Billable Hours and Law Firm Economics: What Every Attorney Needs to Understand to Get Ahead | BCGSearch.com

Billable Hours and Law Firm Economics: What Every Attorney Needs to Understand to Get Ahead

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Summary: This guide from BCG Attorney Search addresses what it takes to be successful in a law firm that you aren't taught in law school.
Learn more about law firm economics and the billable hour in this guide.


When you become an associate at a law firm, you may not realize it, but your employer has a lot in common with a hot dog vendor. Why is that? They’re both businesses. The hot dog vendor is peddling red hots, and your employer is selling time–your time and the time of every other lawyer who works there.

Maybe you’ve got the whole business thing down pat. If so, I don’t want to insult you, and I invite you to skip ahead to the billables section of this guide. But from what I hear from partners at law firms everywhere, that’s probably not the case–especially if you went straight from college to law school. Many partners complain new associates don’t understand the nature of the business they’re getting into.


Here’s how the business of law works. As a general rule, partners attract clients to the firm. When you, as a new associate, do work for those clients, the hours that you put on your time sheets generate reports, which generate bills, which generate revenue, which in turn pay overheads, associate salaries, and profits to the partners.

As you move up the food chain at the firm—usually faster at small firms and slower at large firms—you are expected to shift your focus from work generation to business generation. As one partner has described it, your job at a large firm is to “mine the ore” in the beginning. Clients are, in the words of another partner at a large firm, “kind of a distraction.” You’re a worker bee when you’re a new associate at a big firm, and you’re not expected to bring in clients off the bat. In contrast, a small firm may expect you to generate business almost immediately.

Those years when you’re working your way up, you’re said to be on the “partnership track.” If all goes well, within a set amount of time you’ll have the skills in place to become a partner. (If, on the other hand, you’re a contract or staff attorney, you’re not on the “partnership track,” meaning that you’ll always be on salary. You won’t get work that’s as sexy but you’ll have less pressure and work fewer hours, which can be very attractive).

After you’ve been on the partnership track for a while—again, longer at a large firm, shorter at a smaller firm—you’ll be eligible for partnership. If the firm perceives you as a business generator, you’ll be invited to become an “equity partner.” As an equity partner, you’ll own a piece of the business and you’ll be entitled to a commensurate piece of the profits. To become an equity partner, you have to buy your share. The price varies widely. At sizable firms it can be $35,000 to $100,000.

If you aren’t perceived as a business generator, you might be invited to become a “non-equity partner.” In that case, everybody recognizes your value to the firm; perhaps you’re an expert in a particularly useful area. You won’t be entitled to a cut of the firm’s profits, but you’ll have job security and a lot of the same managerial and other responsibilities as the equity partners. Becoming a non-equity partner also gives you a chance to develop business generation skills.

Of course, maybe you won’t be invited to become a partner at all. Luckily most firms will let you know that some time in advance, so you can polish your rainmaking skills, or find a job someplace else.


What does this extremely simplified business model tell you?
 

1. As in all businesses, the people who bring in the work are worth more than the people who do the work.


Coaches of successful sports teams at colleges often make more–much more–than the college president. Why? Because big-time basketball and football teams bring in a ton of dough, and the big salaries are a recognition of that. It’s the same in virtually every walk of business, including law. If you bring in business, you’re a “rainmaker,” and you’ll do better than people who don’t.

Does the idea of “selling” make your skin crawl? It shouldn’t. You sell all the time without realizing it. When you convince anyone to do anything—whether it’s to go on a date with you or to see the movie you want to see or go to dinner where you want to dine—you’re selling. You're persuading. To get your job in the first place, you sold an employer on you. Well, when you join a law firm, sooner or later those same skills are the ones that can rocket you to the top.

As the partner at one large firm put it bluntly, “If you want megabucks, generating money for the firm is the only way to do it. Bring the cash in! You’re worth more money than the people who do the work. On top of that it’s the only way to get autonomy. If you want independence, you need your own clients to be able to control your own schedule. And if you decide you want to leave, if you have a huge book of business, you can walk out any time you want.”

Another lawyer, formerly an associate at a large firm, points out, “It’s a mistake to think that ‘if I just do good work every day, I’ll make partner.’ You’re really a sole practitioner no matter where you work. If you can’t make a book of business, you aren’t profitable, you won’t make partner no matter how much people or clients love you. They told me that after I’d been an associate for seven years. Until then, I thought, if I do a good job, I’ll get rewarded with partnership. I had my head in the sand. You need to be economically self-sufficient as you move up. Pay attention as you progress. See what stars at your level are doing, in any year, whether it’s your first or fifth or seventh. You’ll find the people who succeed aren’t smarter than you. They just pay attention.”

Another lawyer points out that “At bigger firms there are people with phenomenal technical skills but no people skills. You can’t leave them alone in a room with a client. But there’s a point where you reach the threshold of competency, and then it’s about marketing. Because a brief is a brief is a brief. Clients don’t want Hemingway (or Stein, for that matter).”

