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Archive for the ‘Billable hours’ Category

The art of rounding

Rounding is a concept that we learn in math class at some point in elementary school, probably right after we learn about decimals.  If your teacher gives you a decimal, like 5.8, and tells you to round to the nearest whole number, you learn that the right answer is 6, not 5.  The only confusion is when you see a number like 5.5.  The “.5” is exactly in the middle – do you round up or round down?  Most teachers will tell you that you always round up, so 5.5 is rounded up to 6, but 5.4 is rounded down to 5.  I did have one creative teacher who told us that if it’s a Monday, Wednesday, or Friday, we round up; if it’s a Tuesday, Thursday, or Saturday, you round down; and if it’s a Sunday, you get to choose.

Lawyers have a reputation for not being good at math, but they certainly know how to round billable hours so that it favors them.  Since billable hours are calculated based on 6 minute, or 0.1 hour increments, lawyers are faced with rounding questions when they bill, for example, 15 minutes or 32 minutes.

I’ve heard a lot of stories about how lawyers round their time, but almost always, they are rounding up.  With the example of 15 minutes, it’s not a hard call.  Even your math teacher from elementary school will say, you can round that up to 0.3 hours.  But what about the 32 minute example?  32 minutes is closed to 0.5 hours than 0.6 hours, but what partner would want you to “write off” those extra two minutes?  The rationale is that if you bill even a minute over the last increment, you get to round up to the next increment.  Using this method, if you billed 31 minutes, you get to round up to 0.6.  If you spent a minute reading a client e-mail, you get to bill 0.1 hours for it.

But things get even more complicated.  Do you get to round up for each individual task you are performing for a client, or just round up at the end of the day?  For example, if I spend 3 minutes reading client e-mail, 15 minutes drafting a letter, and 3 hours and 40 minutes preparing a legal brief, do I add all the minutes up first and then round up, or do I round up first and then add the minutes up?  Using the first method, my total minutes add up to 3 hours and 58 minutes, which rounds to 4.0 billable hours.  Using the second method, I round 3 minutes up to 0.1 hours, 15 minutes to 0.3 hours, and 3 hours and 40 minutes to 3.7 billable hours.  The total is 4.1 hours.

In this example, the difference is only 0.1 hours, but that difference expands once you increase the numerous of tasks per day for one client.  Our example used only three tasks, but if you performed 15 or 20 different tasks during that day, the difference could be huge.

Now, you are probably thinking: the second method seems unfair to the client.  Rounding up for each individual task makes no sense if the client is being billed for the day as a whole.  But what if the client insists on line-item billing?

Line-item billing differs from block billing.  In block billing, you describe all the tasks that you did in one day for one particular client matter, and then place a number next to it representing the total hours you spent on all tasks.  In line-item billing, you assign a number next to each individual task representing the amount of time spent on each task.

Some clients insist on line-item billing because they believe that it’s easier for lawyers to fudge numbers if they can lump all the work together into one number.  It’s also impossible for clients to look at a bill and figure out how much time was spent in a meeting versus preparing a brief.  As a result, it’s difficult for clients to determine whether their lawyers are being efficient, and whether there are areas where they can cut down on wasteful time.

The problem, however, is that line-item billing may also tempt some lawyers to round up for each individual task, as we see in the example above.  Some lawyers may be guided by an inner moral compass, and approach line-item rounding by rounding up and rounding down equally, so that everything balances out in the end; others may not.

How do you approach the rounding issues in your daily practice?  Do you round up, round down, vary it?  Do you change your rounding practices depending on whether you are block billing or line-item billing?  Post a comment and let me know!

