QNBT: Extracting Real Value from Non-Billable Time

“Your billable time is your income; your non-billable time is your future.” – David Maister

Non-billable time gets little respect*

Many perceive non-billable time as something that can be conjured at will. Taking someone to dinner who may or may not be a qualified client prospect can be recorded as business development. Furthermore, that two-hour dinner can turn into three or four and, with travel time, five hours. Those who have spent many hours on gruelling and challenging legal work can easily resent the generation of these hours with so little effort.

The consequence: Non-billable time is often not tracked accurately

In fact, in many firms, it is seen as a sign of prestige not to record non-billable time.

Some firms have learned to break this cycle by making non-billable time less discretionary and harmonizing it with the objectives of the team or firm.

The nature of the “qualified non-billable hour” is pre-negotiated and pre-authorized.

Suppose a senior associate wants to join the ABA section relevant to her practice area. Furthermore, she’d like to attend the meetings of her subsection locally, regionally, and nationally. Her practice group leader wants to know why this will be a worthwhile investment for the firm and indeed what the return on investment might be. She argues that over the next several years, gaining prominence in the section will yield referrals from other parts of the country and thereby enhance the practice for her, her group and the firm.

Her practice group leader might wisely ask something like: “Do you think you can get on the ladder such that you will occupy a position of prominence in the section, perhaps leading to becoming a chair of the section within five years?” The senior associate may respond that she was successful in attaining elected offices in school and then university and is confident that she can do so in the section. The deal might be struck such that the approval to spend the non-billable time (and the travel expenses) will be conditionally approved based upon a monitoring of her progress over the course of the next two years. If that progress is promising, the firm will continue to support the effort.

In this instance, the non-billable time expended by the associate becomes qualified non-billable time (QNBT). It is not merely discretionary time, nor is it perceived to be something that can be conjured at will, but rather it is something that has been vetted and will be measured against a set of objectives.

Imagine a situation where most, if not all, of the lawyers create a plan – for approval – that will constitute QNBT. Aside from an improved perception and respect for the non-billable time that is being invested, there is also a much higher probability of a good return on that investment for the firm.

A heretical principle: The non-billable hour is worth more than the billable hour

A Chicago firm I know which has had a meteoric rise in prosperity decided that a non-billable hour was worth more than a billable hour. Before you faint, this did not mean that spending eight non-billable hours and no billable hours in a day was considered more valuable for the firm. Not at all. Rather, the firm decided that those who spend ten billable hours and no non-billable hours are depriving the firm of the strong return that it would obtain on having at least one quality non-billable hour from that individual in a day.

Desirable non-billable minimums and billable maximums

For those firms that still bill exclusively by the hour, it is tough to persuade leadership that excessive billable hours are counterproductive. The truth is that the more senior people with the relationships should be spending at least a portion of their time attracting more work from existing clients and attracting new clients. Those who do exclusively billable work deprive the firm of that new work generation. Therefore, some enlightened firms actually place a maximum on the billable hours that a partner can spend, especially if that partner is a part of senior leadership or practice group leadership or industry group leadership or have a proven rainmaking capability.

I strongly recommend that the managing partner and executive team give some serious consideration to becoming QNBT-oriented.

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* Note: This article first appeared in the March, 2019 issue of Edge International Communiqué (EIC). Each month, EIC publishes items of interest to lawyers around the world on various aspects of law-firm strategy, marketing, technology, management, economics, human relations and a host of other topics. In addition to the most recent edition, the EIC site includes a sign-up page for those who are interested in subscribing to EIC, as well as a list of archived articles.

I welcome your thoughts and feedback on both Edge International Communique and Amazing Firms, Amazing Practices, either in the comments section below, or directly via email.

 

Scam Against Dentons Serves as a Reminder: No Law Firm Is Immune

In a world where unfamiliar and complex communications systems are the norm, it is not only the legislatively naive and digitally undereducated who are subject to expensive cons and scams. This difficult lesson was driven home at Dentons Canada last year during a real estate transaction, when an associate inadvertently wired $2.5 million to a fraudulent account in Hong Kong rather than to the intended recipient.