If this scares the tar out of you, remember there’s a bright side to it too. As one partner pointed out, “The way the business of law is right now, you can succeed in more than one way. It used to be that you needed to be a great lawyer to succeed. Now you can be a great businessperson and succeed tremendously. The scholarly aspect of it isn’t so important. Good sales and social skills can make you great. There’s room for people with a whole new set of skills.”

The sooner you recognize that these are the skills that will ultimately be asked of you, the better off you’ll be. A couple years ago, a student came up to me to chat about an idea she had for becoming an entertainment lawyer. “Here’s what I do,” she said. “I go to the new talent night at local nightclubs. And when I see an act that seems pretty good, I’ll go up to them afterwards, and say, ‘Listen. I’m in law school. You can’t afford a lawyer, and I can’t represent you. But when you go to sign a contract, we can chat generally about the kinds of stuff you should watch out for. By the time I get out of school, maybe you will need a lawyer. And maybe it could be me.” Did I think it was a good idea? I thought it was brilliant. She was thinking ten jumps ahead.

Do you have to think that way to be a successful lawyer? No. There are tons of jobs–enough for all kinds of different people. But remember, law is a business, and the people who bring in the business are the most valuable.
 

 

2. Your firm has to make money on you to justify what they pay you, sooner rather than later.


I know that it’s a popular pastime to get online and see who’s paying what and who’s handing out which goodies. It’s a mistake to think that if somebody else is getting something you’re not, that their employer is somehow more generous. These people you’re working for? They’re not Santa Claus. They’re businesspeople.

As Rhett Butler said in Gone With The Wind, “I always get paid.” The reality of work is not what you expect. If a firm is paying you, they’re getting it out of you. A senior partner at one large firm said, “I got an e-mail from a student, saying he was turning down our offer and taking one in another city because they’d give him a new Rolex and $3,500 as a signing bonus, as though they were just doing it out of the kindness of their hearts. Then an associate came to me and said, ‘I understand XYZ firm is paying new associates $10,000 more than we get.’ I explained, ‘Here’s what you don’t know. They’re basing that starting pay on 2,200 billable hours and 300 quality non-billables, like bar work. We have an 1,800 hour billable requirement. For those last 700 hours they want out of you, you’re getting $13 an hour. Think about what matters in your life.”


A senior partner at another firm used a sports analogy. He said, “In the old days, if you were a top draft pick, if you had potential, they paid you a nice salary and you sat on the bench for two years learning the game. Now, with $5 million dollar salaries, they let you watch for two games and then boom, you’re the man. It’s the same with law firms. If they’re paying you six figures to start, there’s no honeymoon. You don’t get to hand in a memo with even a typo on it. You’ve got to get out of the gate fast.”

It’s true that employers don’t expect you to be a profit generator when you start out. At small firms, you’ve got to hit the ground pretty quickly; at large firms, they expect a two to three year investment in you. But they’re not just throwing money at you in the meantime. As a rule of thumb, assume that unless you’re bringing in business, the more money you make, the more hours you’ll have to work.
 

3. It’s important that you understand from the start what’s expected of you in terms of business generation, and that you’re comfortable with that.


At a big firm, you won’t be expected to develop any business for years. It’s not feasible with the kind of clients large firms serve. So you’ve got time to develop your skills without having to worry about netting business.

At a smaller firm, business generation is a much more immediate prospect. And while it can seem intimidating, it’s a matter of getting involved in the community in a variety of ways, so people get to know and respect you.

In a nutshell, there are two ways to generate business: either bring in new clients, or get additional work from clients you already have. When it comes to bringing in new clients, a lot of young lawyers say, “I’ll be active in the bar association,” but that’s only useful if your business involves a lot of referrals. On the other hand, banks, investment companies, community groups, and real estate brokers—those are more fertile sources. Serve on boards of community activities. Make presentations at senior community groups and nursing homes. Get to know real estate brokers with high net-worth clients who might get divorced if you’ve got a family law practice. Business can come from all kinds of sources.

Getting additional work from existing clients is something new lawyers don’t often think about. The managing partner of one law firm talked about cross-marketing: “I worked my way through school at a shoe store. You can’t make enough money selling shoes and nothing else. But if you can convince the person to buy the shoe polish or the laces, you can do a lot better.”

In a law practice, this kind of cross-marketing is a lot easier than bringing in new clients. Maybe you work for an entrepreneur doing their tax work. See if they need estate planning too. Or maybe you can use estate planning as a loss leader. You bring in big clients by giving them inexpensive estate planning, and then you talk about their business.

As the managing partner said, “There’s more to selling legal services than glad-handing.” No matter how you bring in business, make sure that your expectations are in line with those of your employer before you start.
 

4. Billable hours count more than non-billables, no matter what the party line is.


You will handle a lot more than client matters at work. Pro bono, campus recruiting, panel participation, community activities, writing speeches for partners (or giving speeches yourself), penning articles for professional publications or the firm newsletter, organizing conferences for practice groups, and working on committees are all part of the job. Some firms consider these activities “billable,” but they really aren’t. As one partner put it bluntly, “If one lawyer writes speeches and the other has pure billables, the billables rule.”

