The billable hours derby: empirical data on the problems and pressure points.

• Author: Fortney, Susan Saab
• Position: Professional Challenges in Large Firm Practices

If you ask law firm attorneys to identify their biggest complaint related to private law practice, most will probably respond with one word: billing. (1) At the same time, clients are likely to identify billing as their most serious concern associated with obtaining legal services. (2) The irony in clients and attorneys sharing frustration over hourly billing relates to the fact that the initial interest in hourly billing stemmed from attorneys' desire to be efficient and to maximize their earnings and clients' preference for only paying for the actual time expended on their behalf. (3) Since the 1960s, hourly billing has evolved as the dominant billing method used by non-contingency fee attorneys. (4) When hourly billing became widespread, the number of billable hours expected of firm attorneys dramatically increased as billable hours clocked and business generated assumed greater importance in evaluating attorney contributions and compensation. (5) As explained by one commentator, "[h]ourly billing, which started as a tool for law office management, turned into a requirement for all timekeepers to bill a large minimum number of hours per year. Salary, bonus and growth within the firm began to be largely based on the number of hours billed." (6)

Over the last decade the number of hours expected of associates increased along with hikes in associate salaries. (7) Pointing to the spiral of increases in associate salaries followed by increases in billable hours requirements, firm managers may engage in an exercise of blaming the "greedy associates." Another reaction involves blaming the "greedy partners" who seek to preserve or even increase partner revenues, while using higher salaries to recruit associates.

Insiders and outsiders alike have speculated on the short and long-term effects of these increases in billable hours expectations. (8) To gauge the effects of these increases, I conducted a 1999-2000 empirical study of associate satisfaction, law firm culture, and billing practices. This study used a mail questionnaire to survey 1000 associates practicing in Texas firms with more than ten attorneys. (9) Five years later, in 2005, I conducted another empirical study on attorney work-life issues and employer efforts to assist attorneys in dealing with work-life conflicts. The 2005 study, funded by The NALP Foundation, was a cross-profession national study of supervised and managing attorneys in law firms, government offices, and in-house counsel departments. Although the NALP Foundation study, called In Pursuit of Attorney Work-Life Balance: Best Practices in Management ("2005 NALP Foundation Work-Life Study"), focused on work-life issues, billable hours pressure emerged as a concern shared by numerous firm attorneys. (10) In discussing the time famine and other work-life conflicts encountered by practitioners, numerous study participants commented on the tyranny of the billable hour. (11)

In an effort to formulate possible solutions to problems identified by practitioners, this article uses information obtained in both studies to discuss firm culture, compensation systems, attorney perceptions, and conduct. For background and context, Part I describes the 2005 NALP Foundation Work-Life Study rationale and methodology. Part II summarizes select study findings related to billable hours requirements and pressure. The text of this article discusses select findings from the 2005 NALP Foundation Work-Life Study relating to billable hours requirements; the footnotes compare those findings to the results of the 1999-2000 Associate Study. Part III concludes by considering what forces and players will change the current course of conduct in which law firm leaders treat increases in billable hours expectations as a necessary evil.

PART I: STUDY RATIONALE AND METHODOLOGY

In 2005, The NALP Foundation conducted a national study of attorneys' work-life balance issues to help attorneys and their employers better understand and evaluate work-life conflicts and approaches for addressing conflicts. Unlike other studies that focused on attorneys in one state or practice setting, the study sought information from a national sample of managing and supervised attorneys in different practice settings.

