The law of averages states that, over a long period of time involving many occurrences of an event, the probable outcomes of that event will eventually “even out.” Let’s take this principle and apply it to attorney billing practices.
We all know that, as human beings, we don’t always do things the most efficiently. If I got up and made coffee every morning for ten years, and I timed myself doing it, it would not take me exactly the same amount of time each day. Instead, it would vary. On most days, I’d probably be sleepy and take my time finding the filter, spooning out the coffee, etc. But there would be other days when I’m hyper awake, especially on mornings before a court appearance. On those days, I’d be whirling around the kitchen like a dervish, and my coffee-making time would be cut in half.
Similarly, there’s no exact science to how much time a project is supposed to take. I love it when a partner tells an associate, “You should be able to finish this legal research in x hours.” Really? Does it matter whether the associate is fully rested or hasn’t slept more than two hours a night for the past week? Does it matter whether the case law for this particular issue is readily available or instead an obscure area where only five court opinions exist nationwide? You can bet it matters.
Now, it’s not a bad thing for partners to set time frames. In fact, partner should do so, and if they don’t, as an associate, you should encourage them to give you an estimate. But the right question to ask is not, “How long should this project take me?” but rather “Has the client expressed a budget for this particular project?” For most work, there’s always more you can do, or less–and what really matters to the firm is whether the client is willing to pay for it. So when a partner tells you that you should do something in x hours, what he really means is that he has authorization from the client for you to spend x hours on the project. If you go over that time limit, there will be fireworks.
Anyway, you’re probably wondering what this has to do with the law of averages. Well, knowing that there is, and can be, no definitive time limit on any individual task, the question is this: as an associate, do you simply bill your time “as is” or do you rely on the law of averages and bill what you believe your average time is?
“As is” billing is easy: you calculate the amount of actual time you spend on the project and bill it. If you were terribly inefficient because you couldn’t focus that day, or you ran into unexpected difficulties, too bad for the client. They get stuck with a big bill, or the partner ends up writing off your time (and lecturing you for being inefficient). If you were crazy alert that day, just “in the zone” for some reason (maybe a hot date that night to look forward to), you end up completing a project twice as fast as normal. Client benefits from your super and unexpected efficiency; partners may feel the firm “loses” because you underbilled. You may then get another type of lecture from that partner about “underbilling.” Trust me, this actually does happen.
So, you probably can see the disadvantages of “as is” billing. You overbill, and the partner yells at you. You underbill, and the partner yells at you. Being too efficient or inefficient makes you stand out like a sore thumb, and that’s not good in a law firm business environment where you are just one soldier in an army of associates.
This leads us to the “law of averages” mentality to billing. You reason to yourself: I don’t like getting yelled at. Maybe I should just write off my own time when I’m inefficient, and pad my hours when I’m really efficient. No one will know the difference, and I’ll just blend in like the average Joe / Jane. It all averages out anyway, right?
Conceptually, this method could work, but in practice, I see this being a really dangerous slippery slope. How do you judge what your “average” really is? How do you judge your “average” vs. the general associate “average”? Almost all associates would probably believe that, on average, they are smarter and more efficient than other associates. As a result, we start padding the hours to account for this perceived efficiency. But, statistically, that simply can’t be the case. What I’m saying is that our natural beliefs in ourselves (a good thing) may lead to a skewed sense of averages for billing purposes (a bad thing).
The irony of all this is that the “as is” method does follow the law of averages, but it does so in a natural way. On average, over time, your efficiencies and inefficiencies will average out. The problem is that clients review bills for glaring inefficiencies, and partners review bills for glaring efficiencies and inefficiencies. And when you review bills at the microscopic level, the law of averages doesn’t work. Instead, if clients and partners understood this law–ultimately understood that at the end of the day, the lawyer behind the bill is a human being who is both efficient and inefficient–we wouldn’t have this problem. Clients wouldn’t yell at partners, who wouldn’t yell at associates, who wouldn’t be tempted to take the law of averages into their own hands.
I agree with a lot of what you say here, but you don’t mention that the law of averages also doesn’t work because some people are naturally more efficient than others. Should the ones who are more efficient always pad their hours, while the ones who are slow always write off their time? Of course, the whole billable system is screwed up because it doesn’t encourage efficiency. Instead, your bonus is based on how many hours you worked, not how much quality work you actually did.
TNG – Thanks for the comment. I agree with you that the billable system encourages hours, not efficiency. There are other external forces that contribute to efficiency, such as court deadlines, etc. I’ll blog about this in future posts. To answer your question, those who are hyper-efficient should not pad their hours. It’s obviously unethical to do so. As for writing off your own time if you are either slow or perceived to be slow, that’s a tough one. On the one hand, you can use that to shield yourself from criticism that you are inefficient. On the other hand, you may invite criticism for having low hours. My best advice is to figure out how to become more efficient during the day.
I agree that the law of averages can be a slippery slope especially given statistically speaking the average person think’s they’re above average!
However, consider the subjective nature of what a partner or client may decide is the “right” amount of time for a particular task – it’s no less subjective than our own estimation of what the “average” amount of time that should be spent. Granted, the partners will be more experienced at making this estimation, but the associate has much more information as to what the particular situation is.
JD – Good point. It brings up an interesting question: who really is in the best position to estimate time? The partner, with far more experience in these matters? or the associate, who, like you said, has more of the “trench” information and is more familiar with the junior-level tasks? The partner may have more overall experience, but when was the last time she actually did associate-level work? (Probably a long time ago, if she is a senior partner.) I’ll blog about this issue in a future post. Thanks for the comment.