In an article in The American Lawyer, Scott Flaherty explains that the associate, who works at the Vancouver office of Dentons, received emails purportedly from affiliates of the mortgage company his firm was dealing with, asking the firm to transfer the funds to a different account than the one originally designated.

In fact, the emails came not from the mortgage company, but from a scam operator who was clearly familiar with the details of the transaction. Despite the firm’s carrying out what was seen as due diligence, the hoax went undetected and the funds were transferred to the fraudulent account. After it realized what had happened, the firm managed to recoup about a third of the money on its own, and turned to its insurance company for the balance. The insurance company refused to pay, and the matter is still before the courts.

Flaherty writes that a representative from Dentons Canada explained that the hoax began “when a third party’s computer system was breached, arming the fraudsters with knowledge of the details and timing of the underlying transaction, and allowing them to impersonate employees of the third party.” The representative also said that all Dentons lawyers and employees are extensively trained in matters relating to potential cyber fraud, and that none of the firm’s existing standards had been breached during the unfortunate transaction.

This and several other instances where law firms have been subjected to cyber theft and computer hacks serve as reminders that all of us need to raise our antennae when it comes to potential breaches – and to check on the status of our insurance policies as they relate to cyber fraud in case our antennae let us down.

I welcome your thoughts on this and any other matter related to the law, either in the comments section below or directly via email.

 

Lawyer Well-Being: An Issue We Must Address Right Now

There may never have been a better time to read The Path to Lawyer Well-Being: Practical Recommendations for Positive Change, a 2017 report by the National Task Force on Lawyer Well-Being.

The Report “defines well-being and sheds light on the lack of well-being in the legal profession.” It then “offers concrete, actionable recommendations on how to fix the problems […] .” The document can be read online, where recommendations may be accessed by stakeholder (defined as “judges, regulators, legal employers, law schools, bar associations, professional liability carriers, and lawyer assistance programs”), or downloaded as a PDF.

This is an extremely important report and should be considered by every law firm leader.

My experience working with many firms globally, is that some lawyers believe that their problems are unique to them and not widely shared in the profession. That is wrong.
These are tough times for lawyers to perform in a way that meets their firm’s expectations. Competition in the legal marketplace has never been more intense. Lawyers are dealing with increased client pressures (including fee pressures), and the rapid acceleration of technology is posing a real threat to pieces of traditional legal work.

The sum total of such professional pressures, when added to global concerns shared by almost everyone and the inevitable personal issues of individuals, can create an emotional situation that is ripe for disaster. With the help of this report, a law firm that is determined to address the issue of lawyer well-being before it is too late for any member of its staff – or before it loses any of its brightest minds to other firms, or even to different career paths – is taking a step in the right direction.

As always, I am interested to know your thoughts on this or any other area of the law, either in the comments section below, or directly via email.

Black Law Firm Partner Says GCs Open Letter on Diversity Is More PR than Practice

Don Prophete, Partner, Constangy, Brooks, Smith & Prophete

Several weeks ago I reported on a significant initiative by 170 general counsel and corporate legal officers – an open letter, published on LinkedIn, warning law firms that if their record of partnership promotions failed to reflect the diversity of the general population, a number of leading corporations would be disinclined in future to hire them as outside counsel.

Shortly after the letter was published, Don Prophete, a partner at Constangy, Brooks, Smith & Prophete, chastised the law profession in general for the continual need for initiatives such as the open letter, which he says have been ongoing for years without noticeable effect.

“Here is what has happened to law firm diversification since the first letter was penned in the early 2000s,” Prophete writes. “Today, law firm racial diversity has either remained stagnant or has decreased significantly. The latest report on Black male lawyers in law firms is alarming. Judging by these numbers, the profession has regressed significantly. [….] The numbers for Latinos, Asians and ‘others’ remain dreadfully low as well.”

Based in part on his own, highly successful career in labor and employment law – which has, he says, led to exactly zero offers from GCs based on his track record to work on major matters – Prophete believes that most of those with “significant outside counsel spend” as the signatories to the open letter describe themselves, put their names to such letters because it is “a politically necessary thing to do, which ultimately requires zero accountability.”