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Today’s post is dedicated to all the employees of the world who have jobs with rules that don’t make sense.  Let me give you an example.  I was at Disney World a few years ago.  Yes, I am an adult; no, I don’t have kids; and yes, Disney World is far better than Disneyland.  My wife had only been to Disneyland, and I told her, Disney World is very different.  She didn’t believe me until we got there.  Oh, by the way, we did feel sorry for all those young couples with babies and small children spending the majority of their day changing diapers, dealing with temper tantrums, or waiting three hours in line for a chance to take a photograph with Mickey.  We, on the other hand, ran around the park like maniacs and managed to go on ride after ride after ride.  That’s why it makes sense to go before having kids.

Anyway, I digress.  At Disney World, there are official photographers everywhere.  If you are a newbie, they give you a photocard, which you can then present to any Disney photographer within the kingdom.  After they take your photo, the card stores the data.  It basically works like a flash drive.  If you want to preview or purchase any of the photos, you can take your photocard to a kiosk (conveniently located near the exits).  So that’s what we did.  This is where things got interesting.

At the kiosk, there were three special machines that allow you to insert your photocard and view all the photos on a screen.  You can then select the ones you want and buy them.  Here was the problem: three machines, but only two Disney employees.  Worse, only one of the two was actually involved in “running” the machine.  In other words, only one of the three machines was actually being used.

There were only two families ahead of us in line, but the family at the one operational machine took forever.  They must have had hundreds of photos taken, and were debating the pros and cons of each individual photo.  I felt like Congress was in session.

A huge line was forming behind us.  I calculated that, at the current rate, the turnover rate would be 15 to 30 minutes per family.  Ridiculous.  I sprung into action.

Me (addressing the employee #1, next to the operational machine): I was wondering if we could use the other machines.

Employee #1: I’m sorry, sir, but we can’t do that.

Me:  Why not?

Employee #1: I can only operate one machine at a time.

Me (thinking to myself): Is this guy for real?

Me (talking to Employee #1): Why is that?  Doesn’t the machine basically run itself as long as someone swipes their photocard?

Employee #1: Our rules state that only one employee can operate one machine at a time.

Me: How about the other person? (pointing at Employee #2)

Employee #2: I’m sorry, I’m the cashier.  I am not allowed to run the machines.

Me: Let me get this straight.  You are two perfectly able employees and there are three perfectly operational machines at this kiosk.  Only one machine is being used.  Neither one of you is doing anything besides watching the family look at all their photos.  Meanwhile, there are 15 families in line waiting.

Employee #1: Sir, these are the rules.  I’m sorry.

Unbelievable.  I’m sure Disney created those rules for a legitimate reason.  They don’t want employees multi-tasking, they want to keep each person’s job simple to prevent the possibility of mistakes, or perhaps they want the big lines forming to generate buzz.  Who knows?  I’ll give Disney the benefit of the doubt that there’s reason to the madness.  That said, it’s clear that sometimes, rules end up having unintended consequences even though they were designed to solve other perceived problems.  In this case, the unintended consequence could involve pissed off customers who don’t end up buying photos.

At this point, you may be wondering what any of this has to do with law.  Well, today’s post is dedicated to another rule that, like the Disney rule, carries unintended consequences.

Some clients have a rule that says that you can’t bill more than 10 hours a day to their case.  The idea is that if you bill more than 10 hours to their case, you can’t possibly be efficient and they just don’t want you to do it.  Clients believe this somehow saves them money.  The implicit message from these clients is this: all projects can be done under 10 hours.

But what do those clients say when I look at my watch the night before we file a major MSJ, and I’ve already put in my 10 billable hours and the MSJ is not close to being ready for filing?  Informing a client, “sorry, but due to your 10 hour rule, I couldn’t continue working so we’re filing an incomplete MSJ” is not going to fly.  So, of course, you break the rule and bill whatever you need to in order to get that MSJ in tip-top form, even if it means billing 17 hours that day.  But in order not to piss off the client, you just break the time into two blocks billed to separate days so they don’t see the dreaded two-digit number on the bills.  If you are billing successive days, or even weeks, of high hour days, sometimes it takes a while to “credit” the overflow time that you spent.  Take a look at a bill at some point in time.  If you see a disproportionate number of 9.9 or 9.8 hour days for a client that imposes the 10 hour max rule, you know what’s really going on.