Another partner recounts, “As a junior associate I just focused on the ‘total commitment’ goal they gave me. I did a ton of community stuff and missed the billable goal. The harsh reality is that the billable hours number counts. Pro bono and bar activities are fine, but the hours you spend on billables and non-billables are not fungible. Billables are more valuable.”

None of this is to suggest that you should ignore non-billable activities that your firm wants you to do. If you focus exclusively on billables, you’ll be viewed as a selfish, non-team player, and you’ll be toast. But watch your balance. If you’re asked to join a committee to help pick out the furniture and carpeting for the firm’s new office, it might be a lot of fun, but don’t get swept up in it. The pro bono work you do may feed your soul, but watch how much of it you do; you can’t ignore your moneymaking work at a private firm. One lawyer comments, “If the firm has a sixty-hour-per-lawyer pro bono target, you’d have to be an idiot to come in with two hundred pro bono hours, unless it’s a very high-profile case or a senior partner is involved.” The senior partner at one large firm told me, “If students think they’re going to come here and make a six-figure salary representing the downtrodden, they’re crazy. They’re in denial.”

The bottom line is this: no matter what your firm tells you about the value of non-billable work, look around. Look at the people ahead of you. See what they get rewarded for. And if you want to get ahead, do the same kinds of things.
 

5. There are always other options.


You may not believe it, but no law firm wants you to work for them if you’re going to be miserable. There are millions of jobs you can get with your law degree. If you like the idea of being with a firm but don’t want the hour and business generation pressure, be a contract attorney. You won’t be on the partnership track and you won’t get the sexiest assignments, but you’ll have more time to yourself. Or go in-house or work in public interest. Or bag law altogether. Lots of law school grads find happiness without being law firm lawyers.

The bottom line is that nobody is looking out for your interests except for you. Just understand the nature of whatever job you get into—whether it’s at a law firm or anywhere else. Look at what you’ll get and the sacrifices you make to get it. It’s the only way to be happy!

If you’re in private practice, billables rule. Your firm—and ultimately you—only gets paid if clients get bills reflecting the work done for them. Billables are a fact of life. You are peddling your time in a service-oriented business. No one cares that you used to be able to cram for an exam the night before and get an ‘A’. In law, billable hours are the name of the game. You can’t do that faster than anyone else.

Here’s what you need to know about handling billable hours issues.
 

1. Clarify what’s expected of you up front.


Virtually every private employer has a billable target for its lawyers. Smaller firms may not have a “quota” as larger ones do, but they do have some expectation of the hours they want you to bill. Ask what that is! Some employers say that their billable number for you is just a target, and not to worry if you don’t meet it, they know that you won’t be as efficient as a beginner. Well, you shouldn't worry, but you do have to be mindful of the fact that you do have to become a productive asset for your employer sooner or later—preferably sooner!

With billable targets, this is what you want to do. First of all, break the yearly target down so that you can see how many hours you are expected to bill on a monthly, weekly, and daily basis. Don’t aim for the minimum; go a little above it, for two reasons: One, you want to cover any contingencies you can’t anticipate that may make your billable hours drop sometimes; and two, you don’t want to develop the reputation for going for the bare minimum. At smaller firms, partners calculate minimum billables by looking at how much it takes to pay salaries, support staff, rent, other overheads, and allowing a 15 to 20% margin for uncollectibles. They divide that by hourly rates, and come up with a break-even point. That’s often what the minimum billables requirement represents. While a large firm isn’t going to rise and sink on your particular hours, for a smaller firm, if you want to keep working, meet your minimum billables!
 

2. Find out up front what happens to the billable hours if clients don’t pay.


Find out when you start what happens to your billable hours if the client whose work you’re doing turns out to be a deadbeat. At some firms, the associate takes the hit but the partner can still count the associate’s hours for his/her bonus. At other firms, the partner and the associate split the loss.
 

3. Lunch isn’t billable. Recognize that every hour you spend physically present is not a billable hour!
 

Maybe you’ll do your billable target analysis and come up with a daily target of nine hours. You might figure, “OK. I’ll come in at 8:00, take an hour for lunch, leave at 6:00. Cool!” Ah, but that it were true!

The fact is, there are lots of billable time killers, and sometimes there’s nothing you can do about it—nor should you. Time that you spend in training sessions or recruiting for the firm or doing other administrative or community activities—these aren’t billable hours, in the sense that no client is paying for them. Chit-chat with your colleagues is very important. You want to form good relationships with people at work, and you want to keep up with the inside skinny. But clients don’t foot the bill for it.

What this means is that you’ll work many more hours than you bill. Lawyers say that as a rule of thumb it takes between 10 and 12 hours to bill 8. If you find yourself consistently spending long hours at work and billing fewer than seven hours or so, NYU’s Gail Cutter advises that you “try to get to the office early, by 7:30 or 8 a.m. That’s well before most clients and their lawyers are open for business. You’ll increase your uninterrupted work time while allowing for social events and conversation with people at the office.”
 

4. Keep track of your time with the ultimate goal in mind: Giving clients bills they’ll pay.

 

The business of law firms is to bill hours and make money. If you don’t bill it, they can’t, either.

