2 Executive Summary In May 2012, LexisNexis launched the Law Firm Billable Hours Survey to help quantify the gap between lawyer hours worked versus hours billed to clients. The survey attracted 499 responses from attorneys at firms of all sizes and from every state except Maine. Survey findings showed an overall gap of 33 percent between average hours worked by lawyers per day and the average number of hours they billed to clients. While the initial billable hour survey provided useful data, it also raised a number of important questions, such as: What types of activities eat up the time attorneys work but don t bill to clients? Do attorneys at larger firms more effectively bill hours than their colleagues at smaller firms, or is billing efficiency more related to practice area versus firm size? To answer these questions and more, we conducted a follow-up survey in July This more recent survey attracted more than double the respondents, with more than 1,000 attorneys weighing in. Below are findings and commentary from the two-part 2012 LexisNexis Non-Billable Hours Survey. Part One: How are Non-Billable Hours Being Spent? Key findings: 1. The Biggest Culprit: Practice Management and Administrative Tasks It might come as no surprise that more than 50 percent of the respondents ranked Administrative or Practice Management tasks (i.e. document management, filing, docketing, billing, accounting) as the number one or two activity eating up the majority of non-billable work hours. This finding was remarkably consistent across firms of all sizes and geographies. 2. Not Implicated: Networking, Client Development, or Client Relationship Development Nearly 70 percent of survey participants reported these client development activities have relatively little impact on their ability to focus on billable client work. 3. Other Interesting Findings A. According to the survey, lawyers at larger firms do indeed have higher average utilization rates than firms with one or two attorneys. More than twice as many law firms with 6 or more attorneys reported spending less than an hour a day on non-billable activities compared to the solo and two attorney firms. B. Ten percent of survey respondents claimed they couldn t accurately account for all their time as a result of their chaotic schedules (e.g. travel to and from court), coupled with a variety of personal distractions. Page 2
3 Part Two: Impact of Firm Size and Area of Practice Key Findings: 1. Which Practice Areas Spend the Most Time on Non-Billable Activities? A. More than 40 percent of Immigration law attorneys reported spending more than four (4+) hours a day on non-billable activities. Personal Injury attorneys come in a close second at 39 percent. 64 percent of respondents specializing in Immigration law (and 60 percent of respondents specializing in Personal Injury law) were from solo or two-attorney firms which suggests that area of practice may not be solely to blame for their poor showing. B. 50 percent of Criminal, Estate & Elder and Personal Injury attorneys (representing 16 percent of all survey respondents) reported spending an average of more than three (3+) hours per day on non-billable activities. C. Attorneys in four practice areas Immigration, Criminal, Estate & Elder and Personal Injury reported that the number one category of tasks that filled up their non-billable work hours was administrative and practice management activities. D. Networking, marketing and client development activities were listed by this group as their second-most common non-billable activity. Criminal and Personal Injury practices at law firms are notorious for being very competitive within their respective fields, so it s no surprise that these groups report spending more of their non-billable time on networking, marketing and client development as compared to their peers in other practice areas 2. Which Practice Areas Spend the Least Amount of Time on Non-Billable Activities? A. Insurance law attorneys get the gold star for billing effectiveness: 76% of them reported spending two or fewer hours on non-billable activities per day. B. Rounding out the top three but following further behind were Labor & Employment law and Litigation attorneys, who reported in at 54% and 51%, respectively. Page 3
4 About the Survey The LexisNexis Non-Billable Hour Survey asked six questions 1. Contact information 2. Size of firm 3. Primary area of practice 4. Secondary area of practice 5. Number of hours spent on non-billable activities per day 6. Rank order where non-billable time is spent (Scale of 1-5: 1 = lowest impact, 5 = highest impact) Networking, marketing, client development Free consultations to win new clients Writing off or writing down time in order to build, strengthen or retain clients Administrative or Practice Management tasks i.e. document management, filing, docketing, billing, accounting Other We solicited approximately 23,400 LexisNexis and non-lexisnexis customers via , plus posted online using Linkedin. We received 1,071 completed responses. Completing the survey qualified participants for a chance to win one of the following: Grand prize Apple ipad 2 2 each E-readers 3 each $100 Amex Gift card 4 each $25 Gourmet Coffee card Page 4