How legit is this practice?  Isn’t this “creative” billing?  Well, it’s creative, but it’s not creative.  Think of it this way: you’re billing time that you actually worked.  Certainly, partners would never want you to write off time simply to stay under 10 hours if you legitimately worked more than that on a case.  In fact, the 10 hour max rule flies in the face of another rule at Biglaw: don’t write off your own time.

Here’s another way of looking at it.

Rule #1: Client says no attorney should work more than 10 hours per day on my case.

Rule #2: Associate is not permitted to write off any time.

Rule #3: It’s probably malpractice (and certainly bad practice) to file incomplete court papers because you weren’t allowed to spend more time on it, per Rule #1.

These three rules are sometimes in conflict with each other.  So, as an associate, do you…

Break Rule #1 and apportion your legitimate billable time to another day or days?

Break Rule #2 and incur the wrath of a partner, and lose credit for legitimate billable hours that go toward your bonus?

Break Rule #3 and risk committing malpractice, not to mention incurring the wrath of both the client and the partner for poor work product?

I think you know the answer to this one.

As for the end of the Disney story, I marched up to one of the other machines, turned it on, swiped my photocard, and bought my photo.  The next person in line followed my lead and used the third machine.  As I departed, I told the Disney employee, “You may have to follow Disney’s rules, but I’m just the customer.  And Disney knows the customer is always right.”

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I recently went to see a wonderful production of Romeo & Juliet.  During the famous balcony scene, Juliet ponders, “What’s in a name?”  As she discovers for herself, “it is nor hand, nor foot, nor arm, nor face, nor any other part belonging to a man.”

This soliloquy prompted me to wonder, “What’s in a day?”  Precisely how do we define the billable day?  (No, I wasn’t thinking this at the exact moment that Juliet fell for her star-crossed lover, in case you were wondering.)

The ordinary dictionary definition of a day is simply the period of light spanning sunrise and sunset.  But you could also be referring to a “solar day,” which would be the 24-hour period that it takes the earth to rotate once on its axis relative to our sun; or perhaps a “civil day,” which is measured from midnight to midnight; or even an “astronomical day,” which is from noon to noon.

In everyday jargon, the word “day” is used even more loosely.  Example:  “My day really sucked” doesn’t usually mean that your entire day sucked but that some event or series of events during your waking hours sucked.  It probably felt like the whole day sucked as a result, but… anyway, you get the point.  There’s no one definition of the word “day.”

How, then, does one calculate the “billable day”?  Is it an ordinary day, or a solar day, a civil day, or an astronomical day?  Is it simply based on the time you step into the office to the time you depart?  What about if you work at home after dinner and go past midnight?  What if you are traveling across time zones?  Or, even more complicated, across the international date line?  How do you account for the fact that you lose a day traveling from New York to Tokyo, for example?

There doesn’t appear to be a clear consensus.  Some lawyers use the “civil day” definition of midnight to midnight.  Others prefer to “call it a day” when they finally go to sleep.  For them, the end of a work day and the beginning of the next may be the two hours between 5 a.m. and 7 a.m. when they take a nap.  Sometimes, you are artificially required to cut off a “billable day” based on end-of-the-year accounting requirements by various clients.  In these instances, a partner may tell you to enter all your time for the current day, and bill everything else to the following day because bills have to get to a client by a certain deadline.

It appears that Shakespeare had it right all along: The billable day is as much an artificial construct with arbitrary rules as a name that is neither hand nor foot nor any other part belonging to a man.

So, how do you define a “billable day”?  Which method do you employ?  Or is it a mix, depending on circumstances?  I’d love to hear your thoughts and comments, as always!

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For those who have been following the posts from this week, by now you have learned how to “save” your vacation days if your firm has a 0.1 billable day policy, and the reasons why I believe this is actually a fair policy to the firm and to associates.