If you exhibit an early awareness of the importance of billables and accurate timekeeping, your reputation will soar. If on the other hand you keep sloppy or inaccurate records, you turn them in late on a regular basis, and you’re generally cavalier about the importance of the billing function, you’re toast.  If you’re not vigilant about keeping your billing slips you’re nothing more than a pro bono attorney. If you want to get paid, then make sure your employer gets paid!

Here’s what you need to know about keeping track of your time.
 

a. Keep track of every minute (yes, it’s a pain in the butt). You’ll find billable time you never realized you had.


Every lawyer hates keeping track of billables. It drives some people to leave the business entirely. As a lawyer at one large law firm points out, “Keeping track of every minute is very foreign—it’s hard!” Another agrees: “Billable time is the single most difficult thing to get used to.” Time sheets are a nuisance.

But the fact is you need to track your time, and the guiding principle is this: Don’t put it off. We tend to procrastinate with things we don’t want to do. Many attorneys ignore the drudgery, and two weeks after the fact find themselves trying to recreate what they did. It happens to everyone.

Everybody agrees that you should mark down your time at least once a day. If you only do it once a day, do it just before you leave, even if you’ve put in a long day. Think of it like brushing your teeth. You wouldn’t go to bed without brushing your teeth (at least—I hope not). Don’t leave work without marking down your time.

Keeping track more frequently is even better. One attorney says that “A wise partner once gave me a very helpful tip: At noon, before you go to lunch or leave for court or client appointments, take five minutes to account for your morning billing. Likewise, when you are ready to leave at the end of the day, account for your afternoon billing. If you are out of the office for the entire afternoon, when you get in the next day enter your billing for the previous day.”

Keep a pad on your desk and keep a running tally of your time.

The bottom line is this. If you keep an accurate tally of the time you work, you’ll find that you actually wind up with more hours than you realized—without spending even one extra minute at work. If you wait, you’ll forget a little time here and a few minutes there that are billable. It’s the same thing that happens to overweight people who are asked what they eat in an average day. They forget about the broken cookies they “cleaned up” standing in front of the pantry. But when they keep a food diary of every bite that goes into their mouths, the truth comes out. You’ll find the same thing with billables—you’re cheating yourself out of the “broken cookie” billables if you delay recording your time!

Keeping track of your time isn’t the only element of record-keeping that’s time sensitive. You also have to turn in your hours on a timely basis. If your employer doesn’t know about your hours, your minute-by-minute diary is useless. If you work on a real estate matter, for instance, once the closing takes place, that’s it. If your time isn’t in, the firm can’t recoup. Even without a real-world deadline like that, you need to be timely with your billings. Most firms run billing reports at the end of the month. It’s near and dear to partners’ hearts. Not getting them in on time will make people question your competence.

They’ll think, "If you can’t do this little administrative chore, how will you get other things right?”

The importance of keeping track of your billable time more frequently is illustrated in the following story. There was a junior associate at a medium-sized firm in California. She hated billing and put it off as long as possible. She took notes on what she'd done, but she didn't bother filling in time sheets and handing them in until the end of the month, when, in a panic mode, she got it all done. She was bemoaning this to another associate, who said, "Didn't you know? Every senior partner gets a mid-month status report on billing." The associate realized, to her horror, that by failing to hand in billing reports promptly, she was getting a "zero" every month!

Incidentally, don’t forget that copying, telephone calls, and faxes are billable items. Ask about billing procedures for these services.
 

b. Don’t mark it up, don’t mark it down—just record it... but be aware of the hidden importance of efficiency.


As a new lawyer you’ll probably be horrified by how long it takes you to do things. Relax. Everybody feels the same way when they start.  If the senior attorney tells you, "Oh, this is an easy issue” when she assigns it to you, and then you take twenty hours researching it, you’ll feel stupid writing down all twenty hours. But bill it all anyway! Let your supervisors cut your hours if they think it’s necessary.

If you’re really concerned about taking too long on something, the best thing to do is to talk to the assigning attorney when you get stuck and look for more guidance. Remember, nobody expects you to be efficient when you start out. You’re learning. Go to the assigning attorney and say, "You thought this would take two hours, I’ve spent four hours on it and I’m not close to done. Am I interpreting this right?”

If you finish an assignment before the time problem strikes you, include a note with your time sheets saying, “It took me longer than I thought it would and here’s why.” If you went off on a tangent, say it. But bill all your time! At worst you’ll be perceived as a hard worker.

If you don’t bill all your time, a couple of things can happen. Number one, if people see you at the office all the time but you only bill five hours a day, they’ll wonder what’s up. For another, if your time sheets show low hours, they’ll assume you’re not overloaded and pile on even more work. Yikes! And if you feel so guilty about taking too long that you take work home with you without anybody knowing, you’ll have no private life and you’ll burn out in a hurry. Nobody wants that to happen to you!

