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Legal Data & Metrics

Practice Innovations: The problem with law firm productivity metrics

William Josten  Manager of Strategic Enterprise Thought Leadership at Thomson Reuters

William Josten  Manager of Strategic Enterprise Thought Leadership at Thomson Reuters

Would law firms benefit from a new way of looking at productivity measurement?

Productivity is clearly a massively important metric for law firms. It’s one that is reported on frequently, and is the source of much discussion in publications like the annual Report on the State of the Legal Market. And why not? How else can we gauge the health of a law firm’s practice and the accuracy of revenue projections if not by measuring the units of production (hours) that lawyers “sell” to their clients?

I’ve been warming to the idea, however, that the productivity metric as utilized by law firms today is potentially under-inclusive of key considerations and possibly a bit myopic.

Allow me to explain. I see two primary problems with the productivity metric: what it measures and what information it uses to make its measurement.

It doesn’t measure what matters

I would assert that today’s definition of productivity doesn’t measure what matters, but I also would ask how else could we gauge the health of a firm’s practice? Those two statements seem to be opposite, yet they are not. The difference is really a matter of perspective — specifically, are we looking at things through the eyes of the firm or through the eyes of the client?

For firms, hours are the key factor because that is the unit of measure upon which the firm’s financial fortunes are based, for better or worse. Clients go along with this definition because they, for the most part, do not have a better tool by which to measure their law firms. Yet in their own daily operations, clients are typically less concerned about the number of hours taken to complete a task than they are about the number of tasks completed. If the tasks completed metric measures up, the time taken doing it is of little concern — things are running optimally.

When the tasks completed measure of productivity lags, however, then time is closely examined to look for problems. Nowhere in the client’s system is a massive amount of time per task generally seen as an advantage.

In short, clients and law firms are measuring different factors in their examinations of productivity. Yet in today’s environment, as clients continually report high matter volumes and an increasing need for efficiency, there will be a growing need on the part of law firms to account for productivity through the client’s eyes.

It under-utilizes available information

The current definition of productivity within a law firm also leaves a lot of information unexplored. By examining only the number of hours billed per lawyer per day or month, law firms miss the opportunity to really explore what they produce and how they produce it, in much more meaningful ways.

I would advocate for, if not the redefinition of productivity, then at least the introduction of a couple of new metrics. Let’s call them work-time efficiency and task efficiency.

Work-time efficiency (WTE) could be a measure of the amount of time billed as a function of the amount of time worked. I’ve written and published studies in the past on the concept of billing efficiency — the amount of time actually billed to the client compared to the amount of time worked and reported to time and billing systems. WTE is an extension of that same theory.

For example, consider two lawyers. Both bill, on average, 6.5 hours per day, which is a high level of productivity by the standard measure. Lawyer A spends an average of 14 hours per day on their various devices to bill that time, whereas Lawyer B spends only 8. Lawyer B clearly has a higher WTE factor.

Unpacking this metric allows for explorations of how both work. Why is Lawyer A spending so much more time plugged in to produce the same amount of work? Are there strategies that could be used to help Lawyer A become more efficient? And what would the benefits be to Lawyer A of getting more time back? Similarly for Lawyer B, what makes them so much more efficient? Are there possibly concerns over how Lawyer B is tracking time?

There are myriad possible avenues to explore with each of these hypothetical lawyers, but unless that specific type of data is tracked, there is no opportunity for such exploration.

We also need to consider the task efficiency (TE) for each of these lawyers, which is a ratio of the number of completed tasks to the hours billed. Lawyer A may complete 18 discrete tasks in their 6.5 hours, while Lawyer B completes only 6. Why? Perhaps the greater number of tasks accounts for Lawyer A’s lower WTE figure (albeit higher TE figure) because she needs additional time to refocus between tasks. Yet, does Lawyer B’s much lower TE figure indicate that he is spending too much time per task, or perhaps he is completing more complicated tasks that inherently require more time?

These again are key factors to understanding the full picture of both lawyers’ productivity, but none of these insights exist under today’s definition of productivity.

It is incumbent upon firms to implement these metrics

I can, and do, advocate for the deployment of these metrics. The necessary data is difficult, if not impossible, to obtain outside the confines of a law firm. But firms should have that data, it’s just a matter of putting it to use.

Yet, think of the difference it would make in the client’s eyes for a firm to bring forward measures of productivity that are aligned more closely to the client’s vision. Which law firms out there can boast about their tasks per hour or matters per month figures for their clients?

And for the firms themselves, gaining a deeper understanding of how their lawyers’ inputs align to the firm’s outputs can help to optimize how their people work. Lawyers who work too many hours with too little to show for it can be made more productive and maybe even improve their own work-life balance.

It is going to be up to firms to begin exploring these unique productivity metrics in new ways. And I hope that’s something the industry can look back on in years to come as a step in the right direction.

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