Saying the right thing to appear politically correct is different than taking real measures to diversify the legal profession. – Don Prophete

While no direct line can be drawn between the lack of improvement in racial diversity in law firms and lack of initiative even by those who are protesting the lack of improvement, it is impossible to ignore the soundness of his allegations. His statement includes a list of ways in which GCs demonstrate their lack of actual interest in increasing diversity when they hire outside counsel. Here’s one: “If you asked most GCs today to identify by name a single racially diverse outside counsel that the company uses, how many could actually identify that lawyer by name […]?”

Prophete’s questions must be addressed in congruence with – not instead of – the points that were raised in the open letter. Clearly, confrontations with this significant problem must take place on more than one front, and must include action as well as words.

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

The Future of the Law Includes More than the Legal Elite

In an article on LawSites entitled “Five Days, Two Conferences, One Echo Chamber,” Massachusetts lawyer and legal journalist Bob Ambrogi describes his recent attendance at two legal conferences held in New York City in early February, Legalweek (now in its 37th year) and Inspire.Legal (inaugurated in 2019).

Although the events were very different, Ambrogi says, he found them both to be of value. However, he was discouraged to note that the organizers, presenters, target audiences, and attendees at both meetings consisted primarily of the ten percent of lawyers who work at the world’s largest law firms and its biggest corporations.

“Virtually nowhere to be found were the 90 percent of lawyers who practice outside biglaw, the business clients who do not run mega-corporations, the access-to-justice community, or those disenfranchised from the legal system,” Ambrogi says.

To Ambrogi’s concern, I would add my own observation that in general there is little help for the majority of lawyers and law firms who are desperate for assistance in managing the technological maze and the host of other issues that face the legal industry today.

I was left wondering how legal tech and innovation became the domain of the legal elite, and how can we bring more voices to the table in order for true change to come about in law. – Robert Ambrogi

In a more expansive article on the same subject at Above the Law, Ambrogi explores ways in which more meaningful and inclusive conversations, and exchanges of information about the future of the law, can be facilitated. I encourage you to read the article as it raises important questions that are worthy of our close consideration.

Ambrogi concludes that “If we truly want to solve the problems that face the legal system […] as a whole, then we need to find ways to bring together all the stakeholders. That means biglaw and small law, big business and small business, clients and those who cannot afford to become clients, those embroiled in the system and those excluded from it.”

It’s a tall order but one that is, I believe, essential to the future of our profession.

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

 

Lawyers Wise to Use Intelligence – Artificial or Otherwise – When Submitting Fees and Costs to Courts

A column by Robert Ambrogi published recently in Above the Law may attract the interest of legal professionals for its comic or its cautionary value – depending on the reader.

Ambrogi details the reasons why, in November of 2018, Justice A.C.R. Whitten of the Superior Court of Justice in Ontario, Canada felt compelled to slice and dice the list of fees and costs that had been submitted to the court for approval by a team of lawyers following a judgment in favour of their client.

Among the judge’s concerns:

  • why two lawyers had been required for a case that seemed straightforward enough to have been handled by only one;
  • why “counsel had billed 26.5 hours to defend against a motion that is typically approved pro forma”;
  • why it had taken the client’s attorneys 80 hours to prepare a summary judgment motion that, Justice Whitten felt, should have taken 20 or 30 hours to complete.

The list of areas where Justice Whitten found fault with the submitted list of fees and disbursements was extensive, and it concluded – most notably, to the mind of the article’s author and others who have reported on the case – with a suggestion that given the capabilities of technology today, even the $900 bill for research could have been reduced with the assistance of AI.

Ambrogi points out that it is not clear what AI program might have assisted in this particular case, but he also correctly points out that Whitten’s opinion does suggest that in future, courts may well assess attorneys’ fees and costs in light of the technological assistance now available to them in addition to their own traditional expertise and resources.

