. AFAs have turned the tables, providing more certainty and less risk for clients, up front, AND law firms now sharing more of the risk.

Under the new normal, law firms must deal with the realities of client expectations and focus on delivery of legal services in an efficient and cost-effective manner. Law firm management is faced with the challenge of shifting from an hourly rate-focused paradigm to that of an efficient-focused business. Therefore, proper and thoughtful planning will be key to making AFAs, or any other billing arrangement, viable and successful. Law firms that preemptively think through the issues of internal efficiency and utilizing project management skill will be prepared to deliver projects more profitably.

Timekeeping will continue to play a critical role. Clients can perceive the value of AFAs, but law firms must continue to track the time it takes to accomplish tasks. Timekeeping data will become a powerful planning tool, rather than something that is passed on to the client in the form of a monthly bill. Law firms will get better at estimating fees to be charged for services and get a better handle on firm investment and generating profit.

There are five key elements to consider when making the shift to AFAs:

  1. Focus on historical time investments. Lawyers should be recording time using task-based billing codes. This will enable law firms to determine how much time is required to complete specific tasks and will assist the firm in developing sound AFAs.
  2. Improving time management. Law firms that use AFAs must pay serious attention to their lawyer/other timekeeper capacity and utilization. This is an area where project management skills will become essential. Firms will need to get serious about the proper leveraging of lawyers/other timekeepers to maximize client value, provide more predictability and minimize firm costs.
  3. Adhering to budgets and time-tracking procedures. Lawyers will need to be trained to review and live by case or matter budgets. Again, this becomes a project management issue. Despite the many perceived imperfections of recording time, tracking time is a logical means of measuring the firm’s effectiveness in efficiency and managing productivity.
  4. Evolution of AFA systems. As law firms learn more about their costs and better understand client concerns, they will refine their pricing strategies. Pricing systems might include blends of hourly rates, fee caps, menu, project and portfolio pricing. The key is to keep the AFA as simple as possible. Many law firms develop pricing systems that are often too complex and clients become frustrated and lose interest.
  5. Profitability. Understanding how much it costs the firm to produce a billable hour per task and per lawyer is essential to AFA success. Successful firms are heavily focused on efficiency and value, and have been successful in changing the paradigm not only in terms of timekeeping and economic monitoring, but in changing internal behaviors.

The big question many law firms ask is how many other law firms are actually achieving profitability by using AFAs? The short answer is some firms are making more profit, but many law firms repeatedly make mistakes that vastly reduce profits. There are already a large number of firms engaged in large scale AFA pricing, and doing so profitably. However, many of those firms made costly mistakes, and learned from those mistakes, before becoming successful.

Some of the mistakes when implementing AFAs include:

  1. Firms/lawyers don’t currently use AFAs, or have done so haphazardly.
  2. Firms/lawyers that have implemented AFAs, failed to place conditions on work or enforce change orders (i.e. changes to the terms of AFAs based on changing events in the matter), or failed to manage their teams effectively or failed to approach the AFAs methodically, or
  3. Firms/lawyers became intimidated by clients when there was resistance to pricing changes.

Those that have been successful with AFAs understand the economics and understand the need to pay more attention to the mechanics of their practices through better planning, organizing and managing of their firms and engagements. Examples include:

  1. System Tools. As noted above, law firms perform historical time investment analysis and determine how much time lawyers have historically taken to complete specific tasks, and creating criteria for assessing change order conditions, e.g. identify potential obstacles that could impact and require modifying AFAs.
  2. Training. Lawyers receive training on budgeting tools, pricing negotiations and assumption building, pricing renegotiations, project management and managing projects and staff to budgeting. Law firms train their lawyers to review and live by a budget, or to contact an in-charge/supervising partner when budget assumptions are being violated. Regular monitoring becomes critical to success.
  3. Resources. Lawyers are provided with resources such as pricing personnel, generally non-lawyer personnel, which can include a firm’s Executive Director or CFO, to assist the lawyers with preparing profitable AFAs. Other personnel include project/team managers that are responsible for monitoring the progress of matters and implementing initiatives for completing a matter timely and profitably.
  4. Personnel Management. Law firms have the challenge of helping lawyers understand the systems tools, training and resources, and they provide guidance for approaching matters in a different way. All of these tools assist law firms with improving internal and external communication, team building and accountability.

Two significant benefits of personnel management include clear, ongoing oversight of a matter, with the goal of creating value for the client, and completing the matter in an efficient and cost-effective manner, and the firm’s ability to learn new skills to improve internal behaviors and build success.

AFAs and project management are not a passing fad. Many law firms struggle with the balance of making the practice of law satisfying and financially rewarding. Now, under the new normal, the balancing act adds client expectations of efficiency, reduced legal fees and added value to the mix. The balancing act becomes more complicated, but not insurmountable.

Project management requires identifying a problem, setting goals and developing a process to keep matters on track. Law firms with this edge will understand their costs, be able to provide accurate estimates and deliver more value to their clients in a timely manner at a lower cost.

Clearly, lawyers and management staff that possess project management skills will gain a competitive advantage.

The 7 New Rules for Effective Law Firm Timekeeping

Todd Gerstein
Founder & CEO, Smart WebParts

In this competitive world, it no longer works to have a disorganized approach to your firm’s timekeeping. Firms that don’t make effective timekeeping a priority – from both the business process and technology angles – are losing money, increasing attorney frustration and compromising timesheet quality.

Based upon our experience and research, I’ve come up with a list of “new rules” for our times. The rules boil down to achieving these objectives:

  • Improve the timekeeping experience
  • Enhance the accuracy of the entry
  • Ensure all hours are booked

With those objectives in mind, here are the new rules for effective law firm timekeeping.

1. Stop trying to change your timekeeper’s behavior

A timekeeper’s behavior is very hard to change. (It is easier to influence new associates, but what about everybody else?) Timekeepers are human, which means they have different personalities — and therefore different behaviors — that are intrinsic to who they are. Our pediatrician used to tell us our kids came factory wired. Ditto for lawyers.

For 25 years, the conventional wisdom has been to compel everyone to keep their time contemporaneously. That never happened. Our research proves over and over again that contemporaneous timekeeping hovers around 40% of the population.  The new rule calls for fitting the tools to the timekeeper’s behavior, whether they be  contemporaneous, reconstructionist or collaborative timekeepers. This enables every behavior type to find timekeeping success.

2. Offer different timekeeping tools for different types of behavior

Trying to force contemporaneous software tools on a reconstructionist just won’t work. It’s not just inconvenient or difficult for the reconstructionist – it’s impossible.

Knowing this, you realize that if you want accurate, compliant timesheets, you need to find a system that offers a spectrum of software tools to suit all behaviors. Time capture to help the reconstructionist. Timers for contemporaneous behavior. Desktop systems for the attorney while they are in the office. Mobile systems for timekeepers who are out of the office or on the go.

3. Make time capture essential

No matter the behavior, the timekeeping tool that helps most and must be a component of any timekeeping system is time capture. This is the only way to ensure that all hours worked are booked into the system.

Time capture increases revenue by capturing billable time that is missed or underreported. It does this by monitoring firm systems and the desktop for documents, phone calls, email, appointments, research and more. It then provides the timekeeper with a journal of the day’s activities.

While reconstructionists benefit most from time capture, other timekeepers can use it to improve accuracy, and find lost units when they’ve been particularly busy multi-tasking or out of the office. Think of it as a timekeeping safety net. Not to mention the benefit of making it feel easier to enter time.