But, you ask, what if my firm forces me to account for seven hours per day?  I can’t simply bill 0.1 billable hours and then get a tan while sipping a Sex on the Beach.

No, you can’t.  But the good news is this: there are other, creative things you can do.

The “working vacation” is a great way to mix business and pleasure, and save those precious vacation days.  When you are buried up to your ears in work, and sick of spending 12+ hours a day in the office, why not change your setting?  If you are in LA, go work in your firm’s NY office.  If your firm is international, even better.  Take a trip to Paris, work out of the Paris office during the day, and enjoy your evenings off.  The human mind works in funny ways, but you may have noticed that when you are working really hard over an extended period of time, even one evening off seems like a huge deal.  Conversely, if you’ve had a long vacation, even working a few hours becomes tiring.  Learn to channel the adaptive nature of your brain and take advantage of it.  Trust me, even having an hour to eat dinner at a fine restaurant in a foreign location feels like a vacation when you’ve been toiling away and eating Chinese takeout every night for two straight months.

Even better when you can make up a reason why you need to work out of the foreign office — your case is staffed there, you need to meet with a certain partner in that office, you have to meet a witness there.  The best part about that is that usually you can get part or all of your business expenses comped.  Not only do you not use vacation hours, you also don’t have to pay for it.

What else?  How about distribution of time on your time entry from one day to another?  Let’s say you worked from 9 a.m. this morning until 2 a.m. the next day.  The reason you worked so hard was because you needed to finish up a lot of work before you go on vacation tomorrow.  Ideally, you’d like not to use your vacation time but your firm doesn’t allow the 0.1 hour policy, so you have to account for 7 hours somehow.

Assuming that out of the 17 hours between 9 a.m. and 2 a.m., you billed 15 hours and spent 2 hours doing other stuff.  How can you apportion your time?  Here are the possibilities:

Option #1:  12/4/09 — 15 hours doing W, X, Y, and Z

12/5/09 — 7 hours billed to vacation

In Option #1, all your billable time is billed to one day.  It is technically one day in the sense that you were in the office the whole day, and you are ignoring the fact that at midnight, you have now moved into the next day.  This option is least attractive because you end up billing 7 hours to vacation.  So what can we do?

Option #2: 12/4/09 — 13 hours doing W, X and Y

12/5/09 — 2 hours doing Z; 5 hours billed to vacation

Option #2 is better because it moves the two hours after midnight to the following day, where it legitimately belongs.  This option is more attractive because you have now “saved” two vacation hours.  But can we do better?

Option #3: 12/4/09 — 8 hours doing W and X

12/5/09 — 7 hours doing Y and Z

Option #3 is the best choice because now, you’ve accounted for 7 billable hours for the next day, and used NO vacation time for it.  You ask, “How can this be justified?”  Well, the two hours after midnight are easy because it’s technically another day.  No argument there.  What about the other five hours?  This depends on what you consider a work day.  Does the work day end for billing purposes when you go home and go to sleep (Option #1), at the stroke of midnight (Option #2), or at the end of COB for the firm staff and for the courts (Option #3)?  As far as I know, there are no official rules governing when one billable day ends and when the next begins.  If you calculate your billable time based on COB, the time you worked after-hours can “count” for the following day.

Congratulations!  Even without the 0.1 hour policy, you have now found ways to save vacation time.  Next week, we’ll continue this topic with discussion about apportioning billable hours, the client “10 hour max rule,” rounding, and other billable madness.  For now, start planning your next “work vacation” and save up those vacation hours!