In the meantime, although Ambrogi’s piece is entitled “Judge Penalizes Lawyers For Not Using Artificial Intelligence,” given that the list of fees and disbursements was ultimately cut by one third by Justice Whitten, it might as easily have been called, “Judge Penalizes Lawyers for Failure to Use Intelligence They Were Born With.”

As always, I am interested to know your thoughts on this or any other area of the law, either in the comments section below, or directly via email.

 

Law Firms Must Heed This GC Warning: “If you want our business, diversify!”

An open letter to law firms penned by 170 general counsel and corporate legal officers from companies across the U.S. warns law firms whose record of partnership promotions fails to reflect the diversity of the general population that they may face dire consequences from a number of leading corporations.

While applauding those firms that do “hire, retain and promote to partnership outstanding and highly accomplished lawyers who are diverse in race, color, age, gender, gender orientation, sexual orientation, national origin, religion, and without regard for disabilities,” the signatories note that “partnership classes remain largely male and largely white.

“[T]he reality is,” they write, “that you must consciously and personally invest in diversity and inclusion and interview, hire, mentor, support, sponsor, and promote talented attorneys who don’t always look like you or share your background.”

Their message to law firms that don’t?

“We, as a group, will direct our substantial outside counsel spend [estimated at hundreds of millions of dollars] to those law firms that manifest results with respect to diversity and inclusion, in addition to providing the highest degree of quality representation. We sincerely hope that you and your firm will be among those that demonstrate this commitment.”

I believe that law firms ignore this letter to their peril.

My recommendations:

1) Review the list of 170 to see if you have clients (or former clients, or prospective clients) on that list.

2)  If the answer to #1 is “yes,” consider communicating now.  (You could delay until you were 100% confident in a perfect communication, but it will be ignored because your delay will have lost you virtually all your credibility.)

3) Consider what elements to include in your communication. Here are some thoughts, to get your thinking started:

  • Prove you heard the message.
  • Note that they are asking for “results with respect to diversity and inclusion,” not “effort.”
  • Show your diversity status and/or action plan.
  • Avoid defensive self congratulating puffery and instead either confirm you have stellar diversity numbers and/or that you have a plan in place to get/maintain them.
  • Congratulate them on their courage to take a stand and communicate it so clearly.
  • Customize your message based on your relationship.

4) Don’t be afraid to use your positive diversity number as part of your business development strategy to attract clients or grow your client base.  These GCs just made that “fair ball.”

Do not fake this. If you don’t care about diversity, or your firm makes this a political issue on which it becomes impossible to make headway, stay silent.

One Third of Law Firms Plan to Increase Marketing and Business Development Budgets in 2019

Michael Rynowecer, founder and president of BTI Consulting, reports that a remarkable one third of law firms in the USA plan to increase their spending on marketing and business development (MBD) in 2019. “This is three times more firms than last year,” Rynowecer says, “making this the largest number of firms increasing their MBD spending in nine years.

Where are the additional funds going? Rynowecer’s interviews with more than 136 law-firm marketing leaders between July and November, 2018 indicate that client feedback, client service, and industry programs are at the top of the list of MBD initiatives.

The actual increases BTI’s surveys project are between 2.6% and 2.9% of firm revenue, which may not sound like a lot. But although “The differences are woefully small to sound meaningful,” Rynowecer points out on his blog, The Mad Clientist, “[they] can be the difference between one and three full time BD equivalents, funding a new client team, or creating one more industry group. All of which are proven to drive new business.”

This kind of gradual increase in spending on marketing and business development makes good sense to me. Does it make sense for your firm as well?

As always, I would be interested to know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

The Power of “How”

I propose* that you join the most effective law firm leaders in the world and start asking “how,“ rather than “whether.”

Let us start with an illustration. Here are two questions that a managing partner might ask a practice group leader. Which do you think will lead to better results?

  1. How do you think you and your team could enhance the quality of the clients we serve in your practice area in the coming year?
  2. I would like your take on whether you think you and your team could enhance the quality of the clients we serve in your practice area in the coming year.

Question 1 makes a strong assumption that the mission is to enhance the quality of the clients in the practice area. The practice group leader is being asked to suggest an action or a set of alternate actions that would accomplish that mission.