4. Prioritize accuracy

The attorney-client relationship is changing, with clients wanting more transparency and value than ever before. That’s why it has never been more important that bills accurately portray the activity and value of the work completed. The information provided by time capture will help the attorney compose better time entry narratives.

5. Enable your timekeepers to keep time anywhere

Without a doubt, the world has gone mobile. Everywhere you go, people are working and communicating using mobile devices like Smartphones and tablets. Whether they’re in court, on the road or at a soccer game, attorneys are working many hours outside the office and need their timekeeping software to be available everywhere. That’s now possible, either through a remote connection into the firm (for desktop applications) or on a smartphone or tablet.

Attorneys are busy people with many demands on them outside the office. But billable hours should not go unbooked because of a timekeeping system that lacks the flexibility to keep time anywhere.

6. Focus on technology

The technology to handle such a long wish list of features is now available to law firms. (Disclosure and shameless plug: We offer a product called Smart Time that fills the bill.) And, more than ever, updated technology must be a part of addressing the inefficiencies and challenges of law firm timekeeping.

Simply, great software technology can improve the timekeeping experience. Since timekeeping  is a major source of pain for timekeepers, whatever you can do to limit and reduce that pain will bring a huge and immediate return on investment for the firm and relief to your timekeepers.

7. Create a culture of compliance

To get timesheets in on time you’ve got to have a plan  that is non-negotiable, consistent and has explicit  expectations. Culturally, firms that have made timesheet compliance a priority are the most successful at achieving compliance.

Those who struggle have problems with inconsistent methodologies, unclear expectations and a culture that doesn’t value timesheet compliance.

A system can help a great deal, offering the right tools for a variety of behaviors. But without the culture, nothing will stick. We think the most effective strategy is that timesheets are due weekly, each Monday at noon for the prior week.  At month’s end, they are due the next day by close of business.

Conclusion

With these rules in mind, any firm can substantially improve both the business process and the actual technology of timekeeping.

We are at one of those moments where technology can revolutionize something that has been inefficient and painfully for  as long as the profession has existed; there are no more excuses for doing things “the way they’ve always been done.”

Apply these rules and find more billable hours, more accurate entries, fewer late timesheets and happier attorneys.  A true renaissance in timekeeping.

A Timesheet Compliance Policy Discussion: Many Voices, Many Solutions

Todd Gerstein
CEO, Smart WebParts

Timesheet compliance has always been dependent on how a firm’s policy shapes and directs human behavior. With that in mind, I posed a question to an online LinkedIn Law Firm Management discussion group, curious to discover how different firms handle this perennial trouble spot.

Below you’ll see the voices of many firms—in their own words—give insight into the highly varied policies and other methods firms have used to encourage compliance – some successful, some not.

The Question

I am preparing an article on timesheet compliance policies. How often do you require your attorneys to submit timesheets? How do you manage it?  What works?  What doesn’t?

The Answers

Success
For us, there are no carrots and no sticks, but there is public accountability and real-time reporting. That is, we know at any moment who is and who isn’t playing by the rules, and we quantify that daily in dollars so that people can see how good and bad behavior impacts the company. The results? We have more than 50 people in multiple offices who get their time in daily (yes, every day) by 10:00 am. Our system(s) begin the public shaming at 10:01… What’s the result on the receivable side? Well, because we have completely accurate time records, our clients get weekly updates on what we’re doing, and over the last ten (10) years, our collection rate is over 99.75% of total receivables.

We simply made it impossible to enter time more than 3 working days after the date of the proposed entry. Anyone trying to do so has to get special permission from the managing partner, based on exceptional circumstances. An attorney or other timekeeper offering the same excuse after getting special permission one time does not get approval.

While there are many strategies that tend to work for a while, the best approach is to adopt a firm-attitude (possible pun), which celebrates 100% compliance and does not tolerate time scofflaws. Offenders must know that non-compliance will be met with disapproval from their peers; punctuated if need be by a stern “talking to” from a managing partner who is comfortable saying that continued flaunting of the policy will be a factor in year-end compensation discussions. In my prior positions, my roles included pointing out this sort of issue in compensation committee meetings and I have witnessed partners and associates dinged financially ($20k in one partner situation) for poor timekeeping deadline compliance – but those three instances were extreme cases (one per decade isn’t too bad). The point being, the firm’s culture did not make excuses for those who flaunted a good and sensible rule, and each of the three people stayed with the firm, got with the program, and probably earn more now as a result of a valuable lesson learned.

We require timesheets to be submitted no later than 48 hours after the close of the day.
Our Partners are fined $25 a day for each day they are late. It is automatically deducted from their draw. As we cannot fine our associates, late timesheet information is reviewed at bonus time.

Mixed results
Our office has a written policy to turn in timesheets and enter them on a daily basis, but there is probably one or two people who actually do that. Most folks here do them weekly, or worse, on the last day of the month!

Ideally, time is entered daily and about half of our timekeepers are compliant. Of 65 attorneys, more than 80% enter their own time. Our general rule of thumb is all time for the prior week must be entered and posted by noon on Monday. On Tuesday, reminder emails are sent to those timekeepers not in compliance with a copy to me and the attorney’s Dept. Chair. For the most part, the protocol works.

Our firm requires time be entered daily; however, the attorneys are not held accountable until the month-end closing process. Most enter time daily, a few weekly and a couple stubborn folks don’t even get it in every month, and so there is endless chasing and cajoling.

They are supposed to turn them in daily. About 75% of them do. With some of them it’s like pulling teeth to get their time from them at the end of the month, and sometimes we end up telling them to add the entries to the pre-bills because we can’t wait any longer. I wish we fined them!

We ask our timekeepers to submit their time weekly, so it can be reflected in the weekly hours reports that go to the partners. Ideally, the reports are used to evaluate who, and which department, is busy. Having said that, about 1/4 of our timekeepers wait until the last day of the month to submit. and half of those are partners.

Failure
Our timekeepers are requested to input time on a daily basis, though the only requirement is that they submit them before month-end. We have a time and billing system, together with remote access, that allows our timekeepers to keep the program open all day as they work, but there is no consistency with methodology. Some of our timekeepers dictate the time entries, some write them out and give to their assistant to enter, while others enter directly through the time and billing system as they should. I have been with this firm for 19 years and it continues to be a struggle to get partners to enter time properly. Penalties for non-compliance is not a consideration.

We require all time to be turned in by Tuesday morning for the previous week. I would prefer to see it entered daily, as I believe that the longer you wait the more you lose. As with all deadlines imposed on attorneys, some follow them and others just let them slide. We are trying to deal with the problem children now. The Managing Partner is considering a “List of Shame,” which I have tried before at another firm, unsuccessfully I might add. Part of our problem is that when we developed the current policy, there were supposed to be consequences for those who missed more than twice. The consequences were not used and thus the policy became a joke.

Conclusion

Carrots and sticks abound, all of them being used with the goal of getting very busy attorneys to prioritize their timesheets. My take-away from this is that the humans in each firm don’t differ all that much, but that the most successful firms are working within a protocol that is non-negotiable, consistent and maintains clear expectations.  Culturally, these firms have made timesheet compliance a priority. The rest are dealing with varying degrees of success and frustration, for a variety of reasons, most having to do with inconsistencies in methodology, unclear expectations and a culture that doesn’t value timesheet compliance.

Hearing these voices from the trenches is an education on timekeeping compliance policy in and of itself. While it seems there is no magic bullet, the ability to compare approaches and policies at least begins to shed some light on what can work to boost compliance.