The flipside of marking down your hours is even worse. You may get the idea that taking things slowly and running up your billables is a good idea. More billables, more money, right? Nope. Partners know that clients won’t pay inflated bills. They’ll just cut your time to what it should have been. As lawyers at Barnes & Thornburg point out, “Big billables where they’re unnecessary is a negative, not a positive. Don’t run up billable hours needlessly.”

And don’t ever, ever inflate your time, claiming you worked hours that you didn’t work. Ever. It’s a serious ethical breach and if you’re busted, you will be cashiered on the spot. It’s not worth the risk.

A junior associate, whom we'll call Benedict Arnold, was working at a large Midwestern firm. He and five other associates went out of town for a week on a document review. They worked together all day and partied together at night.

Shortly after they got back to the office, one of the other associates was called to the supervising attorney's office. "When you were in X city, did you work with Benedict Arnold every day?"

The associate said he did.

"Did he work by himself at all?" the supervising attorney continued.

The associate responded, "No, we all worked together."

The supervising attorney said "Thank you."

As the associate prepared to leave the supervising attorney's office, he said "just out of curiosity—why do you ask?"

Supervising attorney: "Because all of the rest of you billed ten hours a day. He billed fourteen."

Busted!

Even if you’re not expected to be efficient when you start, you need to know that it does count, and you should try to become efficient as soon as possible (don’t worry—it gets much, much easier as you get more experience under your belt). There are two good reasons why: bonuses and “realization rates.”

As the partner at one firm points out, “There’s such a thing as ‘quality’ billing. A letter is worth 0.2 hours whether you took twelve minutes or an hour to write it. When you’re new it can take you half an hour writing a letter to forward a pleading to a court, which should take five minutes when you’re experienced.” The partner doing the billing for your work will write down your time to the ‘quality’ billing level, no matter how long it took you. Another partner at another firm points out that “It may be that you work four hours and they get cut to one. Yes, you have four hours recorded. But someone is going to write off three of those hours. At the end of the year, the firm looks at the hours you actually worked to determine if you met your billing requirement; but for bonuses and raises and promotions, efficiencies count. They will look at how much they had to cut your hours.” And another partner explains that “When your supervising partner writes off your time, it counts against them, in the guise of their ‘realization rate.’ The realization rate reflects how many hours people who work for you have spent working on their files compared to what’s collectible. If your associates work a hundred hours but only sixty are collectible, it’s either a problem of slow-paying clients or inefficient associates. The higher your realization rate as a partner, say 80 to 90%, the better your compensation. So partners don’t like writing off a lot of time—and they seek out associates who are efficient!”
 

c. “But I dreamed about the case!”—figuring out what's billable.

 

When you are filling out your time sheets, you have one goal and one goal only. As one partner says, “You need to know: What I write down—will it help or hinder the billing attorney?” He adds, “If you do it wrong, the client will call and complain to the partner, ‘Your associate wrote this on their time sheet. What were they doing?’” The hours on your time sheets should be easy to sell. Make your supervisor’s life easier and you’ll be rewarded.

Another partner recommends that “As a new associate, ask to look at client bills! Expressing an interest in seeing what clients will pay for and the form you should follow prepares you for being a billing attorney and makes people think you have rainmaking potential. If you think in that vein, when you become a billing attorney yourself, you’ll be able to answer the question—Gee, will they pay for that? It makes you a better business developer.” Keep in mind that once in a while partners will be territorial about their clients and not be willing to share their bills with you—and if you hear that about somebody, don’t ask them!—but in general it’s a good idea.

As a new associate, how do you figure out what’s billable—and how to describe it? Let’s see:   
 

1) Some things are never billable. Ever.

A partner at one large firm told me about an associate who asked him, “If I’m asleep on a plane and I have a dream about the case, can I bill it?” The partner responded, “When you woke up, had you propelled the case forward? Was it like the Kubla Khan?” The partner laughed and told me “The ironic thing is, I once had a dream about a something that was driving me crazy on a case, and when I woke up I had the problem solved. But I didn’t bill for it. How do you explain to somebody that clients don’t pay for dreams? You can’t.”

Lawyers have tons of stories about what new associates sometimes put on time sheets. Among the ones I heard:

  • “Talked about assignment with a fellow associate at Friday ice cream social.”

  • “Packing for business trip.”

  • “Haircut.” (The explanation: “My hair grows during the day on client time, so they should pay for it.”).

  • “Dry cleaning” at home. (“I wear the suits to work”)

  • Lunch. (“I think while I chew....”)

  • “0.1 hours—bathroom.”

  • “Cleaning off desk.” (Reports a supervising partner: “Soon we asked him to clean off his desk permanently.”)

  • “Nine hours in library spinning my wheels.” (For this one, the firm’s recruiting administrator said, “It would have been very funny, but the billing attorney didn’t have time to review the entry and sent the bill directly to the client. Oops!”)

One lamentable area that’s not billable is professional reading. As one corporate associate said, “Out of school, you don’t know anything about deals and how to structure them. PLI books, CLE books, they show you how deals are structured, from project financing to asset securitization to ADA issues. They’re great books; they get down and dirty about how deals work. Reading them makes you immensely more efficient, but you can’t bill the time you spend reading them; partners say, ‘Read them in your free time.’”

