LexisNexis Law Firm Billable Hours Survey Report

LexisNexis Law Firm Billable Hours Survey Report

Executive Summary Despite the critical impact on a firm s bottom line, it remains challenging for some attorneys and legal staff to efficiently capture and bill their time, just how much was a question to answer. LexisNexis conducted a survey in late May with the objective to gain insight of the gap between hours worked and billed by attorneys and legal professionals. Does the ability to bill more of the time worked vary by state and size of firm? With about 500 survey respondents, we analyzed and identified a number of key findings. Key Findings 1. There was a 54% difference between the highest and lowest reported hours billed compared to hours worked by state, with Delaware reporting 94% and Oregon at 40% of time billed that was worked. 2. 39% of time worked is not being billed in the solo and two-attorney firm segment. 3. 92% of time worked is being billed in the 11-20 attorney segment. This segment worked.1 hours more than the 20+ attorney segment and billed on average 1.8 hours more per day or 19%. 4. The size of law firm was not the silver bullet for effectively billing time that is worked. The top 25% of respondents who reported billing their time most efficiently was distributed fairly evenly by size of firm, except for the 20+ attorney firms which had a much smaller representation. 5. The average number of hours worked in a day were 8.9 and average hours billed = 6.9. 6. Looking at the survey results by size of law firm excluding the least and most effective billing segment, the remaining law firm segments averaged between 24-26% gaps of hours worked and hours billed. For the full topline report visit http://mattersofpractice.com/billable-hours-survey/ About the Survey The LexisNexis Law Firm Billable Hours Survey was conducted by the LexisNexis Law Firm Practice Management business between May 15 and 25, 2012, among legal professional in the United States who track their billable hours. The intent of the survey was to learn more about the average number of hours worked and billed by legal professionals. More than 8,000 legal professionals were invited to participate either via email or via LinkedIn. We received 499 respondents to the survey, which consisted of four questions to identify who they are, the size of their firm, average hours worked per day, and average hours billed per day. We excluded 39 respondents from some of the data, as they are categorized as small legal department or firms that bill only by Alternative Fee Arrangements (AFA). The following pages provide detailed findings. Page 2

Number of Respondents by Size of Law Firm Respondents were asked to identify the size of their firm so that their responses could be segmented. Firms of varying size are represented fairly evenly, with the 3-5 attorney firms representing the largest segment (27%). Figure 1 20+ ATTY 37 Legal Dept. AFA Firms 39 1 ATTY 71 2 ATTY 53 11-20 ATTY 85 6-10 ATTY 83 3-5 ATTY 131 Figure 2 Firm Size Responses % by Firm Size 1 71 15.83% 2 53 12.83% 3-5 131 27.66% 6-10 83 18.04% 11-20 85 17.64% 20+ 37 8.02% Legal Dept. or AFA Firm 39 7.82% Total Responses: 499 Page 3

Respondents by Geographical Location All states except Maine were represented in the survey, 14 states had more than 10 survey participants with California leading with 67 respondents. Ninety-five respondents or 19% of respondents did not provide state data. Figure 3 70 60 67 50 40 30 20 10 11 11 11 12 12 13 13 14 18 19 22 23 23 0 NV OH WA NC GA MA TN MI CO PA NY IL TX CA States with more than 10 respondents Page 4

States Most Effective at Billing Their Time Worked Location seems to have an impact on how effective attorneys are at billing their time, as shown in Figure 4. In analyzing data by billing efficiency by state, Delaware reported the highest billing efficiency at just over 94%, while Oregon reported the least efficient billing at 41%. The least efficient 25% of the respondents are prevalent in the mid-eastern states (dark blue). Figure 4 Figure 5 Legend Billed > 40% but < 63% Billed > 63% but < 70% Billed > 70% but < 76% Billed > 76% but < 100% States Ranked by % of Hours Billed versus Hours Worked OR 40.63% VT 63.16% NC 70.05% AR 76.19% AL 49.55% IA 63.70% PA 70.27% MT 76.67% KY 51.14% WI 63.72% TX 70.48% CO 77.07% VA 5 1.55% GA 63.93% CA 71.02% NJ 80.86% SD 55.26% AK 64.71% CT 71.88% NY 80.92% OK 56.18% KS 65.35% DC 72.97% UT 81.13% MA 57.15% FL 66.31% AZ 73.81% LA 82.76% MO 59.26% MD 66.36% NM 74.18% WY 83.33% IN 59.30% ND 66.67% NH 74.29% RI 83.78% MN 59.39% NE 66.67% HI 75.00% IL 85.74% TN 60.66% MI 67.12% WV 75.00% MS 88.55% OH 60.96% NV 68.90% ID 75.83% DE 94.44% SC 63.06% WA 69.44% Page 5

Gap of Time Worked vs. Billed by Segment In segmenting the firms by size, solo and two-attorney firms were the least efficient segments, billing just 60% of their time. As firms grow, billing efficiency rises, with the 11-20 attorney firms having the best efficiency at 92%. Figure 6 100 80 92% Percentage 60 60% 60% 76% 74% 73% 78% 40 20 0 1 2 3-5 6-10 11-20 20+ Total Number of Attorneys % Hours Worked - Billed % Hours Worked - Not Billed Page 6

Conclusion The billable hour is still the critical lever for how many firms can affect profitability. Just a few more minutes per day per attorney can increase revenue by tens of thousands of dollars. But a gap, can lead to lost revenue and lower profitability. The LexisNexis Billable Hour Survey only exposes the tip of the iceberg and the plan to drilldown further with other surveys is around the corner. Our hypothesis is there are other reasons that contribute to this gap. Not utilizing and/or leveraging staff for non-billable functions Inefficient timekeeping, managing and billing client work Goodwill issues, i.e.: Lawyers spend some of their time engaged in networking, business development and other non-billable activities -- particularly when business is slow. Some lawyers believe they cannot bill all clients for all hours worked so they purposely discount the actual number of hours worked in order to keep clients happy. At the end of the day, few attorneys can bill for every minute worked. However, by looking closely at how time is spent working, attorneys can begin to bridge the gap of hours works versus hours billed. Page 7

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. Other products or services may be trademarks of their respective companies. 2012 LexisNexis. All Rights Reserved.