Lastly, I want to thank everyone who took the time to reply with their honest (and often detailed) assessment of their firm’s approach.

Timekeeping Enforcement: Culture, Behavior, Sticks & Carrots

By Todd Gerstein
CEO & Founder, Smart WebParts

You have a clear timesheet policy, a great time recording system and a firm full of hard-working attorneys. Why then, do you still need someone to be the timesheet “enforcer” and chase after people to turn in their timesheets on schedule?

Though attorneys find it painful to record their time, it is still essential to the business process. Primarily, of course, it is the first step in the billing process that turns hours into revenue. It also serves to aid the firm in delegating work assignments, evaluating employees, calculating profitability, gaining insight into operations and finding efficiencies.

So, why don’t attorneys submit their timesheets in on time? Two words: culture and behavior.

Culture & Behavior

Let’s tackle culture first. Some think the most effective way to achieve timesheet compliance is to make it cultural. Everyone, from accounting staff to assistants to the attorneys and partners, understands and accepts that it is a firm priority. No sticks or carrots—it’s just part of being at the firm.

Or, viewed from a slightly different angle: You have all the right tools, great people and clear policies, but if the firm environment and culture do not communicate that on-schedule timesheets are a priority, chances are good that late timesheets will endure as a problem.

I’ve observed that culture alone does not work in most firms. It’s not that your attorneys don’t want to submit their timesheets on time. It’s that their behavior is based on a sense of what’s most important.

For whatever reason, those who consistently turn in late timesheets have decided that on-schedule timesheets are not important. All you have to do is make them important. In other words, you change the timekeeper’s priorities by raising the stakes of non-compliance appropriate to how serious you are about wanting timesheets in on time.

So, what are your options for behavior modification? Sticks and carrots. What follows is what we have learned about timesheet enforcement at AMLAW 100 & 200 firms from firsthand experience, news reports, or input we have gotten from colleagues in the industry.

The Sticks Approach

Unfortunately, it is true that some people only respond when they feel pain. With that in mind, here are some “sticks” we’ve seen adopted in firms.

Pay Cuts

This approach hits delinquent timekeepers where it matters most: the wallet. We have seen two Biglaw firms recently expose their plans. From the Simpson Thatcher policy handbook:

Maintaining daily time records is very important to both the firm and our clients, as it directly impacts the firm’s ability to administer work assignments and to bill clients on a timely basis. If a lawyer is missing ten business days of diaries prior to any payroll date, the lawyer’s gross salary will be reduced by twenty percent prospectively for the next pay period. The reduced salary will continue in effect until diaries are no longer ten business days in arrears by a payroll date. Restoration to the prior salary will occur in the pay period following the pay period in which the lawyer’s time records are once again current, and retroactive restoration will only be made in exceptional and rare cases, such as in some situations of personal or family illness or emergencies, with such reimbursement to be approved in writing by a co-chair of the Personnel Committee. If a lawyer has any reason to believe that he or she will be unable to complete time records in compliance with this policy, the firm expects that the lawyer will raise the matter in advance.

Hughes Hubbard is the second major firm to have their timekeeping enforcement policy exposed in the press. The policy proposes irrevocable docks in pay for timekeepers whose time is more than five days late.  Here are the key paragraphs of the Hughes Hubbard policy:

 We are implementing a new approach to the issue of late time: if a timekeeper has more than five business days of late time prior to any payroll date, the timekeeper’s gross salary will be reduced by 5% in the first instance, prospectively for the next pay date. The reduction will be increased to 10% in the second instance and to 20% in the third instance and any subsequent instance. The reduced salary will continue in effect until the timekeeper’s time is no longer more than five business days in arrears by a payroll date.

There will be no retroactive restoration of a timekeeper’s reduced salary unless, in the discretion of the Chief Operating Officer or his designee after a showing of exceptional circumstances, the Chief Operating Officer or his designee approves an exception in writing. If a timekeeper has any reason to believe that he or she will be unable to complete time records in compliance with this policy, the timekeeper must communicate this in advance to the Chief Operating Officer or his designee.

In addition to pay cuts, we’ve seen these twigs added to the mix:

Cancel Direct Deposit

Cancel late timekeepers’ direct payroll deposit for six months.  Force the offender to go to the managing partner’s office to pick up their paychecks.

Cut Off Computer Access

If a timekeeper is late on timesheets, the IT department shuts down their computer. When they attempt to use it, every application is locked down except time entry. After they enter their time, they report it to the accounting department, who gives the IT department the high sign to turn the computer back on.

The Carrots Approach

If the positive approach is more your speed, these tactics have been implemented by other firms to motivate compliance:

Giveaways

Everybody loves “free.” This approach gets people to think of their timesheets as a means to an end.  At year end, Brown Rudnick offered its timekeepers a fun reason to get their time in for the year end close. Here is an excerpt of the Brown Rudnick memo:

1. Attend the Effective Billing Practices training on Monday, December 6th at 12:00 p.m. EST/5:00 p.m.GMT;

 2. Follow “best practices” for all timekeeping entries (as described in the December 6th training session); and

 3. Submit your time daily from December 6th – January 31st in accordance with our timekeeping policy.[Redacted] and his team of experts will determine whether timekeepers are following “best practices” (including submission of detailed, informative descriptions of the individual tasks performed and the amount of time spent on each). All eligible timekeepers will be included in a raffle for 24 iPads! Winners will be announced no later than February 7th.

The Disappearing Bonus

Here’s the positive spin on the wallet approach, and one which reminds employees, each week, that there is a consequence for their choices and behavior:

Each January, every employee begins the year with $1,000 in a special bonus account, payable at the end of the year. Each week where there is a missing timesheet, one hundred dollars is deducted. At the end of the year, whatever amount remains is added to the final paycheck.

Embed Compliance into Important Firm Metrics

This is the method I like best. A mix of culture, sticks and carrots. It came from a CFO at an AMLAW firm.

 We carefully monitor time entry — our policy is weekly (time through prior Friday due Monday; end of month due at the end of the first business day of the following month). The number of appearances on late time reports is a financial statistic that is considered along with all other metrics (e.g., billable hours, realization, etc.) at every opportunity — associate raises and bonuses, partnership consideration, partner compensation committee, etc. There are also economic sanctions to equity partners, both on a weekly and monthly basis.

It has taken us many years to obtain the buy-in and cultural acceptance of these policies. It is a very difficult but imperative process.

Conclusion

Given that most people aren’t usually motivated by firm culture alone, it’s my view that the most effective approach is a mix of culture, sticks and carrots. As you’ve seen from this post, there are many potential paths, each of which offers its own advantages and drawbacks.

The first challenge is to realistically appraise what your firm’s culture is, and whether you need to make any changes to that culture to get employee buy-in on new or changed policies. Recognize too, that for your attorneys, timekeeping is a painful process, so anything you can do to acknowledge and attempt to reduce their pain will go a long way toward achieving this buy-in.

Then, of course, you need to decide what compliance measure best fits your firm, and pursue it, expecting that it may be an experimental process that requires patience and tenacity.

Whichever path you go down, the key to an effective policy is embracing it at every level and remaining consistent regarding expectations and enforcement.  Changes in culture are some of the hardest to initiate, but can be some of the most worthy your firm can make.

Big Law’s $1,000-Plus an Hour Club

From The Wall Street Journal
By Vanessa O’Connell
.

Editors Note:  At these rates timekeeping better be accurate.

Leading attorneys in the U.S. are asking as much as $1,250 an hour, significantly more than in previous years, taking advantage of big clients’ willingness to pay top dollar for certain types of services.

