Measuring Missed Time

According to a 2007 study by Ipsos Reid, people gain on average one hour of productive time per day by having a Blackberry.  That is an average of 250 hours per year!  Regardless of whether an attorney has a Blackberry or not, it isn’t a stretch to say that attorneys miss at least one hour of billable time per day.  At an average rate of $200 per hour, this can result in lost value of up to $50,000 per year per timekeeper!  Recovering “lost” time can help increase profitability as well as provide leverage opportunities.

The problem is establishing the habit of timekeepers entering time regularly.  As in every other area of law firm management, measurement improves performance.  Using a Missing Time Report, such as the one shown below (click to enlarge), can help timekeepers get into the habit of paying attention to their time spent serving their clients and making sure they are recording the time spent on such activities.

In this report, the timekeeper can see the days they missed during a range of days – whether it be a month or week or whatever the time range entered.  A gauge is a good graphical method of tracking time entered for the range – in the case of the report to the left, it is looking at a month’s range.  The minimum hours is set to 167, or just over 8 hours per day.   Any day that the timekeeper does not enter 8 hours is shown, as well as the average rate on the day the time target was missed.  This will be used at the end of the report to determine value of the time missed.

The report also shows, per timekeeper, the total number of days where the time target was missed and the total hours entered for the range of dates.  The report should be flexible, however.  As much as we would like attorneys to enter time daily, some are stuck in the habit of recreating time at the end of the month and, if they are equity partners, they can minimize the value of this report by explaining that it doesn’t take into effect their total hours at the end of the month.  Therefore, the report should first filter out any timekeeper that, over the entire range of dates, records the minimum time expectation regardless of whether it was put in daily or all in one day.  If the firm decides that it wants to enforce daily time entry, that is fine.  The report just needs to be flexible in the event that the firm can’t enforce such a measure.

Finally, the report summary should show what timekeepers are accounting for the lost time, as a percentage.

This way you know who may need additional mentoring (or needling) in developing good time recording habits.  To emphasize the importance of recording your time, add  in the report summary  the total days where the target wasn’t missed, the total time missed, the average rate of all timekeeper time lost and the value of the time lost (the total hours missed multipled by the average rate).

Click on the graph to the left to see it in action.  If you are interested in using reports like the one described in this post, please feel free to email me or call (205) 588-4622.

Survey Your Clients To Improve Performance

When talking about improving performance, we talk about measurement.  Measuring productivity, rate, realization, margin and leverage.  But what about measuring the satisfaction of your clients?  After all, without their satisfaction, all of your numbers decrease.

Internal “upward reviews” are good to determine how well management is doing internally.  Client satisfaction reviews are good to determine how well your attorneys are doing in providing excellent service to the firm’s clients.

Tom Collins wrote a good sample client survey form that posted on More Partner Income in 2005.  It’s freely distributable, so I have posted a copy of it that you can download by clicking here.

Tracking Billing Cycle Metrics

The law firm business model is based on the measurement of 5 key profit drivers:  Rate, Realization, Utilization, Leverage, and Margin.  I would add another metric:  Cash flow.  You can really see a return on your investment in time and effort if you have a lot of time in WIP (work in process) and AR (accounts receivable).

The critical metrics that affect cash flow are the average days to bill, average days to collect (and by extension the sum of both to create the total billing cycle) and the average days in AR. Using a rolling 12 month period will give you an annual baseline, but you can also track it monthly. 

In the graph below, The variables are the total fees unbilled, total fees billed, and total fees collected over a 12 month period.  Knowing these numbers, you can calculate the total receivables outstanding during this time span, the average monthly and daily fees unbilled, billed and paid and your average days to bill, collect and days outstanding.

These metrics are critical for measuring your efficiency both at billing your work and collecting your fees.  If these numbers are high, then a review of your processes is due. Click on the graphic above to download and test with your own numbers.