Baseball, Biglaw, Billable Hours, Killing Lockstep, Money, Partner Issues, Partner Profits, Sports

Biglaw's Statistical Shortcomings

What are statistics like the billable hour worth, and how can they be improved?

By  
on

To pass the time while commuting, I like to listen to podcasts. If ATL had a podcast I would add that to my listening rotation (especially if Lat is able to pull in sitting judges to guest host or as interview subjects). But this is not a column about podcasts. Though the idea for this contest came from a podcast I was listening to, the B.S. Report with Bill Simmons. The host was interviewing a former ESPN colleague, and they were discussing how certain statistics in baseball are misleading.

An example? Wins for pitchers. Apparently there is a movement to abolish that statistic. Why? Because a pitcher can pitch a terrible game, and still come away with the win, assuming his lineup bails him out. Conversely, a pitcher can pitch a beautiful game, and lose just because his hitters decide to approach their at-bats like the pudgy partner from bankruptcy at the annual intra-firm softball game. To prove the limited utility of using wins as a proxy for determining who is the best pitcher, consider the following. By nearly all accounts, Clayton Kershaw of the L.A. Dodgers is the single most dominant pitcher in baseball today. Unsurprisingly, he is reportedly in line for the richest (around $30 million a year or so) contract extension for a pitcher — ever. But he has fewer wins this season (so far) than Bartolo Colon, a 40-year-old journeyman pitcher (on his sixth team, and nearly a decade removed from his last All-Star game appearance), who is making non-equity service partner money ($3 million) by baseball standards. Wins simply do not tell the whole story.

Biglaw has its share of statistical shortcomings….

This is partly by design, and partly because most of the senior partners have made so much money over the last decade and a half that there was no reason to start measuring production in more accurate ways. Of course, it is critical to know your Biglaw statistics – billable hours, realization rate, collections on your working time, collections on your originations, etc., as you can be assured that those responsible for grading you in Biglaw know them. In fact, most partners have access to that information through software used by the firm’s accounting department. New partner and lateral partner orientations should include tutorials on how partners can get access to both their personal statistics and those of other timekeepers.

So what are statistics like the billable hour worth? And how can they be improved?

Before answering, I would suggest that everyone in Biglaw admit that the billable hour is a very skimpy statistic. And therefore is a very poor way for someone to measure and broadcast their performance, whether for themselves or to demonstrate their value to others. Telling me your hours are good is meaningless in isolation. Returning to our baseball analogy, billable hours are more akin to innings pitched or at-bats than more robust, if still skimpy, statistics like wins or runs batted in. Having high billables can be a sign of a hard worker (or skilled padder), and hard work still counts as a measure of productivity. But no one would suggest that hard work minus profitability is more deserving of reward than hard work and profitability. For example, give me an associate or fellow partner whose contribution to the firm’s profitability is high over an hours-generating drone on a case where we are getting paid a flat fee. Now I am not against rewarding high billers. In Biglaw, profitability is paramount, and the “first dollars” should go those who contribute the most to that profitability. In fact, each Biglaw timekeeper should have a target “profitability contribution,” taking into account the general profitability of their personal team, practice group, base office, overhead, and the expected demand for their services based on their historical performance. Measuring performance against that, rather hours billed, would be informative at the least.

Sponsored

Of course, Biglaw firms want to maintain the illusion that generating more billable hours is the salve to smooth over any blemish. And there is a long-cherished belief in Biglaw that by throwing more hours on a bill, client fatigue or inattention will result in increased odds of collecting some easy profit on a matter. So more hours are always encouraged. But while they may not admit it publicly, rest assured that your firm’s management is well aware of each and every lawyer’s “profit contribution” or some similar metric. You would do well to try and determine yours. It is an exercise in estimating your value, both internally and externally. Of course, if your firm’s management does not feel the need to consider profitability in its analysis of firm and lawyer performance, good luck.

That said, many of the Biglaw statistics that we normally discuss are pretty blunt instruments — easy ways to measure attorney performance, but of scant value in terms of really trying to understand the context of that performance. A simple way of looking at things is that the only statistic that really counts — compensation — is actually a fairly accurate measurement of performance in context for the vast majority of Biglaw’s lawyers. The notable exception is firms that embrace a lockstep compensation scheme; for those firms, the focus is on rewarding people due to the firm’s performance, as opposed to trying to quantify an individual’s contribution to that performance.

But most Biglaw firms are not lockstep, and compensation determinations for partners are increasingly becoming the result of black-box “closed” calculations by CEO’s in consultation with their financial officers and outside consultants. In contrast, associate pay is still lockstep at many Biglaw firms, mainly because associate compensation is less worthy of a Biglaw chieftain’s interest in these days of declining associate headcount, decreasing leverage, and easier headcount “management,” i.e., layoffs. I submit that the less your firm talks about associate compensation nowadays the better. Too much interest by management in the topic is more likely a sign of serious financial distress or plain old miserliness than a sign that management has some brilliant new strategy for making the firm an even better place to work and live.

Ultimately, there is no end to potentially informative statistics to measure performance in Biglaw. As Biglaw adapts to a changing business model, it needs to develop and use new statistics, and even consider de-emphasizing the old standbys like billable hours. I am sure there are experts out there who can contribute on this front. For myself, as a litigator, I would love to see statistics kept on such things as case wins or favorable settlements, client recommendations, assignment success rate, number of colleagues worked with (by office, people in group), importance of matters and result, and how many times someone was the first choice for a work assignment. Used correctly, statistics can be a really valuable comparative tool. And statistics can deceive as well. It is time for both Biglaw management and the rank-and-file to embrace better ones.

What kinds of statistics would you like to see Biglaw develop or adopt? Let me know by email or in the comments.

Sponsored

Anonymous Partner is a partner at a major law firm. You can reach him by email at atlpartnercolumn@gmail.com.

Topics

, , , , , , , , , , , , ,