A few pioneers had raised their fees to more than $1,000 an hour about five years ago, at the peak of the economic boom. But after the recession hit, many of the rest of the industry’s elite were hesitant, until recently, to charge more than $990 an hour.

[TOPRATESjp]

While companies have cut legal budgets and continue to push for hourly discounts and capped-fee deals with their law firms, many of them have shown they won’t skimp on some kinds of legal advice, especially in high-stakes situations or when they think a star attorney might resolve their problem faster and more efficiently than a lesser-known talent.

Harvey Miller, a bankruptcy partner at New York-based Weil, Gotshal & Manges, said his firm had an “artificial constraint” limiting top partners’ hourly fee because “$1,000 an hour is a lot of money.” It got rid of the cap after studying filings that showed other lawyers surpassing that barrier by about $50.

Chart: Top Billers

See which attorneys had some of the highest-known hourly rates in 2010 and 2009.

[topbillers]

Today Mr. Miller and some other lawyers at Weil Gotshal ask as much as $1,045 an hour. “The underlying principle is if you can get it, get it,” he said.

“Not many attorneys can command four figures hourly, and I do have trouble swallowing that,” said Thomas L. Sager, assistant general counsel at chemical maker DuPont Co. Still, he added, DuPont pays more than $1,000 an hour to a “select few,” particularly for mergers-and-acquisitions advice.

Janine Dascenzo, associate general counsel of General Electric Co., said that her company is willing to pay what it must when it needs a lawyer with “unique” expertise. “We’ll keep paying them a lot of money, because they’re worth that,” she added.

Industrywide, attorneys in finance-related practices such as M&A, bankruptcy law and taxes, tend to command a premium to their peers in other specialties.

One of the priciest attorneys over the past year, according to court filings, has been Kirk A. Radke, whose specialty at Kirkland & Ellis LLP in New York is advising clients on leveraged buyouts and forming private-equity funds. As of early 2010, Mr. Radke, whose clients include private-equity firm Avista Capital Partners, had an hourly fee of $1,250.

Mr. Radke and Kirkland & Ellis declined to comment, as did Avista Capital.

Such rates are contributing to inflation across the $100 billion-a-year global corporate-law industry as the slow economic recovery has left many law firms struggling to finance the hefty pay packages they award their stars. Since most law partners bill roughly 2,000 hours, those asking $1,100 hourly will bring in $2.2 million, a few million short of the $3 million or $4 million in annual compensation star attorneys get at many big firms.

To help fill the gap, the firms rely on the profit they often reap on the work of junior attorneys, or associates. Dozens of associates at a time can work on a single case, and some firms bill as much as $700 an hour for their time, according to Valeo Partners, a Washington consulting firm that maintains a database of hourly legal rates in fields such as litigation, corporate law and intellectual property.

That strategy can fuel tensions with clients. “We are much less willing to pay an army of associates at the ever-increasing rate,” said GE’s Ms. Dascenzo.

“Plenty of clients say to me, ‘I don’t have any problems with your rate,’ ” said William F. Nelson, a Washington-based tax partner at Bingham McCutchen, who commands $1,095 an hour, up from $1,065 last year. “But there is price pressure for associates, especially junior lawyers.

A small but growing number of top lawyers are using other arrangements in place of hourly billing. David Boies, chairman of Boies, Schiller & Flexner and a prominent trial lawyer, charges $960 an hour, a spokeswoman for the firm said. But just a third of his time is devoted to matters that are billed hourly. More often his deals with clients involve alternatives such as pegging fees to his success, she said.

More typically, big law firms’ managing partners dictate hourly rates annually, often studying what their rivals charge, according to disclosures in their attorney-fee filings in corporate-bankruptcy cases, which provide a rare public peek at the industry. Such cases involve more than just bankruptcy lawyers; they frequently draw in a range of attorneys, including specialists in such areas as taxes, product liability and environmental and intellectual-property law.

This year, top litigators at Morgan, Lewis & Bockius LLP, a Philadelphia-based firm, are asking as much as $1,200 an hour. A spokeswoman for the firm said “less than 1% of our partners are at rates of $1,000 or more.”

Gregory B. Craig, a former counsel to the Obama White House who joined Skadden, Arps, Slate, Meagher & Flom LLP a year ago as a Washington-based litigation partner, is asking $1,065 an hour, according to a court filing last month. Skadden Arps declined to comment. Mr. Craig didn’t respond to a request for comment

M&A lawyer John M. Reiss, from White & Case in New York, started billing $1,100 an hour last year. “Some clients do focus on the hourly rate, but in the end what really matters is their total cost and whether they got a fair price,” said Mr. Reiss.

In recent years, pressure from clients for discounts has made it increasingly difficult for law firms to increase their lawyers’ fees across the board. Hourly rates for partners rose by an average 3% in 2009 and 2010, and 2.3% this year, compared with an 8% increase in 2008, according to Hildebrandt Baker Robbins. The average law-firm partner now asks $635 an hour and bills $575, the firm said. But a small group of attorneys in some specialties command significantly more.

Nearly 2.9% of partners at a group of 24 large U.S. and British law firms asked for $1,000 an hour or more in U.S. cases last year, up from 1.5% in 2009, according to Valeo.

London-based lawyers have tended to charge higher per-hour rates than their U.S.-based counterparts. However, London attorneys typically don’t bill as many hours on a case as do U.S. attorneys, some lawyers say.

“A thousand dollars an hour was a choke point for some clients,” said Peter Zeughauser, a consultant to law firms. “I don’t think there will be another significant psychological barrier until rates reach $2,000 an hour, which they will do, probably in five to seven years.”

Hughes Hubbard Is the Latest Firm to Crack the Time Keeping Whip

From Above the Law
By Elie Mystal

I find it funny that firms that want to skimp on bonuses also expect associates to make sure they are helping the overall health and performance of the firm. At some level, why should associates care if the firm is up to date on its collections? It’s not like that money is going to trickle down to the time keepers once their hours are realized. Hell, we’ve got people in the comments claiming they are going to purposely underbill in order to hurt firms in 2011 for stinginess in 2010.

The firms aren’t wrong to be doing everything they can to get associates to enter in their hours in a timely fashion. Time keeping is more accurate when you do it every day (as opposed to trying to recreate your days at the end of the week or month). Firms are struggling to collect from their clients. And, for what it’s worth, billing hours is part of the job for attorneys. I just find it ironic that firms are trying to pressure their associates to produce more money for them even as they are sharing a smaller percentage of those profits with associates.

It’s pretty clear that being a part of a Biglaw firm isn’t a “team” proposition. Everybody for themselves; that’s how the partners act, and that’s how partners expect associates to act.

And so Hughes Hubbard is bringing a little personal punishment to associates who are late with their time…

If you’ve been following along with Above the Law, you know that a number of firms have stepped up the pressure on associate time keeping. Simpson Thacher, defenders of the cheap Cravath bonus scale, got the ball rolling back in November, by threatening to dock the pay of associates who were delinquent with their billable hours.

Then Steve Pesner of Akin Gump sent out an email (an email that still hasn’t been repudiated by Akin Gump management) threatening the livelihood of all the associates in his department. Later, Brown Rudnick tried the “get more flies with honey than with petulant screaming” tactic, by offering to raffle off free iPads for time keepers who were up to date with their time.