And even though it’s an outstanding idea to be familiar with your clients’ industries, learning about them isn’t billable. You need to do it on your own time. A partner at one firm said that “Our firm does a lot of work for companies that make equipment for airplanes. As a result, we subscribe to publications like Aviation Week. Nobody is required to read them; it’s kind of like having the Wall Street Journal in your front lobby. Once, one of the partners was curious as to why the firm was not recapturing more billable time from our summer clerks, so he reviewed a printout of all their time. One of the clerks was putting down between an hour and two hours a day for activities like ‘Reading Aviation Week.'”
 

2) Different firms bill differently. Ask for a “Billables 101” lesson at work.

Ask your mentor or an office administrator or a partner to put together a ‘billable hour’ workshop to explain the firm’s billing policy, procedures, and proper vs. improper billing. Ask them to demonstrate with filled-out time sheets. The fact is, nobody comes out of law school knowing how to bill time, what’s appropriate and what’s not. Whether you’re a summer associate or a new permanent associate, you need to take the initiative to find out how to do it right.

You can also lean on your secretary for advice. Secretaries can be very helpful with billing questions because they handle it. You can always ask another attorney as well. Nobody expects you to know intuitively what’s billable. It’s all unspoken policy.

Among the areas that differ from firm to firm and client to client are:

  • Travel. Some clients negotiate up front that it won’t be billable at all. For others, things like the time it takes you to get to the airport are billable, and sometimes they’re not. When you’re on the plane, if you’re travelling for one client and doing work for another, you have to ask who gets billed? One—or split it?

  • Researching issues that impact more than one client—who pays for it?

One junior associate told me about putting an entry on her time sheet that said “0.1 hours—left message for client.” Her supervising attorney said, “For my clients, you can’t bill for leaving a message.” She commented, “He wasn’t mad that I wrote it down. I didn’t know. Different clients have different sensitivities.”
 

d. Realize that sometimes when it comes to billability, it's not what you say—it’s the way you say it.


Remember, time sheets are documents with a particular audience in mind: the client. The days of quaint bills that had one line reading “For professional services rendered, $” are gone.

Clients sometimes even have their legal bills audited for fraud. So make sure your descriptions will fly. One lawyer said “Make sure every entry on your time sheet is meaningful by placing yourself in the client’s position. Ask yourself: Would these time descriptions satisfy me if I were buying the time?”

One lawyer said that, “You can never tell what’ll honk off a client. They can pay $100,000 for a month’s legal work and then go ballistic over a $20 hotel breakfast. Think about that next time you want to send out a bill with excessive copier charges!”

According to a partner at a large California firm: "In one of my early cases, I represented a large, wealthy company which was one of several defendants in the case. I got a terrific result in federal court on a motion to dismiss; the judge denied the plaintiffs the right to replead against my client, while denying other lawyers' motions to dismiss on behalf of the other defendants. It potentially saved my client from paying millions of dollars in damages. The judge's opinion read like he'd taken chunks of my brief verbatim, a fact that did not go unnoticed by the Assistant General Counsel of my client. I thought the General Counsel would be happy to see the decision as soon as possible, so I FedExed it to him. The next morning when the General Counsel called with what I was sure would be a grateful and congratulatory call, he reamed me out for spending money on FedEx without getting authorization from him first! A startling, but very useful, lesson about making assumptions—and always checking costs with your client!"

So on your time sheets, err on the side of giving too much detail rather than too little. As one partner puts it, “Don’t write down things that clients won’t pay! For instance, if you put '8 hours— reviewed file,' a client won’t go for that. What in the world is that? Instead, put 'Reviewed this and this pleading and generated this report,' and the time you spent on each.”

Per this partner, “research” is another entry that really bugs clients. They think it might be fluff, and want to get value for their time. Give a description: “I researched X issue for __ hours, Y issue for one hour.”

And copying cases? It’s a non-starter for most clients. If a client sees, “Copying XYZ cases” on your time sheet, she will wonder, “Why am I spending more than a hundred dollars an hour for you to copy cases? Why can’t a secretary do that?”

According to this partner, “Sometimes things are part of a bigger whole, and if you package it right it will fly.” He points out that getting to the gate at least half an hour before a flight takes off is a necessary part of travel. “But anybody would be yanked at the idea of paying for ‘Waiting.’ So instead of saying ‘Waiting at airport for flight,’ make it part of a bigger ‘Traveling to X destination,’” he says.

Or let’s say you’re traveling to a deposition in another state. You need to prep for it as you travel. “Don’t bill the time as travel,” he suggests. “[B]ill it as ‘Prep for XYZ deposition, reviewing W document.’” Clients won’t even question it if you say, “Prep for deposition in X city, review documents and subpoena.” He explains the travel time is built in this way. “Don’t highlight the time as simply ‘travel’!”

Another thing that bothers clients is conferences between attorneys in the firm. They have no problem with conversations with opposing counsel. But each other? No.

It’s ridiculous for clients to think this way. As a lawyer you need to strategize. Asking a question of someone who handles that type of matter every day is much more efficient (and cheaper for the client) than researching how to do it from scratch. Plus, batting an issue around often leads to creative solutions to problems. But clients don’t see it that way, and you have to be sensitive to that.

