The Ultimate Time-Money Trade-off
As long as there have been billable-hour requirements, associates have been complaining about them. And they often cite the time requisite as a primary reason for leaving private practice. At the same time, large law firms express concern over associate retention. But if associates were given an opportunity to work—and earn—a little bit less, would they?
Yes, say an overwhelming number of young lawyers who participated in an unscientific online survey conducted by the ABA Journal in November. Respondents identified themselves as associates.
Of the 2,377 respondents who answered all or part of the survey, 84.2 percent indicated they would be willing to earn less money in exchange for lower billable hour requirements.
A sizable minority of associates are looking for a big workload cut 31.9 percent of respondents favored a 20 percent reduction in billable hours. That was followed by a 10 percent cut in hours (chosen by 27.8 percent of respondents), a 15 percent cut (14.3 percent), a 25 percent reduction (13.5 percent) and a 5 percent cut (4.3 percent).
A majority of respondents no matter how much less they wanted to work were willing to accept a pay cut equal to the percentage reduction in their workload. (Though 15.1 percent of those looking for a 20 percent cut in billable hours would be willing to sacrifice 25 percent or 30 percent of their pay for less time at work.)
But partners and consultants say no to the idea, for the most part.
“I don’t think this would work if you want to have a very successful firm,” says Carl A. Leonard, former chairman of Morrison & Foerster. “The world has always been competitive, and it just gets more so.” Based in San Francisco, Leonard advises law firms on strategic planning and management issues.
“The ones who want to cut back, I don’t think they really in their hearts are willing to make the real trade off, which is being a kind of so so lawyer,” he adds.
Paul H. Irving, chairman of Manatt, Phelps & Phillips, acknowledges that many talented lawyers want to work fewer hours, and he says some in his firm have made such arrangements. But lowering billable hour requirements for all his associates, he says, would not work. The firm has a starting annual salary of $145,000 and a billable hours requirement of 2,000 hours a year.
“Our experience is that, for the most part, the people we recruit are looking for top compensation and a highly engaging work experience,” says Irving, who practices in Los Angeles. “I think the important thing firms need to be thinking about is the issue of choice to provide different opportunities and compensation arrangements.”
Some partner level lawyers wondered whether the survey responses reflected a generation gap. Of those responding to the survey, 68.5 percent indicated they were between the ages of 26 and 35, and 73.4 percent reported that they had been practicing law five years or fewer. Slightly more women than men answered the questions.
“Firms are struggling with the long term effect of associates not wanting to work as hard,” says Peter Zeughauser, a former general counsel who now advises law firms on increasing profits, as well as strengthening values and culture within the workplace.
“Partners will view this as further confirmation of the different affirmations of Generation Y,” he says, adding that incremental additional hours are where law firms make a profit, which is why billable hour requirements shouldn’t be lowered. Also, many studies indicate that partners bill more hours than associates, says the Newport Beach, Calif., lawyer.
Another concern was how clients would perceive law firms that lowered billable hour requirements.
Clients want lawyers to be available when they need them, Leonard says. If they aren’t which might happen if billable hour requirements were reduced clients could take their business elsewhere.
But if service levels were consistent, clients might not know, or care, that law firms dropped their billable hour requirements, particularly if associates understood they’d still have to work long hours when necessary, says Michael Roster, executive vice president of World Savings, a subsidiary of Wachovia Corp.
“I would welcome the arrangement very much because we clients know that as it gets toward the end of the year, some of these kids look at their total hours, realize they’re a hundred hours short, and their pencils get heavier,” says Roster, an Oakland, Calif., lawyer who was a member of the ABA’s Commission on Billable Hours. The group was established in 2000 to study and address how the profession’s focus on billable hours affected other parts of the practice, such as pro bono work, training and mentoring. Other general counsels expressed similar thoughts.
“We may be getting billed for stuff that we wouldn’t be billed for if there weren’t such aggressive targets for associates,” says Barry Nagler, senior vice president and general counsel of Hasbro Inc.
If outside counsel lowered billable requirements, he says, the arrangement would concern him only if it meant good associates were leaving law firms in search of better salaries.
“I actually think that change of this sort would be a very helpful retention tool,” says Nagler, a Pawtucket, R.I., lawyer who in 2006 chaired the Association of Corporate Counsel’s board of directors.
“From my standpoint, I would view this as a creative and enlightened way to reduce associate turnover and keep the best and brightest young lawyer,” he adds.
Susan C. Robinson, associate dean for career services at Stanford Law School, also thinks that lowering billable hour requirements could be a great recruiting tool, particularly for lateral associates.
She mentions “millennials” those who graduated from high school after 2000.
“The supposed characterization of the millennials is that they are not as willing to compromise life and family for work,” says Robinson, adding that if that characterization is accurate, law firms may have an even harder time retaining associates in the next decade.
Still, she suspects that partners, particularly successful ones, would be reluctant to cut associate time requirements. Rainmakers might leave for higher profits, taking their clients with them.
Roster also thinks lowering the billable requirements could be complicated because set standards have long been in place.
“It’s hard for law firms to gauge who is really good and who is committed without measuring it,” Roster says. He adds that even if firms did lower billable hour requirements, there would still be associates who billed more than 2,000 hours a year, and they would be deemed more partner worthy than those who billed less.
Billable hour requirements could be lowered without cutting partner profits, says Ida O. Abbott, if the change involved more planning and better management from law firms. A former partner at Heller Ehrman White and McAuliffe in San Francisco, Abbott now does consulting work, focusing on professional development, out of Oakland.
“I think you’d get greater efficiency, people wouldn’t be as exhausted, and they’d have a better ability to focus,” she says. “What we’re talking about here is cutting back to a normal workload. It’s not like you’re starting out at 40 hours a week and cutting down to 30.”