Lawyer time recording: three possible futures

In a recent article, I traced the history of granular time recording in law firms. ‘GTR’ for short. It involves capturing a record of activity down to the hour and minute level.

GTR in legal work began life a century ago with reasonable intentions but is widely thought to contribute to over-working — ‘You get what you measure.’ This has obvious adverse consequences for lawyers’ clients (over-complication, priceyness) and some more insidious ones for lawyers themselves.

There is also a transaction cost — the time spent entering and describing time and (in some cases) analysing and arguing over it.

However, the big question remains — is there a better alternative to status quo GTR? One which can meet the relevant needs with fewer unhelpful side-effects.

This article discusses three options.

1) Automate GTR to the max

2) Automate GTR much more cautiously

3) Zoom out: make time recording less granular

Before assessing these, let’s look a little more closely at the needs which GTR seeks to meet.

The underlying needs

With the onset in recent centuries of more complex products reliant on inputs from many people, there has inevitably been a desire to see and understand individual contribution with a view to recognising and improving it; and also (let’s be realistic) in an effort to reduce slacking.

Several answers have been attempted over the centuries, but they tend to boil down to

• measuring useful outputs at a particular stage of a process
• making visible what people are doing, i.e. their inputs

The first is obviously more useful but can be hard because of the difficulty of defining and measuring quality. The temptation is therefore to focus on the second.

‘How can we see what people are doing?’

Panopticon drawing by Samuel and Jeremy Bentham (1791). This is a penal use case example.

An early engineering effort to improve input visibility more efficiently than by employing large numbers of floor supervisors was the 1780s construction of a prototype Panopticon building by the English naval engineer Samuel Bentham to help supervise a shipbuilding project for Potemkin on the Dnieper. The notion became more famous later when his older brother Jeremy promoted it in England for penal use cases.

Panopticons proved to be a dead end in the context of physical manufacture. The idea manages to combine trust-harming surveillance with gameability (‘Look busy!’) and anti-efficiency incentives. Instead, nineteenth century (and subsequent) industrialists became better at observing and measuring the quality as well as quantity of outputs more closely.

That said, factories typically also maintained supervisors, assisted by time clocks to measure the basic input of presence on site or, in some cases, the time taken to complete a particular task (time clocks are a technology I’ve only come across rarely in law firms, though one large firm used them when I worked in Hong Kong and apparently a few others have tried it).

From Gattaca — go see it if you don’t get the relevance :-)

‘But we’re different…’

In the field of legal work, the nature of outputs presents more of a challenge than in manufacturing. The problem is not so much the intangible nature — that’s not an issue if the scope can be made clear and the process and time required can be highly defined. The problem, rather, is the need to deal with the uncertainty as to the level of effort imposed by the client’s particular situation and, sometimes, by the actions of an unpredictable counterparty or authority figure.

The definition of quality and the cost / benefit trade off in bespoke legal work can also be debatable — ‘quality’ in legal work is sometimes a question of reducing hard-to-define risk. And defining scope and value in bespoke legal work both take time, i.e. impose a transaction cost of their own.

The narrative that much legal work is inherently bespoke and unpredictable has, of course, been challenged. The challenges are, in my view, justified up to a point. But they’re also often exaggerated. However, I’m not proposing to go deeper into that in this article.

Enter GTR

My earlier article summarised the history of GTR. The major reasons for adopting it boil down, I suggest, to three.

1. Understanding what people you’re paying for are doing — with various motivations, such as challenging inefficiency or reassessing where to spend money because the value (or risk averted) simply isn’t worth the cost.
2. Pricing, in the absence of a better, mutually acceptable way to determine value which does not involve undue argument (given the subjectivity of value), unacceptable transaction costs or (for the vendor) the risk of failing to cover time-based costs such as salaries, rent.
3. Assessing relative contribution within an organisation, ideally as part of a balanced scorecard.

In modern times, further justifications are sometimes given (e.g. managing yourself more effectively, having a defensible record of what was done if sued) but I believe the three points just outlined are the main drivers.

Moreover, although point 1 seems to have been the original motivation behind the introduction of GTR in 1920, it has often proved more aspirational than real. In contrast, points 2 and 3 are very real indeed. These are the points which account for its widespread adoption.

Problematic side-effects

‘We shape our tools and thereafter they shape us’

Culkin / McLuhan, 1967.

Marshall McLuhan with tools

The problem with GTR is that, in practice, it seems to increase risks such as

1. Rewarding inefficiency and disincentivising investment in efficiency. GTR, in short, gets in the way of necessity becoming the mother of invention.
2. Harm to individual health by encouraging over-working.
3. Devaluation of contributions which cannot be immediately monetised.
4. Exacerbation of emotions such as distrust (‘be ready to explain how you’ve been spending your time’), fear (‘will I make my billables target?’) and futility (‘I’m just a billing machine’) — with all that flows from this. Alienation, in short.
5. Significant transaction costs, i.e. time spent reporting, and in some cases analysing, how time was spent. There is a lawyer in-joke about wanting a time code for ‘time spent recording time’.