5 Number of Respondents by Size of Law Firm Figure ATTY 11% 20+ ATTY 3% 1 ATTY 35% 6-10 ATTY 15% 3-5 ATTY 23% 2 ATTY 13% Figure 2 Firm Size Responses % by Firm Size % % % % % % Total Responses: 1,071 Page 5
6 Participants by Area of Practice Figure 3 20% 1% 2% 2% 2% 2% 3% 3% 3% 5% 11% 5% 6% 10% 8% 8% 8% Figure 4 Firm Type Tax Law 1% Worker s Compensation Law 2% Immigration Law 2% Insurance Law 2% Corporate & Securities Law 2% Estate & Elder Law 3% Trust & Probate 3% Labor & Employment Law 3% Criminal Defense 5% Intellectual Property Law 5% Firm Type Bankruptcy Law 6% Other 8% Personal Injury 8% Real Estate Law 8% Family Law 10% General Practice 11% Litigation 20% Page 6
7 Respondents by Geographical Location Figure IL FL TX NY CA Top Responding States Figure 6 Top 5 Responding States: 1. California 2. New York 3. Texas 4. Florida 5. Illinois Page 7
8 Lowest Reported Non-Billable Hours by Area of Practice and Size of Firm Figure Non-Billable Hours Area of Practice Insurance Law Labor & Employment Law Bankruptcy Law Litigation General Practice Size of Firm Highest Reported Non-Billable Hours by Area of Practice and Size of Firm Figure Non-Billable Hours Area of Practice Tax Law Estate & Elder Law Personal Injury Criminal Defense Immigration Law * Note: Responses were not provided for all firm sizes. Size of Firm Page 8
9 Conclusions and Recommendations: While administrative and practice management tasks eat up the majority of non-billable hours worked, the 2012 ABA Legal Technology Survey Report showed that fewer than 35 percent of smaller law firms are using any sort of legal-specific practice management software to assist with these tasks. The Insurance law segment offers an interesting test-case for the benefits of technology on streamlining administrative and practice management tasks; attorneys who specialize in Insurance law are obligated to use specific software and systems to track and record client and matter information. These attorneys also report spending a much lower percentage of their time managing non-billable activities as compared to their peers in other practice areas. While there are no easy fixes, these best practices can help bridge the billing gap. Carefully tracking all hours worked is a critical first step to understanding how your time is spent, to improving overall efficiency, and to accurately recording and billing clients. First-rate, affordable software is available to help firms of all sizes manage case and matter details and capture, classify and record hours worked, so there s no excuse for using legal pads, napkins, or other analog methods. By embracing more effective and efficient tools for tracking and recording time worked, lawyers can help improve their utilization rates and make more informed, proactive decisions about how they allocate time to practice management, business development and other critical though non-billable tasks. Page 9
10 About LexisNexis LexisNexis Legal & Professional (www.lexisnexis.com) is a leading global provider of content and technology solutions that enable professionals in legal, corporate, tax, government, academic and non-profit organizations to make informed decisions and achieve better business outcomes. As a digital pioneer, the company was first to bring legal and business information online with it Lexis and Nexis services. Today, LexisNexis harnesses leading-edge technology and world-class content, to help professionals work in faster, easier and more effective ways. Through close collaboration with it customers, the company ensures organizations can leverage its solutions to reduce risk, improve productivity, increase profitability and grow their business. Part of Reed Elsevier, LexisNexis Legal & Professional serves customers in more than 100 countries with 10,000 employees worldwide. LexisNexis helps professionals at law firms and legal departments of all sizes manage the business element of their practice with innovative software and mobile solutions for customer relationship management, competitive intelligence gathering and assessment, time and billing management, matter management, client analysis, legal holds and more. LexisNexis and the Knowledge Burst Logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Interaction is a registered trademark of LexisNexis, a division of Reed Elsevier Inc. Microsoft and Outlook are registered trademarks of Microsoft Corporation. Apple and ipad are registered trademarks of Apple, Inc. Amex is a registered trademark of American Express Company. Other products or services may be trademarks of their respective companies LexisNexis. All Rights Reserved.
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