Law firm productivity has become a pressing concern among organizations in recent years, particularly as a greater emphasis on technology and efficiency becomes a key determinant between success and struggle.
In this article, we will be examining why law firms struggle with productivity and what you can do about it to improve efficiency within your organization.
- A common issue of law firm productivity
- The state of law firms today
- Law firm productivity is more important than ever
- Start using project collaboration software
- Know your law firm productivity metrics
- Outsource the non-legal stuff
- Automate billing and invoicing
A common issue of law firm productivity
Raise your hand if you’ve had a day like this at your law firm:
You’re working on a time-sensitive brief and things are flowing smoothly when a senior partner pops his head into your office. “Hey, how’s that brief going?” You stop, smile, explain, and give off body language that subtly says, ‘let me get back to work.’
Five minutes later, the phone rings. It’s your assistant. “Hey, are you ready for me to format that brief?” Sigh. You explain that you’ll send it via email the moment it’s ready.
You settle back into typing when your cell phone starts to buzz. It’s a text from another associate on the matter. “Hey, dude. Done with that brief yet?” At this point, you actively start pulling your hair out as you realize you’ve completely forgotten the brilliant point you were just about to type.
But wait, there’s more! Just as you get back into making that brilliant point, an IM pops up on your screen. It’s your department head, reminding you that there’s a law firm marketing luncheon in five minutes in the conference room. She hopes you’ll be there. Reluctantly, you attend and are dismayed to find that the meeting consists of 60% personal chit-chat and 40% lawyers realizing they don’t know the first thing about marketing.
Later, you realize that you forgot to stop billing during the luncheon and you have to go back and correct your time records. Now over half your day is gone, everyone has communicated that they want a finished brief, yet no one has allowed you the space to finish it.
Don’t worry, you’re not alone. The good news is, there are things that can be done to make your law firm work more efficiently (and, consequently, more profitably).
Let’s dive in.
The state of law firms today
According to a report from Wells Fargo’s Legal Specialty Group, U.S. law firms are facing the challenge of keeping their expanded ranks of attorneys busy due to a drop in demand. The survey conducted by Wells Fargo revealed that law firms reported a 1.9% decline in demand, with the top 50 highest-grossing firms experiencing a 2.9% drop. More than 140 law firms, including 68 of the top 100 highest-grossing U.S. firms, were included in the survey.
This decrease in demand comes as law firms have retained the majority of the lawyers they hired in 2021 and early 2022 to handle a surge in mergers and acquisitions (M&A) work. The number of lawyers increased by 4.5% in 2022, as mentioned in the report. However, the M&A market cooled off in 2022, dropping by 37% compared to the record-breaking $5.9 trillion in global announced deal work seen in 2021.
Lawyers logged fewer billable hours in 2022 compared to the previous year, with each lawyer averaging 1,568 billable hours, 102 hours less than in 2021. Owen Burman, a senior consultant at Wells Fargo, expressed surprise at the relatively low number of layoffs across the industry given the slowdown in work.
Law firm productivity is more important than ever
With this uncertainty, it’s more important than ever that law firms focus on productivity and run a tight ship.
This evaluation should focus on the timely delivery of services and cost-effectiveness, as well as identifying opportunities for improvement. Two areas in particular are significant for driving better outcomes for both parties: partnership (including pricing, scoping, and project management), and legal technology.
To optimize partnerships, formal client feedback and 360-degree feedback, where both the law firm and the client provide constructive feedback, are crucial. Identifying areas for improvement can enhance the effectiveness of partnerships. The three key areas to optimize are pricing, scoping, and project management.
Law departments increasingly desire more innovation in law firm pricing to achieve greater cost certainty. Additionally, scoping improvements can optimize cost certainty and client experience. Project management, both externally and internally, is essential for improving efficiency; and increasing demand for legal project manager involvement can bridge the gap between aspirations and current delivery in terms of productivity.
Legal technology plays a significant role in optimizing law firms. The use of legal technologies has increased, with eFiling, legal research, and contract and document management systems being actively used by more than half of the departments. Investment in legal project management roles or empowering existing roles can positively impact pricing, scoping, and project management. Legal project management technologies are particularly underutilized, presenting an opportunity for departments to improve in this area.
With all that said, let’s get into some actionable items that you can get started with to improve productivity in your law firm.
Start using project collaboration software
Remember how we began this article with an all-too-familiar depiction of a working frustration?
Well, in this day and age, there is not a single reason why any of those people who asked you about your brief needed to interrupt to get the answer they wanted. There are all sorts of project collaboration programs that would allow each of those people to log in and view your progress in real-time without disrupting your flow.
Project management platforms such as ActiveCollab, Slack, Trello, and even Google Docs allow team members to track progress as the project is underway. There’s no reason for the pop-in, the phone call, or the text (although many of these programs have instant messaging features that can also be distracting).