Question 2 invites a debate as to whether attempting to enhance the quality of the clients is a good idea or not (let alone how that enhancement might be accomplished). This question is more likely to draw a defensive response from the practice group leader that relates to the partner’s assumption that client quality should be – or could be – enhanced in the first place.

I have written elsewhere about the propensity of lawyers to be critical and analytical. We are trained to detect the fragrance of risk and to eliminate it. Therefore, a binary question which invites a debate about whether something is worth doing will spawn arguments and counterarguments, likely including reasons why the status quo is just fine or the contemplated change is beyond the control of those being asked.

If what you are looking for is a robust open discussion – including a dash of defensiveness for the status quo – which does not necessarily lead to action,  then go ahead and ask “whether.” If you want to harness the cerebral horsepower of the person or team to whom you’re putting the question, ask “how.”

To further illustrate the point, here are some sample good and not-so-good questions:

Good: How can our law firm make more effective use of social media?

Not So Good: Do you think our law firm could make more effective use of social media?

Good: How can we raise the profile and street recognition of our law firm for the benefit of those of our lawyers who are trying to attract more work?

Not So Good: Do you think we could raise the profile and street recognition of our law firm for the benefit of those of our lawyers who are trying to attract more work?

The takeaway from this article is not complex… in fact, it’s insanely simple. The issue is not whether you comprehend or understand. The issue purely devolves to whether you have the discipline to pose your questions in this fashion.

Don’t take my word for it… try it. I hope you experience its power.

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* Note: This article first appeared in the January, 2019 issue of Edge International Communiqué (EIC).

Each month, EIC publishes items of interest to lawyers around the world on various aspects of law-firm strategy, marketing, technology, management, economics, human relations and a host of other topics. In addition to the most recent edition, the EIC site includes a sign-up page for those who are interested in subscribing to EIC, as well as a list of archived articles.

I welcome your thoughts and feedback on both Edge International Communique and Amazing Firms, Amazing Practices, either in the comments section below, or directly via email.

The Big Four and The Legal Industry: Who Should Be Afraid?

A recent instalment of the podcast series LegalSpeak addresses the question of whether or not recent forays into the legal arena by the accounting industry’s Big Four actually comprise a significant threat to U.S. law firms.

Nicholas Bruch, principal analyst at ALM Legal Intelligence, who has been looking into this issue deeply for at least two years, believes that the answer is “Yes” – particularly for large law firms with an international reach. He also believes that many of those firms are not paying enough attention to potential threats to their existence  – or at least to their current law-practice systems and structures.

Bruch points out that for many corporate entities around the world, particularly in Asia, the Big Four provided the first introduction to the global economy. These accounting firms have the benefit over almost every law firm of having built brand recognition and trust over several decades. Clients also like the idea of “single stop shopping” when doing certain work that requires both an accountant and a lawyer.

At the present time, this kind of advantage has more to do with legal services than legal advice, but Bruch believes that sooner or later, the accounting industry will want to extend its purview into other traditional legal practice areas. Bruch predicts that in the long term they will be successful, because they have the money as well as the global reach to do so.

Already, in addition to having made inroads into the most obvious legal fields, such as those associated with tax, Bruch points out that the Big Four have acquired legal expertise in traditionally law-firm-exclusive fields like regulation and compliance, labor and employment, mergers and acquisitions, and certain other areas of corporate work – particularly in Asia. The accounting industry is also making advances in legal technology, mainly through acquisitions.

Bruch admits that in some areas the threat may currently be be overblown, pointing out that accounting mega-firms tend to be “big vereins” that are not as organized as some might think, and therefore not as capable of detailed planning. But he believes that keeping a close eye on the situation is essential.

This podcast is definitely worth a listen for Bruch’s predictions regarding accounting’s prospective legal-talent acquisitions, the future of trade restrictions, what the ABA is doing, and – the essential questions – who is worrying, who should be and who isn’t.

Please let me know your thoughts on this or any other area of the law, either in the comments section below, or directly via email.

 

 

 

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