The national study involved two phases, one designed to yield quantitative information and one designed to provide qualitative information. In Phase One of the study, survey information was obtained using two questionnaires, one for managing attorneys ("Managing Attorney Work-Life Survey") and one for supervised attorneys ("Attorney Work-Life Survey"). In February 2005, these questionnaires were mailed to a random sample of attorneys in law firms, corporations, and government agencies. (12)

The study design called for 250 questionnaires to be sent to managing attorneys in each of the following groups: government offices, corporate legal departments, and law firms of varying sizes. (13) In addition, four supervised attorneys in each of these segments were randomly selected to receive the Attorney Work-Life Survey. After sampling and dropping names for reasons such as address problems, the final sample consisted of 1,138 managing attorneys and 4,649 supervised attorneys in all segments. (14)

The mailing of the Attorney Work-Life Survey and Managing Attorney Work-Life Survey yielded 679 responses for a response rate of 12.3 percent for supervised attorneys and 9.4 percent for managing attorneys. The responses from managing and supervised attorneys were spread among each practice segment. (15)

After survey responses were received, nine focus group sessions were conducted to provide a mix of perspectives from attorneys in different practice areas, positions, and regions. (16) In these focus groups, managing and supervised attorneys candidly and confidentially discussed work-life issues. (17) The focus group discussions provided opportunities to explore specific issues identified in Phase One of the study. (18) Focus group participants also provided insights and anecdotal information related to their experiences and perspectives on work-life issues, employer programs, employer policies, and best practices related to attorneys balancing their work and personal lives. (19)

PART H: GENERAL PROFILE OF RESPONDENTS AND SURVEY FINDINGS RELATED TO BILLING AND BILLABLE HOURS EXPECTATIONS

The survey generated responses from managing and employed attorneys working in government offices, in-house legal departments, and firms with ten or more attorneys in all branches or offices worldwide. The discussion below focuses on information provided by law firm respondents.

The majority of firm respondents (81.9 percent) were associates on the partnership track, eight percent were law firm attorneys not on the partnership track, and 0.5 percent were contract attorneys. Most of these respondents (93.2 percent) worked on a full-time basis and 6.8 percent worked on a part-time basis. (20)

Both survey instruments asked respondents to provide information related to hours billed and billable hours expectations, if any. Survey data reflects the trend among law firms to adopt minimum billing expectations or requirements. (21) When asked to indicate whether the respondent's organization has a minimum billable hours expectation or requirement for associates, 82.8 percent of firm managing attorneys checked "yes" and 85.6 percent of firm supervised attorneys checked "yes." The questionnaires then asked respondents to note the annual billing expectation or requirement. The mean number of hours for the billable hours requirement or expectation was 1,861 hours per year based on managing attorney responses and 1,887 hours per year based on supervised attorney responses.

Table One below sets forth the mean calculations by firm size based on supervised attorney responses on billable hours requirements and hours actually billed.

The mean calculations in Table One reflect that the mean for hours required, as well as hours actually billed in 2004, increased with firm size. In firms of all sizes, the mean number for hours billed exceeds the minimum billable expectation, anywhere from nineteen hours for Small Firms to 129 hours for Very Large Firms. Associates whose billable hours production exceeds the minimum requirement may expect favorable treatment when considered for bonuses and promotion. (23)

Survey responses also reflect the movement among firms to use billable hours production to determine bonuses. (24) In the survey, the majority of managers and supervising attorneys reported that associate bonuses are largely based on billable hours production. While eighty-three percent of supervised attorneys indicated that bonuses were largely based on billable hours production, only 67.2 percent of firm managing attorneys answered in the affirmative. This difference in percentages could reflect the fact that different law firms may be represented by the respondents in the two surveys. Another possibility is that a large percentage of associates may perceive billable hours production as "driving the bonus train," although managing attorneys may not share that perception. A third possibility is that some managing attorneys either genuinely believe that they base bonuses on a variety of factors or decline to acknowledge the significant role that hours play in bonus determinations. (25)

Other survey responses provide supervised attorneys' perspectives on the firm incentives to clock hours. The majority of firm supervised attorneys (fifty-two percent) agreed with the following statement, "My career advancement is principally based on the number of hours that I work." (26) Only twenty-two percent disagreed with the statement. (27)

Overall, a commonly expressed complaint related to "quantifying" worth and contributions based on billable hours production. One supervised firm attorney simply stated that "devotion equals promotion. The more you work the higher you rise." 28)...