If a partner and an associate have a quick conversation about something, then the junior person is usually the only one to bill it. For a longer conference, both the partner and associate typically bill. But he cautions, “Word it as ‘clarifying the issue’ or something that the client will find more palatable.”

The partner’s advice reminds of a story I read once, about how Xerox discovered it was a lot cheaper and more efficient if they just let the copier repairmen eat lunch together so they could swap ideas. So I guess the value of talking is an issue in more industries than just law!

Also be sensitive to billing large blocks of time in one day to one client. One lawyer points out that “There are clients who say that once they see more than eight hours on a given day billed to them, they scrutinize it very closely—they think, ‘Gee, in that ninth hour, I wasn’t getting the same bang for my buck as I was in the first hour.’”
 

e. Don’t obsess with billables at the expense of your professional growth.

 

After all this talk about billables, you’re thinking, ‘Well, swell—now you’re telling me to forget about billables?’ No, of course not. But it’s easy to be so focused on billables that you miss out on great non-billable opportunities. It’s not just your time sheets. It’s your career.  If you’re obsessed with your billables, you miss out on tremendous opportunities to sit in on things and learn. If you tag along for negotiations, conference calls, the knowledge you gain is invaluable. The most valuable thing you can learn as a new lawyer doesn’t have to do with research. See how more experienced attorneys handle situations. Learn how to deal with clients.”

 

f. Even if you work for the government, for Legal Aid, or for a firm that works on a contingency basis, you still have time issues.


If you work for an employer for whom you don’t have to keep detailed time sheets, thank your lucky stars. But check up front to see exactly how you should keep track of your time. It’s a mistake to assume that because a client isn’t paying for it, you don’t have to keep track of your time!

If your public interest job is funded by the Legal Services Corporation, for instance, you have to keep track of your time the same as you would for paying clients. Government agencies don’t strictly track your time, but they do watch to see how efficiently you handle cases. If you’re a prosecutor, one prosecutor pointed out that “You’re not doing billables, you’re doing the job. If that means working the weekend, because you’re going to trial on Monday and you have to spend the weekend organizing witnesses and reviewing exhibits and checking case law, you do it. You don’t write it down, but you do it.”

If you work for a personal injury firm that works on a contingency basis, don’t make the mistake of figuring that since clients don’t pay for your time, you don’t have to keep track of it. Ask! A junior associate at one P.I. firm said that “When I worked at a plaintiff’s P.I. firm during law school, I never had to bill to a file or track my time in any way. When I started practice after graduating, I went to work for another plaintiff’s P.I. firm. You can imagine my horror when two and a half weeks had passed, I hadn’t turned in a single time sheet, and a partner asked what I had billed for the past eighteen days. Unbeknownst to me, this particular firm billed against their contingency files to track their profitability!”

QUESTIONS ANSWERED IN THIS ARTICLE
 

1. What is the primary business model of a law firm, and how does it compare to other businesses?

A law firm's primary business model revolves around selling time, specifically the time of its lawyers. This is similar to how other businesses sell products or services. For example, a hot dog vendor sells hot dogs, whereas a law firm sells the billable hours of its attorneys. This business model generates revenue through the hours attorneys work for clients, which then pay for overheads, associate salaries, and profits for partners.
 

2. How does the expectation for business generation differ between large and small law firms for new associates?

At large law firms, new associates are primarily expected to focus on work generation, such as completing tasks assigned to them by partners. They are not expected to bring in new clients or generate business right away. In contrast, small law firms often expect new associates to contribute to business generation almost immediately. This involves bringing in new clients or obtaining additional work from existing clients.
 

3. What are the potential career paths for associates on the partnership track at law firms?

Associates on the partnership track typically progress through several stages. Initially, they focus on work generation and billable hours. As they advance, they shift their focus towards business generation. After a certain period, associates may become eligible for partnership. There are two main types of partnership: equity partnership, where they own a share of the firm and receive a portion of the profits, and non-equity partnership, where they do not share in the profits but have job security and managerial responsibilities. If associates do not make partner, they may choose other paths such as becoming contract attorneys, moving in-house, or leaving law practice altogether.
 

4. Why are billable hours considered more valuable than non-billable hours in a law firm?

Billable hours are directly tied to the firm's revenue, as clients are billed for the time lawyers spend working on their cases. Non-billable hours, which include activities like pro bono work, community involvement, and firm administration, do not generate immediate revenue. Although non-billable activities are important for personal and professional development, and contribute to the firm's overall reputation, billable hours are prioritized because they directly impact the firm's financial health and the compensation of its lawyers.
 

5. What should new associates understand about the importance of business generation and billable hours to their career progression in a law firm?

New associates should recognize that while technical legal skills are important, business generation and billable hours are crucial for career advancement in a law firm. Associates need to develop skills in bringing in new clients and generating additional work from existing clients. They should also be aware of the firm's expectations regarding billable hours and strive to meet or exceed these targets. Balancing billable work with non-billable activities is key, but billable hours typically hold more weight in terms of compensation and career progression. Understanding these dynamics can help associates navigate their careers effectively and increase their chances of becoming partners.
 