The Hughes Hubbard plan is along the lines of STB’s: punishing delinquent timekeepers with pay cuts. Hughes Hubbard is proposing significant, irrevocable docks in pay for people who are more than five days late in entering their time. The new rule is buried in a lengthy firm-wide email touting the virtues of a new timekeeping system. Here’s the pertinent part:

We are confident that the new Elite Webview time system will make it even easier for the Firm’s timekeepers to enter their time on a contemporaneous basis. To compliment that new system, we are implementing a new approach to the issue of late time: if a timkeeper has more than five business days of late time prior to any payroll date, the timkeeper’s gross salary will be reduced by 5% in the first instance, prospectively for the next pay date. The reduction will be increased to 10% in the second instance and to 20% in the third instance and any subsequent instance. The reduced salary will continue in effect until the timekeeper’s time is no longer more than five business days in arrears by a payroll date.

There will be no retroactive restoration of a timekeeper’s reduced salary unless, in the discretion of the Chief Operating Officer or his designee after a showing of exceptional circumstances, the Chief Operating Officer or his designee approves an exception in writing. If a timekeeper has any reason to believe that he or she will be unable to complete time records in compliance with this policy, the timkeeper must communicate this in advance to the Chief Operating Officer or his designee.

The new policy will become effective on January 1, 2011 in all of our U.S. offices (save for Los Angeles, which is implementing a different program to address the late-time problem).

Damn. Up to a 20% reduction, with no restoration absent a written exception? Hughes Hubbard is like the not f**king around crew.

However, according to the Hughes Hubbard associates committee, “this not f***ing around thing is about to go both ways.” Here’s the response from the associates committee:

Dear colleagues:

The associates committee will be collecting questions about the new time policy described in the [prior] email. Please read that email and the new policy carefully. In addition to being sent during a week when most people are out, the headline is buried deep in the fourth paragraph.

In short, the firm has a new policy of reducing your salary for late time entries. Late is defined as five days. The salary reductions can cut as deeply as 20% of your gross pay. The policy is going into effect as of January 1, 20111 except in our LA and Paris offices (because the policy is illegal in those jurisdictions). You will want to ensure that your secretary gets your time in promptly and no longer enters it in batches.

If you have any questions about the policy that you would like for the associates committee to raise to the partnership, please send them to me and I will pass them on.

They sound pissed.

But really, what are they going to do? You’re supposed to enter your time, on time. You can bitch about it, but at the end of the day you exist to make money for the firm. All you can really hope for is to work for a firm that will reinvest some of those profits back into your bank account.

And if you really want to work for a place like that, you should probably send in a résumé to Cahill or Kirkland or Boies or some other firm that pays top of the market bonuses.

Brown Rudnick Shows Steven Pesner How to Inspire Time Keeping Compliance

From Above the Law
By Elie Mystal

Last month, we profiled Steven Pesner, a partner at Akin Gump who sounded like an egomaniac while threatening associates who did not promptly enter in their time.

Prior to Pesner, Simpson Thacher threatened to dock the pay of timekeepers who are delinquent.

Entering time is important, but sometimes you can get more flies with honey than with douches. At least at Brown Rudnick, the firm is trying to reward dutiful time keepers instead of threatening those who fall behind…

Here’s a radical thought, instead of penalizing people, you could incentivize people. Brown Rudnick is offering its people a fun reason to get their time in:

We are giving away 24 iPads! All you (partners, associates, counsel and paralegals alike) have to do to become eligible to win one is:

1. Attend the Effective Billing Practices training on Monday, December 6th at 12:00 p.m. EST/5:00 p.m.GMT;

2. Follow “best practices” for all timekeeping entries (as described in the December 6th training session); and

3. Submit your time daily from December 6th – January 31st in accordance with our timekeeping policy.

[Redacted] and his team of experts will determine whether timekeepers are following “best practices” (including submission of detailed, informative descriptions of the individual tasks performed and the amount of time spent on each). All eligible timekeepers will be included in a raffle. Winners will be announced no later than February 7th.

There are a couple of great things about this program. First of all, it’s great that Brown Rudnick included partners in its missive about time-keeping. Partners are just as susceptible to falling behind on their paperwork as anybody else. How nice of Brown Rudnick to look at the whole problem instead of just singling out the people in the weakest power position at the firm.

And offering prizes is a great idea. I mean sure, it’s an iPad (quick question: what, precisely, is the iPad for? It’s not a phone, it’s not a laptop, you can’t have sex with it, if I got an iPad, what other thing in my life would I no longer need?). What Brown Rudnick is doing is trying to create a sense of community among everybody who works at the firm. Instead of using fear and intimidation, it’s telling people that if they do what Brown Rudnick wants them to do, they might get something in the bargain.

Does anybody remember this mentality? It’s what we used to see before the recession. It’s what we used to see before employers starting acting like they were doing some kind of magnanimous favor merely by allowing people to work for them. Having a job is not a “perk,” having a job is not a “bonus.” Having a job… is work.

Sure, as Steven Pesner so eloquently reminded us, the job market is tough. People can’t easily leave one job and land another one. People need their jobs. But that’s no excuse for taking emotional advantage of the people “trapped” in your employ.

I applaud Brown Rudnick here. They didn’t have to do it this way. The could have just told people to enter their time and punish the delinquents. Doing nice things when you don’t have to is the definition of being “nice.” At a time when seemingly all of America is stressed out and terrified of becoming a victim of the recession, Brown Rudnick did this little small thing, and it’ll make people feel a little less economically depressed as they struggle through the “recovery.”

Management has paid very little attention to firm morale since the start of the recession. Let’s hope Brown Rudnick starts the ball rolling in the other direction.

Simpson Thacher’s Time Sheet Policy – Barely Legal?

From the Careerist
By Vivia Chen

Partners, I feel your pain. Squeezed by the bad economy and badgering clients, you really have to hustle to take home that million or two these days. What’s more, you face an enemy at your own firm: Lawyers who won’t or can’t get their time sheets in on time.

Clearly, late time sheets are driving people batty. Recently, I blogged about the partner who’s so frustrated with delinquent timekeepers that he’s taken to threatening them with public humiliation and firings. And before that, I blogged about Simpson Thacher & Bartlett’s new policy of reducing compensation by 20 percent for associates who are ten days late in filing their time records. (Even after the associate is up-to-date on time sheets, Simpson won’t restore the lost wages, except in “exceptional and rare cases,” according to the firm’s employee manual.)  

When a firm like Simpson adopts this kind of draconian policy, it carries authority. But on this one, I’ve been hearing rumbling from lawyers (at other firms) that Simpson might be going too far. “You can fire someone for not getting in their time sheets, but you can’t cut their wages,” one lawyer tells me.

Could a firm like Simpson be skirting the law? I asked an employment-lawyer friend for his take. Here’s what he says: “It is flat out illegal in New York to make deductions from employees’ paychecks for failure to follow company policies.”

In particular, he cites New York labor law section 193, which talks about what’s considered proper and improper deductions by employers:

No employer shall make any deduction from the wages of an employee, except deductions which a. are made in accordance with the provisions of any law or any rule or regulation issued by any governmental agency; or b. are expressly authorized in writing by the employee and are for the benefit of  the employee; provided that such authorization is kept on file on the employer’s premises. Such  authorized  deductions  shall  be limited  to  payments  for  insurance  premiums,  pension  or health and welfare benefits….

But Simpson Thacher has found a clever way to get around this statutory prohibition, explains my friend, by making the salary reduction prospective, rather than retrospective: “I think that is permissible, because it is really not a deduction from pay–it is a reduction in pay, going forward.” Still, he says “the policy could be problematic if they routinely reinstate salary retroactively, because then it could be regarded as a de facto deduction.” (I also asked Simpson to comment, but haven’t heard back.)