According to the Legal Technology Survey Report by the American Bar Association, lawyers who utilize practice management software and document automation tools tend to have higher billable hours and efficiency compared to those who rely on manual processes.
The point is, by keeping all team members up to date on your progress at all times, no one has to waste time worrying about where you’re at or when you’ll be finished.
As an added bonus, project management systems can help you stay organized and get work done more efficiently, too. You’ll be able to pick up where you left off more quickly, and if anyone else is collaborating on the same task, you’ll all know exactly what’s next.
I must stress that these kinds of tools only work if everyone at the firm uses it regularly. The transition period might be a little tough, but it’s well worth the effort to get the entire team on the same page.
Know your law firm productivity metrics
Law firms do a lot of amazing things, but there’s one thing many smaller firms do wrong — they fail to run their law firm like a business.
Specifically, firms waste a lot of time wondering what they’re doing wrong or how they can do better, but they’re not doing anything to measure their current performance. How can you tell if you’re being efficient or profitable if you’re not keeping track of efficiency or profitability?
Businesses maintain (and increase) profitability by keeping track of data in the same way that your doctor tracks and improves your health with vital signs like blood pressure and cholesterol levels.
At first it may be hard to come up with a viable list of data points that could be tracked within a law firm. Not to worry. Other people have already thought of that. In fact, there are all sorts of key performance indicators (KPIs) that law firms can use to track overall and individual efficiencies.
Moreover, KPIs can be used to make important decisions within your firm; such as when to hire a new lawyer, whether you need to improve client services, or where you can improve efficiency on particular tasks that occur daily.
If you’re new to this concept, start by tracking a few data points that give you clear, unbiased insights into your top priorities. For example, if you’re focused on marketing and attracting new clients, you should track KPIs like these:
- The total amount you spend on marketing
- The marketing cost you spend per new client
- The average value of new clients from each marketing channel
- The percentage of consultations that lead to a case initiation
As you choose your top productivity metrics, make sure to think through each KPI critically. Will this data point tell you what you really want to know?
Be careful about vanity metrics, which are numbers that feel important but aren’t directly related to your income stream. It’s far more important for law firm productivity to know things like how many people book consultations on your website and which clients are taking up the most non-billable time.
Outsource the non-legal stuff
Remember that marketing meeting we talked about at the outset of this article? That’s not so unusual, is it?
We’ve all suffered through meetings that are a gigantic waste of time. Fortunately, there’s a lot you can do to make law firm meetings more productive.
First of all, start by knowing what you don’t know.
Most people in your firm have legal training — they’re not experts in marketing, office administration, or business strategy. Trying to get them to fulfill all of those other functions is a recipe for wasted time.
Why make your legal staff waste untold hours of otherwise-billable time each month on marketing when you can just hire a marketing professional to do the entire job quickly, efficiently, and without the time-waste?
The same is true for things like office management, graphic design, accounting, and website upkeep. You’re better off hiring a virtual assistant or a specialist to handle those types of tasks, especially if you’re a small firm.
Ultimately, it’s cheaper to pay a third-party expert. Your time is expensive and it will take you longer to do lower quality work. If you use that time to do productive work instead, you’ll quickly make up for the expense of hiring a specialist.
Automate billing and invoicing
One of the best things you can do to improve your law firm’s profitability is to increase efficiencies around billing and invoicing.
Law firm bills are nothing to be taken lightly, especially since the Rules of Professional Conduct require “reasonableness” in billing practices.
Fortunately, many law firms began using electronic billing programs as soon as they came onto the market. Clearly, we were all ready for a good tool that took some of that manual work off of our plates.
However, many of those programs came with their own inefficiencies. In the end, they weren’t much more productive than the “keeping time on a sticky note” method that was popular in my day. This is a pretty common problem when a new type of software hits the market. You can spend just as much time managing the program as you used to spend just doing the task.
That’s fine as long as you’re willing to upgrade when something better comes along.
Today’s billing and invoicing programs deploy artificial intelligence and machine learning to create a seamless billing process. If you’re still spending an inordinate number of hours on billing each month despite your electronic billing software, maybe it’s time to look into an upgrade.
We’ve talked a lot about law firm productivity in this article, but it’s also important to recognize that you are human. You need periods of intense focus and periods of distraction. Frankly, it’s not healthy (or even possible) to spend every minute of your workday at peak productivity.
Nonetheless, once your firm commits to running like a business and focusing on profitability, there are concrete measures you can and should take to improve your bottom line. Be realistic, but stay ambitious.
Your job as a leader is to clear the way so that when people in your firm are ready to perform, they don’t have to work around problems to get the job done. It’s easy to blame your employees for wasted time, but in almost every situation, the problem is not a lack of work ethic. Find ways to make your system more productive and your people will naturally get more done — trust the process, so to speak.
As an added bonus, your employees will probably be thrilled that they’re not wasting time on inefficient processes anymore and feel more fulfilled as a result.
With that in mind, go forth and get more done.
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