About Harrison Barnes

Harrison Barnes is a prominent figure in the legal placement industry, known for his expertise in attorney placements and his extensive knowledge of the legal profession.

With over 25 years of experience, he has established himself as a leading voice in the field and has helped thousands of lawyers and law students find their ideal career paths.

Barnes is a former federal law clerk and associate at Quinn Emanuel and a graduate of the University of Chicago College and the University of Virginia Law School. He was a Rhodes Scholar Finalist at the University of Chicago and a member of the University of Virginia Law Review. Early in his legal career, he enrolled in Stanford Business School but dropped out because he missed legal recruiting too much.

Barnes' approach to the legal industry is rooted in his commitment to helping lawyers achieve their full potential. He believes that the key to success in the legal profession is to be proactive, persistent, and disciplined in one's approach to work and life. He encourages lawyers to take ownership of their careers and to focus on developing their skills and expertise in a way that aligns with their passions and interests.

One of how Barnes provides support to lawyers is through his writing. On his blog, HarrisonBarnes.com, and BCGSearch.com, he regularly shares his insights and advice on a range of topics related to the legal profession. Through his writing, he aims to empower lawyers to control their careers and make informed decisions about their professional development.

One of Barnes's fundamental philosophies in his writing is the importance of networking. He believes that networking is a critical component of career success and that it is essential for lawyers to establish relationships with others in their field. He encourages lawyers to attend events, join organizations, and connect with others in the legal community to build their professional networks.

Another central theme in Barnes' writing is the importance of personal and professional development. He believes that lawyers should continuously strive to improve themselves and develop their skills to succeed in their careers. He encourages lawyers to pursue ongoing education and training actively, read widely, and seek new opportunities for growth and development.

In addition to his work in the legal industry, Barnes is also a fitness and lifestyle enthusiast. He sees fitness and wellness as integral to his personal and professional development and encourages others to adopt a similar mindset. He starts his day at 4:00 am and dedicates several daily hours to running, weightlifting, and pursuing spiritual disciplines.

Finally, Barnes is a strong advocate for community service and giving back. He volunteers for the University of Chicago, where he is the former area chair of Los Angeles for the University of Chicago Admissions Office. He also serves as the President of the Young Presidents Organization's Century City Los Angeles Chapter, where he works to support and connect young business leaders.

In conclusion, Harrison Barnes is a visionary legal industry leader committed to helping lawyers achieve their full potential. Through his work at BCG Attorney Search, writing, and community involvement, he empowers lawyers to take control of their careers, develop their skills continuously, and lead fulfilling and successful lives. His philosophy of being proactive, persistent, and disciplined, combined with his focus on personal and professional development, makes him a valuable resource for anyone looking to succeed in the legal profession.


About BCG Attorney Search

BCG Attorney Search matches attorneys and law firms with unparalleled expertise and drive, while achieving results. Known globally for its success in locating and placing attorneys in law firms of all sizes, BCG Attorney Search has placed thousands of attorneys in law firms in thousands of different law firms around the country. Unlike other legal placement firms, BCG Attorney Search brings massive resources of over 150 employees to its placement efforts locating positions and opportunities its competitors simply cannot. Every legal recruiter at BCG Attorney Search is a former successful attorney who attended a top law school, worked in top law firms and brought massive drive and commitment to their work. BCG Attorney Search legal recruiters take your legal career seriously and understand attorneys. For more information, please visit www.BCGSearch.com.

Harrison Barnes does a weekly free webinar with live Q&A for attorneys and law students each Wednesday at 10:00 am PST. You can attend anonymously and ask questions about your career, this article, or any other legal career-related topics. You can sign up for the weekly webinar here: Register on Zoom

Harrison also does a weekly free webinar with live Q&A for law firms, companies, and others who hire attorneys each Wednesday at 10:00 am PST. You can sign up for the weekly webinar here: Register on Zoom

You can browse a list of past webinars here: Webinar Replays

You can also listen to Harrison Barnes Podcasts here: Attorney Career Advice Podcasts

You can also read Harrison Barnes' articles and books here: Harrison's Perspectives


Harrison Barnes is the legal profession's mentor and may be the only person in your legal career who will tell you why you are not reaching your full potential and what you really need to do to grow as an attorney--regardless of how much it hurts. If you prefer truth to stagnation, growth to comfort, and actionable ideas instead of fluffy concepts, you and Harrison will get along just fine. If, however, you want to stay where you are, talk about your past successes, and feel comfortable, Harrison is not for you.

Truly great mentors are like parents, doctors, therapists, spiritual figures, and others because in order to help you they need to expose you to pain and expose your weaknesses. But suppose you act on the advice and pain created by a mentor. In that case, you will become better: a better attorney, better employees, a better boss, know where you are going, and appreciate where you have been--you will hopefully also become a happier and better person. As you learn from Harrison, he hopes he will become your mentor.

To read more career and life advice articles visit Harrison's personal blog.


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