So is Simpson out of the woods or not? Well, says my friend, “it would be interesting to know what the New York Department of Labor thinks of this policy. Perhaps someone could request from the department a formal opinion.”

Readers–what do you think of Simpson’s time sheet policy? Does it go too far? Will this cure late time sheets, or is it inviting legal trouble?

Akin Gump Partner Pens Email Fantasy About Firing Delinquent Timekeepers

From Above the Law
By Elie Mystal

Nothing says “Biglaw” quite like an old-fashioned partner threat. Biglaw partners, a self-important bunch if there ever was one, generally do little to mask their huge egos. But when those egos express themselves in the form of threats against underlings, well, that’s when you learn why people get paid $160,000 right out of school.

You see, in most situations you just can’t treat highly educated people like naughty schoolchildren and expect them to take it. Not if you are paying them $50,000 a year for some average, middle-class lifestyle. They’ll quit. They’ll tell you to take your BS job and shove it down your condescending throat. But when you pay people $160,000 (or more), then you can talk to them however you please. They’ll take it (and apparently thank you for it). Biglaw partners know that their associates are being paid more money than they can make nearly anywhere else, and so they have little incentive to consider how they speak to their associate colleagues.

Now most partners threaten or belittle people on an individual, face-to-face basis. But sometimes these communications are disseminated to a broader group, and on the rarest of occasions these partner meltdowns are captured over email and sent to Above the Law. And those are the best.

Yes, Steven Pesner of Akin Gump, we’re about to make you a star….

Steven Pesner

Mr. Pesner joins an esteemed line of partners who have used law firm emails to teach associates how they’d like things to be done at their firms. Charles Kerr of Morrison & Foerster springs to mind, with his lovely face-time directive to associates who weren’t dutifully sitting at their desks — despite the remote conveniences of the modern age. And you can’t talk about remote conveniences without mentioning William Urquhart of Quinn Emanuel — and “CHECK YOU EMAIL” fame. But neither of those guys actually fantasized about firing random associates to make an example out of them.

Steven Pesner did. He’s on a crusade to make sure that associates at Akin Gump New York enter their time on a daily basis. Not weekly or monthly, but daily. He sent out an email with 11 bullet points towards that goal.

Fair enough; we’ve mentioned that timekeeping is critically important to partners in an environment where some clients can be sketchy about paying bills. Simpson Thacher threatened to dock people’s pay if their time is delinquent. Granted, given how shockingly cheap Cravath (and Skadden) wants everybody to be, I can’t imagine Biglaw associates are in the mood to help the partners out. But in Biglaw partner world, associates are supposed to help out the firm even if the firm screws over associates.

The first eight points in Pesner’s email are all about the importance of daily timekeeping. You can read the full email below; it’s condescending, but not out of the ordinary if you’ve held one of these Biglaw jobs for ten minutes.

But by point nine, Pesner’s ego starts to take over:

9. For those of you who think you are exempt from doing time sheets on a daily basis, I’d suggest that you re-evaluate your importance and get ready to prove that (a) you are busier than I am on legal work, (b) you are busier than I am on client development work, (c) you are busier than I am on firm work and (d) [redacted] and I do not have better things to do with our time than beg you to be responsible;

“Re-evaluate your importance”? Mr. Pesner, I think you need to examine your motives. Nobody (besides you) is looking for a fight here. There’s no need for you to drop your gloves and march towards the Client Development Coliseum. Some people in your office got behind on their paperwork; they didn’t threaten your manly dominance.

Pesner continues:

10. Candidly, I’d put every future material violator’s name in a hat, randomly pick out a name, and publicly fire the person on the spot—to demonstrate that time sheet compliance is serious business. And incidentally, it is my understanding that the job market is not so good right now in case you did not know;

Candidly, you seem like a horrible person. Yes, the job market “is not so good right now.” So, way to be a tool and bring that up in the context of theoretically firing somebody whose name you picked out of a hat. Did you think that sharing your sick little fantasy involving your own power over the careers and livelihoods of the people who work for you would sound funny? Or would better express the seriousness of your concerns? A petty despot can have a man hanged to set an example for his people; it doesn’t make him any less odious.

And other Akin Gump partners, where are you on this? I’ve met some of you. You’re not like this guy. Is this really the impression you want people to have about your firm? Is this really how you want your own associates to feel — like the partners really wish they could randomly fire them to prove a point?

Of course, Pesner won’t (or can’t) pick names out of a hat and indulge his public stoning fantasies. But he can do this:

11. Also, please remember that I have a long and excellent memory.

If you have any questions, think long and hard before asking them—this simply is not very complicated.

So Pesner the Elephant is above even being questioned by the people he works with. Initially I thought that he had been a partner for so long he had simply forgotten how to act like a human, but since he is incapable of forgetting anything, I suppose he was never taught how to act decently in the first place.

Let’s end where Pesner does in this little postscript:

P.S. This email is not being sent only in anger; it also is being sent to demonstrate my deep and personal disappointment in the irresponsible people.

I can only hope that the rest of the Akin Gump partnership is feeling some intense “personal disappointment” right now too.


MEMORANDOM FROM STEVEN PESNER REGARDING TIME KEEPING

Subject: Read Carefully!

To All NY Litigation Attorneys, Paralegals and Secretaries:

First, I want to thank those of you who do your time sheets on a daily basis. We should respect, recognize and thank those people who play by the rules.

Now for the rest of you, let’s make sure we understand what the real story is on time sheets, in my view:

1. Every time keeper is required to do a 100% accurate time sheet every single day;

2. That time sheet is required to be completed on the same day as the work you do on the various matters. That is the only real way, in my view, to accurately record your time;

3. The consequences of failing to accurately record your time range from “having to make up” your time entries (a potential fraud on our clients) to under-recording your time (a detriment to your law firm);

4. Your daily time sheet should be given to your secretary BEFORE you leave for the day or first thing the next morning for those us us who also work after leaving the office;

5. Your secretary should input and release your time sheet the morning after your work has been done;

6. It is the timekeeper’s responsibility to complete her/his time sheet as set forth above;

7. It is the secretary’s responsibility to make sure that the timekeeper does so and to input and release the time sheet daily;

8. The concept that time sheets are not due until the last day of the month, last day of a week or some time other than daily simply is wrong; they are due at the end of every day or first thing the following morning for those of us who also work after leaving the office;

9. For those of you who think you are exempt from doing time sheets on a daily basis, I’d suggest that you re-evaluate your importance and get ready to prove that (a) you are busier than I am on legal work, (b) you are busier than I am on client development work, (c) you are busier than I am on firm work and (d) [Redacted] and I do not have better things to do with our time than beg you to be responsible;

10. Candidly, I’d put every future material violator’s name in a hat, randomly pick out a name, and publicly fire the person on the spot—to demonstrate that time sheet compliance is serious business. And incidentally, it is my understanding that the job market is not so good right now in case you did not know; and

11. Also, please remember that I have a long and excellent memory.

If you have any questions, think long and hard before asking them—this simply is not very complicated.

Thx

Steve

P.S. This email is not being sent only in anger; it also is being sent to demonstrate my deep and personal disappointment in the irresponsible people.

Simpson Thacher Threatens to Withhold Salary For Delinquent Timekeepers


From Above the Law
By Elie Mystal

If you talk to law firm partners who are in charge of collecting fees, they’ll tell you that getting clients to pay has become a real hassle ever since the recession started. Clients are trying to make their books look as palatable as possible, and if that means avoiding or delaying payments to their lawyers, well then that’s what they are going to do. Collecting fees from clients is one of the top concerns of Biglaw managers.

