Clocking lawyers: Why law firms need automated time capture systems

"Put your hand on a hot stove for a minute, and it seems like an hour. Sit with a pretty girl for an hour, and it seems like a minute. That’s relativity” – Albert Einstein.

Unless you are moving at close to the speed of light, time is a constant. But, our relationship with it is highly subjective. So, no matter what type of work that you do, or how you charge for it, accurately recording time is key to ensuring profitability.

Law firms’ fees have historically been based on a measure of the amount of time spent on client work. Even though this may be changing with the advent of alternative fee arrangements (AFA), time spent by fee earners is still used as the primary measure of costs. Therefore, the analysis of time actually expended by lawyers will still be vital for gauging and managing the profitability of AFA deals with clients, as well as for setting suitably profitable fee rates for other non-AFA work.

So, whichever way a law firm wants to base its charges, if it wants to manage its profitability well, it still needs to record time. The historical problems with recording time are that not only is it a cumbersome and thankless task that attorneys do not like undertaking, but it usually involves a subjective retrospective assessment of how long something took to do.

All research (law firm and non-law firm) indicates that people are notoriously bad at recalling how long a task took to perform and that, the longer after the event the assessment is made, the more inaccurate it becomes.

In other words, if someone undertakes a task and immediately afterwards determines how long it took (without reference to a clock), he is likely to get it wrong; if he is asked to recall how long it took several hours later, he is likely to get it even more wrong.

Fee earners often need make such an assessment retrospectively because they do not keep a contemporaneous record of all activities. Surprisingly, given the reputation of lawyers, the most common inaccuracy is to underestimate (rather than overestimate) how long it took to undertake a task. This phenomenon is caused by a number of subconscious and conscious factors affecting the perception of duration.

Subconscious factors

The primary subconscious factor is how long a task should have taken. This is likely to lead to an underestimation due to another psychological effect that causes planners to consistently underestimate how long something will take to do in future – a natural human trait towards optimism.

This trait is well understood and there are many examples of large-scale projects where the world’s best experts in their field have been involved in plans that proved to be hopelessly over-optimistic. Examples of such projects include:?

• the Channel Tunnel;

• the Sydney Opera House;

• Concorde;

• the Danish Great Belt Fixed Link;

• Scottish parliament;

• Boston’s Big Dig;

• the Airbus A400M; and

• the eastern span replacement of the San Francisco-Oakland Bay bridge.

The cost overrun of the Sydney Opera House was 1,400 per cent and the Concorde supersonic aeroplane project was over by 1,100 per cent. The cost overrun of Boston’s Big Dig was 275 per cent, while the Channel tunnel overran by 80 per cent in construction costs and 140 per cent in financing costs. Many of the other projects have been delayed by a time factor of two or three and suffered cost overruns by a factor of five to ten.

These were caused by an innate human characteristic of assuming that we live in the best of all possible worlds when it comes to getting things done, that everything will fall into place when it should, and that no hidden or uncontrollable factors will intervene.

Essentially, planners (despite previous experience) will gauge how long something should take to achieve in an ideal world, rather than how long it may take to ?achieve in the real world. The same ?innate optimism causes people to underestimate the duration of even ?recent tasks at a subconscious level.

Conscious factors

Conscious, or deliberate, factors that affect perceptions of time include:?

• a conscious assessment of how long the task should have taken – this is overlaid on the subconscious factor and can further shrink the assessment of duration;?

• a view that the bill cannot sustain the true length of time a task took – essentially this is making a billing judgement at the point of time capture and is very bad practice; and?

• a conscious effort to manage the key performance indicators against which the fee earner is being measured. For example, when a firm puts pressure on fee earners to raise time utilisation, they will record more chargeable time, and when the firm puts pressure on fee realisation, they will record less chargeable time.?

All of these factors have an impact on the assessment of historical task duration and have long eroded the profitability of law firms. This is why firms have sought to improve the accuracy of time recording for several decades.Such techniques have included the advent of daily as opposed to weekly time capture, electronic time entry tools and the introduction of matter start/stop timers. ?The problem with these technologies is that they, in themselves, are seen to intrude on the client delivery focus with which fee earners are imbued. They are also seen as cumbersome and impractical – especially timers, a tool that very few fee earners have successfully adopted.

The holy grail of time recording in law firms, then, is something that automatically records the actual time it takes for fee earners to undertake each specific task. This is what automated time capture does, with less effort than fee earners spend on recording time using current methods.

Automated time capture tools

There are a variety of tools from different vendors that provide automated time capture. These include Aderant Found Time, DTE Axiom, IntApp Time Builder and – most recently – Carpe Diem TimeFinder.

These systems operate in a similar way: they take clues about what fee earners are doing, and how long they are doing them for, from the various technology tools that they use throughout the day, such as desk phones, BlackBerries, Word, emails, calendars, client relationship management tools, and so on. They also capture mobile activity undertaken on the commuter train and at weekends that often otherwise goes forgotten.

Each separate activity – composing an email, editing a document, attending an appointment listed in the calendar, making a call, looking up contact details – is tracked and listed so that, at the end of the day, the fee earner can look at the log and add any missing client and matter details.

Sometimes the client and the matter can be identified from the context, such as who the email is for or which client/matter folder the document is from. Sometimes only the client can be identified, such as from a phone number.

In any event, the day’s activities can be displayed in chronologic order and any missing client/matter information can be added in. At the same time, any other corrections can be made and any gaps can be filled. Usually the context of the previous and subsequent activities will jog the fee earner’s memory about activities that would otherwise have been omitted.

Thus, at the end of the day, a highly accurate assessment of what work has been undertaken during the course of the day (and on whose behalf) can fairly readily be determined – with the minimum of effort by the fee earner. Such a record of time and activity is vital for time-based charging, but also provides an invaluable basis of cost capture for other purposes (see box).

 

---

Financial benefits of automated time capture systems

• Obtain base data on how long it takes to complete certain types of matters.

• Measure the profitability of current alternative fee arrangements.

• Enable the calculation of effective and profitable time-based hourly fee rates.

---

 

Financial rewards

There has been no in-depth research about what lawyers actually do in the course of the delivery of legal services since 1978. Traditional time recording is largely based on which client and matter fee earners are working on, rather than the way in which their time is divided between specific types of tasks and activities.

Several firms in the US and the UK that have recently implemented automated time capture have reported various advantages. First, they have found that their fee earners have recorded more chargeable time.

In one case, the firm found that it had recorded nearly four additional hours per fee earner per month on average. For a medium-sized law firm, this could result in increased fee income of several millions of pounds per year; for a large global firm it could be £10m or more (depending on how much is chargeable).

Law firms using automated time capture also report that this technology provides invaluable management information on what lawyers actually do, ?as well as on whose behalf they do it.

These firms have found that the information gathered by automated time capture is allowing them – for the first ?time – to analyse what lawyers do, to review the processes in which lawyers ?are engaged, and to consider how to improve the efficiency of legal service delivery for the benefit of fee earners, ?the firm and clients.

neil@neilcameronconsulting.com