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Happy Halloween!  To celebrate the day of ghosts and ghouls and haunted houses, I’ll share a short and spooky story about billable hours.  I heard this story from another attorney, to whom this incident actually happened.  Technically, that makes it hearsay (any exceptions?  excitable utterance? voice emanating behind the walls?).  Anyway, I digress…

This particular attorney (we’ll just call him Mr. Ghost) had an assistant (let’s call her Pumpkin).  Mr. Ghost was a partner at a large law firm, and Pumpkin used to enter his billable time for him.  This in and of itself was not unusual; after all, the vast majority of partners and even associates have their secretaries enter billable time.  What was unusual, however, was that when his monthly totals came in, they always looked low.  What felt like a 200 billable hour month was recorded as 170.  A month that he swore he billed at least 250 hours was recorded at around 225.  It felt low, but Mr. Ghost was too busy to look into it.  This unusual activity occurred for many months.

Finally, during one month when the billable total was WAY low, Mr. Ghost spooked and decided to look into the matter.  What he discovered was shocking.  Pumpkin, who was not very good with math, had been taking his handwritten time logs (one hour 30 minutes here, three hours 50 minutes there) and converting them to the decimal system that the time entry software would recognize.  But she was doing it all wrong.  One hour 30 minutes became 1.3 hours; three hours 50 minutes became 3.5 hours.  Mr. Ghost just lost 32 minutes of billable time from Pumpkin’s improper conversions!

As Jim Carrey in The Mask would say: “Spoooky!”

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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.

 

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Over the years, I have talked to numerous attorneys, both partners and associates, about how they actually bill their time. I’ve also observed the actual practices of these attorneys. Today, I’m going to share with you techniques that other attorneys have employed to increase their billable time. In particular, we will discuss positive vs. negative accrual methods of calculating billable hours.

As an entry-level associate, you probably bill your time using a positive accrual method. By that, I mean that you start the timer every time you sit down to work for a block of time. Throughout the day, you accumulate blocks of time based on the work you do, and when you add it up, that total becomes your billable hours for the day. Let’s say you were physically in the office for 13 hours. Throughout the day, you worked on a number of different cases. 0.3 hours for a client call, 1.2 hours for a telephonic meet and confer with opposing counsel, 3.4 hours revising a legal brief, et cetera. Yet, somehow at the end of the day, you add up all the 0.1s and the 0.2s and they don’t amount to much. Perhaps, at the end of your 13 hour day, your billables only add up to 7.8 hours. It doesn’t seem to reflect how hard you actually worked. Where did all the lost time go?

Hence, the negative accrual method. This is a system of calculating the total number of hours you are actually in the office. If you get in to work at 9 a.m. and leave at 10 p.m., your total hours is 13. Now, instead of calculating the blocks of time you actually worked, instead you calculate the blocks of time that you did not work. So you subtract an hour for lunch, half an hour for doing personal e-mail, another 0.3 hours for talking to your significant other or spouse on the phone. That’s 1.8 hours total. 13 minus 1.8 is 11.2. All of a sudden, your billables have just increased significantly!

Theoretically, the positive and negative accrual methods should result in the same billable total. In practice, they never do. The reason for this is that time gets “lost” every time you transition from one matter to another. The reality is that an attorney is rarely working on one case for the whole day. Sometimes that happens, and it makes it really easy to bill for the day. But when you are working on a brief for one client, and another client calls, and then a partner steps into your office to talk about a third case, and then you take a call from co-counsel for a fourth case… well, you see how things can get complex pretty quickly. Every time you transition from one case to another, it’s difficult to keep track of that time.

The other reason that the positive and negative accrual methods result in different totals has to do with a lot of “tick tack” time that is not calculated in the positive accrual method but is “absorbed” by the negative accrual method. Bathroom time, chatting with your secretary for 3 minutes about her kid, talking with another associate for 5 minutes about the game last night–all this time adds up quickly. Technically, if you are a strict follower of the positive accrual method, your stopwatch is stopped each time one of these tick tack events occurs. But when you apply the negative accrual method, some or all of these tiny tick tacks simply aren’t calculated or subtracted from the overall day.

Which method is more accurate? more ethical? Is the negative accrual method already “built in” to the billable rates? Is it odd that there aren’t more specific rules governing how attorneys bill their time, even though the whole business is structured around, and dependant upon, the billable hour?

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