And it should be a top concern for Biglaw associates. Nobody is going to be getting a bonus when the firm cannot realize its profits.

You’d think every practicing attorney would be on the same page with this by now. You’d think, at the very least, every person would be diligently putting in their time to give their firm the maximum opportunity to collect on their billable hours. But apparently some people haven’t gotten the memo that putting in your hours in a timely fashion is critical in this environment.

Well, at Simpson Thacher, they want to know your hours, now. And the firms is threatening to bring the hammer down on attorney time-keepers who are putting off this important paper work. Put in your hours, or STB will punch you right in the wallet…

Yesterday, STB essentially threatened its attorneys with wage garnishment if their time is not entered in a diligent fashion. First, here’s the carrot from the firm wide Simpson memo:

Section 111. B. 1. of the Legal Policy Handbook sets out the firm’s longstanding policy on the completion of time records. Every lawyer is required to maintain accurate records concerning all billable and nonbillable work performed, and these time records need to be prepared, submitted, and released daily, even when the lawyer is outside the office.

Maintaining daily time records is very important to both the firm and our clients, as it directly impacts the firm’s ability to administer work assignments, to bill clients on a timely and accurate basis and to provide clients with current and accurate estimates of accrued time upon their request. A growing number of clients require us to provide periodic estimates and to exclude non-current time from bills that we send them.

And now, the big ass stick STB is willing to wield against its own people:

In order to emphasize the importance with which the firm views this policy, the third paragraph of Section 111. B. 1. has been amended to read as follows:

Maintaining daily time records is very important to both the firm and our clients, as it directly impacts the firm’s ability to administer work assignments and to bill clients on a timely basis. If a lawyer is missing ten business days of diaries prior to any payroll date, the lawyer’s gross salary will be reduced by twenty percent prospectively for the next pay period. The reduced salary will continue in effect until diaries are no longer ten business days in arrears by a payroll date. Restoration to the prior salary will occur in the pay period following the pay period in which the lawyer’s time records are once again current, and retroactive restoration will only be made in exceptional and rare cases, such as in some situations of personal or family illness or emergencies, with such reimbursement to be approved in writing by a co-chair of the Personnel Committee. If a lawyer has any reason to believe that he or she will be unable to complete time records in compliance with this policy, the firm expects that the lawyer will raise the matter in advance.

A 20% salary reduction, and they won’t make restitution of that money absent special circumstances! Does Simpson have your attention now? It’s like the firm is channeling Mr. Blonde: If they hadn’t done what I told ‘em not to do, they’d still be alive.

And while these measures might seem a little draconian from Simpson, isn’t the firm absolutely correct in this instance? Putting in your time is crucial. If you can’t make a point to get in your hours once a week, you are directly responsible for hindering the firm’s efforts to make money. If you’re going to hurt the firm’s ability to make money, than it will hurt yours. It might be a bit Hobbesian, but it doesn’t strike me as unfair.

STB collecting enough money to keep partner profits soaring but then turning around and making a cheap bonus payment to its associates — that would be unfair. But to the extent that STB attorneys are hoping for a big time bonus, the least they can do is to make sure to log their time.

If you are an STB associate, I suggest you put in your time before commenting on this post. I’m just trying to help.

Read the full Simpson memo below:


SIMPSON THACHER — MEMO — TIME KEEPING

November 1, 2010
TO: All Associates, Counsel and Senior Counsel in New York and Washington, D.C.
FROM: [Redacted]
RE: Daily Time Records

Section 111. B. 1. of the Legal Policy Handbook sets out the firm’s longstanding policy on the completion of time records. Every lawyer is required to maintain accurate records concerning all billable and nonbillable work performed, and these time records need to be prepared, submitted, and released daily, even when the lawyer is outside the office.

Maintaining daily time records is very important to both the firm and our clients, as it directly impacts the firm’s ability to administer work assignments, to bill clients on a timely and accurate basis and to provide clients with current and accurate estimates of accrued time upon their request. A growing number of clients require us to provide periodic estimates and to exclude non-current time from bills that we send them.

In order to emphasize the importance with which the firm views this policy, the third paragraph of Section 111. B. 1. has been amended to read as follows:

Maintaining daily time records is very important to both the firm and our clients, as it directly impacts the firm’s ability to administer work assignments and to bill clients on a timely basis. If a lawyer is missing ten business days of diaries prior to any payroll date, the lawyer’s gross salary will be reduced by twenty percent prospectively for the next pay period. The reduced salary will continue in effect until diaries are no longer ten business days in arrears by a payroll date. Restoration to the prior salary will occur in the pay period following the pay period in which the lawyer’s time records are once again current, and retroactive restoration will only be made in exceptional and rare cases, such as in some situations of personal or family illness or emergencies, with such reimbursement to be approved in writing by a co-chair of the Personnel Committee. If a lawyer has any reason to believe that he or she will be unable to complete time records in compliance with this policy, the firm expects that the lawyer will raise the matter in advance.

Before each payroll date, associates, counsel and senior counsel with missing diaries will be reminded that they are in arrears and are required to get their diaries up to date. Further reminders will also be sent prior to the payroll date. We hope and expect that all lawyers will comply with the policy, and that the penalties set out will not need to be enforced. We note that while the penalties will only apply when diaries are ten or more business days in arrears prior to a payroll date despite several reminders, the firm’s policy continues to be that diaries should be submitted on a daily basis. The policy change will first apply to the final November payroll and will be applicable to all associates, counsel and senior counsel in the New York and Washington, D.C. offices.

Attorney Timekeeping: Why It Pays to Plug The Leak

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From Law360
By Allison Grande

Law360, New York (August 05, 2010) — Inaccurate timekeeping causes major headaches and can lead to significant losses in a firm’s bottom line. But firms can take some simple steps to improve their timekeeping capabilities and maximize their profits, experts say.

A survey conducted by consulting firm Adam Smith Esq. and software company Smart WebParts LLC from mid-May through early June found that average “leakage” due to an individual’s failure to accurately report all billable time ranges from $20,000 to nearly $40,000 annually per individual, while the overhead costs of keeping time can add up to roughly $16,000 per person per year.

“Timekeeping or lack thereof is the kind of dirty little secret that can cost law firms a significant amount of revenue,” Adam Smith partner Janet Stanton said.

While firms have faced the problem of how to accurately and efficiently record billable hours for years, Stanton points out that the results of the survey — which collected feedback from 86 law firm partners, 72 associates and 51 senior staff — highlight the significant degree to which lackadaisical timekeeping is impacting the bottom line.

“With more rigorous timekeeping, all of that sound revenue can be recovered for the firm’s bottom line without anyone working any additional time,” Stanton said.

Although lawyers still dread the task of keeping tabs on their daily movements — respondents to the survey called timekeeping “the bane of my existence” and “the worst part of firm life” — doing so represents an opportunity to increase revenue without incurring additional costs.

“Many attorneys dislike timekeeping and view it as a necessary evil … and as a result treat the recording of their time as an afterthought,” said John L. Trunko, a St. Louis-based attorney and former senior legal auditor with Stuart Maue Mitchell & James Ltd. “Sloppy and undisciplined timekeeping practices decrease productivity, result in lost fees, and can create serious client-relations and other problems down the road.”

Address the Issue

As with any potential problem, the first step for most law firms is admitting that their timekeeping structure has room for improvement.

Jenner & Block LLP’s Executive Director and Chief Operating Officer Meredith Mendes realized three years ago that changes could be made to the firm’s timekeeping process in order to save lost revenue.

