The 2017 Legal Trends Report, compiled by Clio, surveyed approximately 3,000 legal professionals. Based on an eight-hour workday, the report found that, on average, only 2.3 hours of the day were billable. This utilization rate was found to decrease even more when legal professionals worked longer than eight hours, a common occurrence in most law firms.
The report’s findings are in stark contrast to billable hour templates put forward by leading legal entities. The Yale Law School, for instance, proposes that approximately 75% of lawyers’ working hours should be billable, compared to the 29% utilization rate found in Clio’s report.
Billable hours are central to driving profits for lawyers. With fewer hours in the day spent doing work that can be invoiced, law practices become less profitable.
This begs the question: “What’s happening to the remaining six hours?” According to the report, there’s a mixed bag of answers.
Where are these hours going?
A scan of recent research suggests lawyers’ billable hours are being consumed by several types of activities.
The 2017 Legal Trends Report found that, on average, a whopping 48% of a lawyer’s time is spent on tasks like office administration, generating and sending bills, and collecting payments.
Even with administrative assistants, lawyers are spending large chunks of what could be billable time on non-billable tasks.
The report also found another, rather simple, explanation for where these hours go: legal professionals get interrupted too often.
For instance, 25% of legal professionals reported that they’re interrupted more than 10 times per day, and 30% reported that they’re interrupted between six and 10 times per day.
Previous studies have shown that it can take up to 23 minutes to get back on track after an interruption, underscoring just how detrimental they are to productivity.
Clio’s report also suggests that many law firms are suffering a loss of time and money due to ineffective business development plans. According to the findings, lawyers spend, on average, a third of their day on client development.
“The fact that so much non-billable time is dedicated to business development (33 percent) suggests earning new clients is a constant concern for most law firms,” the report reads.
Lawyers also frequently find themselves under representing the hours of legal research they need to do to meet their clients’ expectations. This is particularly true of medium and large sized law firms, where clients are increasingly pressuring lawyers to reduce inefficiencies and charge only for work that clients deem to be value-adding (e.g., the analysis that results from legal research, rather than the work that goes into preparing it).
To address the shift in client expectations surrounding legal research, law firms are often presented with a dilemma: legal research needs to be conducted in order to ensure due diligence and high-quality output, but client pressures are forcing firms to categorize these hours as “overhead” or non-billable.
How technology can help
The combination of these factors leaves lawyers in a tricky situation: non-billable activities are necessary, but they compete with the billable time so often relied on to drive profits.
Fortunately, there are now technologies available that can slash time spent on non-billable activities or, even better, turn them into profit centres.
To save time spent on non-billable administrative tasks, products like Clio and Practice Panther are starting to be widely adopted, expediting functions like sending bills and collecting payments. For both types of tools, their value proposition hinges on efficiency, freeing up time to work on value-adding, potentially billable activities.
There are also new technologies that can help lawyers expedite and monetize legal research, which, as we’ve illustrated above, is increasingly being lumped into non-billable overhead to meet heightened cost pressures from clients.
Blue J Legal’s Tax Foresight and Employment Foresight, for instance, leverage artificial intelligence to predict legal outcomes in challenging areas of tax and employment law. The tools are up to four times faster at finding cases than traditional research methods, such as keyword and Boolean searches. The software is also 90%+ accurate in predicting case outcomes and considers all relevant past case outcomes when computing predictions.
Not only are these tools making legal research more efficient, they’re actually improving the quality and comprehensiveness of research, which in turn enables lawyers to provide their clients with high-quality legal advice.
What’s more, Tax Foresight and Employment Foresight have a “chargeback functionality,” allowing lawyers to closely track and charge for the software’s outputs (e.g. classifiers run, cases searched), rather than the time spent researching. In this way, lawyers can shift the conversation away from billable hours and instead focus their clients’ attention on quality of output.
Even with the uptick in alternative revenue-generating models, billable hours will remain a key part of profitability for law firms for years to come. In the tug of war between client expectations for lower costs and law firms’ desire to maximize billable hours, technology promises to be the solution that will satisfy both sides.