Another Reason Business People Need to Manage their Attorneys: The Legal Industry’s Definition of “Productivity” Drives Unnecessary Work

The attorney’s definition of “productivity”? How many hours did I bill the client and get paid for?

It’s that simplistic. And it’s that one-sided — in favor of the lawyer — and against the client.

Consequently — according to conventional law firm metrics — the lawyer who bills and gets paid for ten hours to draft a contract is twice as “productive” as the one who bills and gets paid for five hours to draft the same contract.

In business, “productivity” means units of output divided by units of input. The enterprise sets out to produce a good or a service to defined specifications using the least inputs of capital, labor, and materials.

But the 2018 Report on the State of the Legal Market by Georgetown Law School and Thomson Reuters Peer Monitor defines “law firm productivity” as “the number of billable hours worked by lawyers divided by the total number of lawyers”.

Law firm lawyers use the term “productivity” — matter-of-factly — to describe the 1800, 2400, or 2600 annual billed hours ascribed to an attorney.

This all-important “productivity” number denotes a partner’s (owner’s) contribution to partnership income — and it determines the “draw” he or she derives from that income. For associates (employee lawyers) this number is just as important — driving current compensation and determining who might be considered for one of the tiny number of possible partnership slots.

And for in-house lawyers — almost all begin their careers in a law firm. They bring with them the view that “productivity” consists of the time they expend on their work.

Casey Flaherty, a lawyer who consults to in-house law departments on organizational effectiveness, puts it this way:

“Lawyer time is the primary resource and the primary unit of measure even in law departments that have no compensable time sheets.”

So …

“The traditional definition of ‘productivity’ in law firms is seriously messed up.”

Said Jordan Furlong — leading consultant to the legal industry — in his response to the  Georgetown Law School definition.

Joshua Lenon — lawyer-in-residence at law practice management software producer Clio — concluded that this confuses lawyers about who they’re meant to serve and what they’re meant to deliver:

“Peer Monitor and Georgetown do a service to the legal industry in producing this report. They do a disservice to the industry by this wrong definition of productivity. It wrongly assumes law firm partners are the end customers in the legal profession, and not our clients …

“Lawyers, your value to clients is not what you bill. Your productivity should not be measured in hours, but in outcomes.”

I take note of Georgetown’s formal definition because it’s so recent: January 10, 2018. This is what lawyers actually believe — present tense!

I take note of the definition because it’s from a source so authoritative among attorneys: Georgetown Law School.

I take note of it because — even after years of law practice and years of paying law firms’ bills as a general manager in the Fortune 500 — I still can’t quite believe that “productivity” can really mean how-long-I-took-to-do-the-work.

To anyone … in any context.

Business needs what lawyers are good at: Going to court, drafting contracts, etc.

Business does not need lawyers are bad at: Cost control and systematic liability prevention.

As a practicing lawyer — and as a former general manager — I think that law Professor Bill Henderson resolves that dilemma in the best way that I’ve seen.

He contends that only when the legal industry gives up on hours-billed — i.e., the basis of its “productivity” definition — can we “re-design” the way that lawyers work:

” … The real value of alternative fees [paying a lawyer on any basis alternative to hours-billed] is to incentivize a re-design of workflow that (i) increases quality, (ii) speeds up delivery, and (iii) decreases cost.”

Without using the term, Professor Henderson has simply translated the business definition of “productivity” — outputs derived from inputs — into a sensible description of how lawyers should re-design their workflows.

On this dilemma — I can’t see the legal industry fixing itself. Its resolution lies in owners and executives re-designing lawyers’ workflows — with guidance from lawyers who are sympathetic to a businesslike (re)definition of “productivity”.

Until those owners and executives make serious use of their purchasing power to make this happen — I don’t expect much cost control in legal or much systematic liability prevention.