“When you begin to look at money that’s being lost simply because people are not accurately writing down their time, it becomes shameful,” Mendes said.

Given the benefits firms stand to gain from increasing the accuracy of their timekeeping methods — lawyers who keep contemporaneous time records enjoy a 25 to 40 percent higher income than those who don’t, according to Law Practice Management Consulting founder and CEO Gisela B. Bradley — it is not surprising that one of the conclusions of the Adam Smith timekeeping survey was that lawyers “would be eager to explore alternatives that invite greater accuracy and, most importantly, would be easier to use.”

“In this environment where every bit of profit matters, to be able to increase profits without anyone working an additional hour is powerful,” Stanton said.

She added that since the release of the survey’s results in early July, a number of firms have inquired about ways to evaluate their timekeeping methods in order to capture more hours and to reduce the time it takes for timekeepers to capture billable hours.

“The firms we have spoken to have not gotten so far as to initiate changes yet because it is still early in their evaluation process, [but] they have an eye toward changing what they do and how they do it,” Stanton said.

New Technology Can More Efficiently Track Time

The typical timekeeping method at law firms involves lawyers or their secretaries entering daily tasks — including phone calls, e-mails and other correspondence with clients — into the firm’s intranet system on a predetermined basis.

However, this system leads to the dreaded “leakage” problem because it relies on lawyers remembering sometimes days after the fact how long they spent performing a certain task, according to firms.

Software programs have the potential to make the act of remembering significantly easier and less burdensome for timekeepers by delivering the exact time spent on a certain task directly to a lawyer’s phone or inbox, according to experts.

“Timekeepers are not writing down time contemporaneously, which is a burden when trying to enter their time later,” Stanton said. “But as technology advances, better ways to capture time and have that information come to you are being made more available.”

A nationally recognized law firm recommended IntApp Inc.’s Time Builder system which, like comparable software programs, provides a journal of attorney activity by automatically monitoring and cross-referencing key productivity applications such as document management, e-mail and phone systems.

The program is also directly integrated with time entry systems such as Elite WebView and Advanced Productivity Software’s DTE, a feature that allows attorneys to more easily track and enter time, according to the company.

Mendes said that Jenner & Block had recently launched a pilot program that allows a few of its attorneys in Washington and New York to use this type of software to receive automatically generated e-mail reminders of how they’ve been spending their time and when they need to enter this data into the system.

“One partner in New York loves it, while another has said it’s not for them,” Mendes said. “It really depends on your role and workload. If you’re working on a bunch of different cases, then it tends to be better.”

Use Old-Fashioned Methods To Finish the Job

While software programs facilitate remembering and make it easier to track these hours, they do not eliminate the task of recording activities into the firm’s time system.

This deficiency means that firms may still have to employ more old-fashioned methods — such as offering incentives for entering input on time or sending out public reminders to repeat offenders — to achieve compliance.

“We send out e-mails and make phone calls to remind people to put their time in, and sometimes the embarrassment factor gets the job done,” Mendes said.

In the end, though, the chosen timekeeping method has to not only work for lawyers but also for the firm’s existing standards.

“Some firms use a more militant approach than we do, but these strategies [such as requiring repeat offenders to donate a certain amount of money for their missed entries] never really caught on and just didn’t work with our culture,” Mendes said.

Alternative Fee Structures Are Not a ‘Solution’

While recent reports show that alternative fee structures have been successful for firms and are likely to increase in the coming years, these arrangements do not necessarily exempt firms from having to keep tack of their work, according to experts.

“A lot of people think that an alternative fee arrangement or a flat fee allows firms to escape the task of having to track hours,” Stanton said. “However, if you don’t have all the hours associated with the project going forward, you’re not in a position to recommend an arrangement that’s good for not only the client but also the bottom line.”

Although firms using these alternative structures do not bill their clients by the hour, knowing the amount of time spent on a certain project is vital because it allows the firm to make sure it has secured the maximum profit for its work.

“If you look at other industries that are more advanced in project management or fixed fee billing, you still see that partners calculate costs of engagement based on estimated hours worked and cost per hour,” Mendes said. “With alternative fees, you still need to know how many hours you put into a project. It’s fundamental to professional services, and you can’t determine if you are making money if you don’t know the costs.”

Curbing Those Long, Lucrative Hours

 Lawyers and your money

Curbing Those Long, Lucrative Hours

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The billable hour is not dead, but many people would like to kill it

A good read in the Economist. 

New Legal Review: Timekeeping Trauma Blights Billable Hour

From New Legal Review

US law firms are risking significant financial leakage from efforts to monitor their billable hours, new survey results have shown. Carried out from mid-May to early June by legal consultancy Adam Smith, Esq, the ‘Law Firm Timekeeper Survey’ has revealed that timesheet-related activities could be costing law firms up to $40,000 per person, per year.

Financial leaks are also springing from unreported time, as retrospective timekeeping habits spawned by daily work pressures conspire to produce inaccurate records. The survey puts the annual, per-lawyer cost of this slippage at up to $30,700 but – where partners are concerned – this rises to $35,000.

The survey attracted 211 respondents – the vast majority of whom were heavy hitters. Among the group were 86 partners, 72 associates and a pool of 51 senior staff members, including directors, executive directors, chief financial officers (CFOs) and chief information officers (CIOs). In terms of the specialist areas covered, 64 respondents worked in litigation and dispute resolution, 53 in corporate/transactional practice and 21 in intellectual property.

Working in partnership with timekeeping experts Smart WebParts, Adam Smith, Esq aimed to understand the levels of accuracy in lawyers’ timesheet habits and examine their views on the processes involved. Announcing their results, the companies noted that a ‘chronic source of mistrust between clients and law firms is scepticism (openly expressed by clients and tacitly acknowledged by lawyers) about the accuracy of timekeeping’.

Lack of precision emerged as a major concern: 47% of the respondents said that their timesheets were ‘accurate over time – it all evens out’. Meanwhile, 18% reported that their timesheets were ‘somewhat accurate – I guess a little’, and 2% admitted their records were ‘not very accurate – I guess a lot’. In the All Partners subset, only 25% put themselves in the ‘100% accurate’ category. More than double (58%) said their records were ‘accurate over time’, while 17% were either ‘somewhat accurate’ or ‘not very accurate’.

The mean figure for leaked or unreported time came to 85 minutes, or 1.4 hours, per week – but some respondents owned up to a weekly loss of five hours plus. Projected annually, this leakage could amount to between 50 and 70 hours per lawyer. This evident detour from strictest accuracy was reflected in the survey’s comments section. One lawyer said that timekeeping was ‘the worst part of law firm life’, while another declared it ‘the bane of my existence’.

The results, said Adam Smith, Esq, ‘were not only fascinating but eye-opening, in terms of the amount of leakage and the sheer overhead involved in tracking time’.

American Legal Technology Insider Covers Law Firm Timekeeping Survey Results

Click to download the July issue of ALTI by Charles Christian

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.

New Law Firm Timekeeper Survey Available – Take it Today!

Whatever your views might be on the intrinsic validity or durability of the billable hour, timekeeping is still fundamental to most firms’ accounting and compensation systems, so it remains a topic of “evergreen” interest.

Smart WebParts and Adam Smith, Esq. have joined forces to study this issue and have posted a short survey (it will take a few minutes at most, if you dawdle) on timekeeping practices, which you can take here. To encourage you to do so, we will distribute the aggregated, anonymized results to all participants.

Click Here To Take the Survey