That’s all very well, but…

the question is, what better method is there?

Reginald Heber Smith, 1940 — see my previous article for context.

There has for several years now been great interest in the legal world in addressing problem 5 (transaction cost) with technology to ‘passively’ (that is, automatically) capture activity. There is also a theory that passive capture may, in the right hands, be able to help significantly with problem 1 by increasing insight as to what is really being done.

There are various tools which seek to help with this, with varying levels of success so far. They track which applications a user is using and attempt to interpret what’s being worked on, using natural language processing and other techniques.

There are two factors which suggest that some caution may be required.

• First, the history of the last century of time recording in law suggests that some managers will conclude sooner or later that, if we can auto-capture X more hours of billable time from you per year and also save you Y hours a year reporting your time, then your annual billable hours target should go up by (X + Y) hours.
• Secondly, there is evidence from other fields to suggest that granular automatic surveillance has bad side-effects. Highly sophisticated automated performance monitoring has been going on for some years now in ‘unskilled’ and ‘semi-skilled’ work. Its human consequences appear to be quite troubling. Josh Diesza’s recent article is a compelling introduction: The pattern is that enhanced metrics empower managers to squeeze more from workers, and the managers are themselves squeezed from higher up. The fact is, also, that such tracking has been going on for some time in skilled financial services IT work off-shored from western countries to India. An attempt to bring the same software system onshore into the UK financial services industry received negative publicity last month. Margaret Heffernan has argued that the risks of this sort of approach in the ‘white collar’ context include devaluing time spent chatting with colleagues unmediated by software and ‘[t]reating people like robots [with] the very real risk that they will behave like robots.’

Having looked online, the software vendor’s answer to concerns of the type just expressed tends to be that implementation is a matter for the customer’s judgement. Don’t blame us, we only created it. The typical answer from said customer seems to be that the tech now exists and it’s a tough competitive world. If we don’t do it, others will. Don’t blame us, we didn’t create it.

Neither of which is exactly reassuring.

A second option — automate GTR more cautiously

I would suggest that there is a case for applying the precautionary principle before plunging too deeply into automated time recording.

If the automatically collected data is in the full control of the individual and only goes further once approved or edited by them, then one can readily see how it can offer benefits in relation to problem 5 and, possibly problem 1, but it really needs thinking through.

To give a few examples

• If a timekeeper enters a certain amount of time for task X after concluding that the system either over-measured or under-measured it for some reason, should the original data be maintained (and, if so, for what purpose) or over-written? And should data of this sort be collected and analysed ‘anonymously’ by the organisation, or is that simply going to translate into more pressure of an undesirable type?
• If you have a genuine interest in addressing problem 1, then what are you going to do to help your people think about and sub-divide their tasks proactively and record time to those? Simply generating more structured data is not enough.

I don’t pretend to have a definitive answer, but I would say that the topic cries out for an incremental approach with careful assessment at each step of the likely benefits and possible unwanted consequences.

A third option — lose the ‘G’ from GTR

The final option may appear eccentric because it involves questioning the orthodoxy that more granular, structured automatically collected data must be beneficial.

But imagine a law firm in which the following practices are applied.

1. Nobody records hours and minutes. Instead, each week people certify an approximate % of time spent on the affairs of each client and on major categories of non-client activity (e.g. management, know-how, sales). Not the absolute hours, just the %.
2. This is aggregated over a reasonable period (e.g. quarterly and yearly) to understand broadly what people are doing. Non-granular time recording, in other words.
3. Contribution is assessed without regard to recorded time. Other industries manage.
4. Training is provided in project management and the use of appropriate tools, and an effort is made to introduce a continuous improvement culture.
5. Pricing and associated cost risks are handled in three ways.

• The first way is for predictable elements of work to be priced based on delivered units of value i.e. outputs. More effort than at present would be put into defining and delivering these efficiently, by automation or highly defined processes.
• The second way is for portfolios of matters with unpredictable work elements to be priced on a per matter basis in a way that will average out, with a suitable escape clause for the occasional case that blows up into something radically more substantial.
• The third way — and the trickiest — is that pricing of genuinely complex, unpredictable, substantial work should be fixed in advance based either on a fixed scope (where possible) or (where not) on a good faith commitment of an approximate fragment of a defined person’s or group’s activity over a fixed or recurring period, with agreed assumptions as to the scope of activity. The idea is to allow for genuinely complex, unpredictable work to be handled in a flexible way while covering costs. If the matter lasts longer than initially expected, the period is extended by agreement. Some mutual trust is required. A relationship, not just a transaction.

In strict theory (i.e. leaving out the human element), there is no reason why these three ways of pricing cannot be optimised even with GTR in force.

In practice, however, with GTR in place, time-based billing is such an easy way out that abandoning the ‘G’ of GTR may be necessary for real progress, as a sort of Ulysses pact.

And that’s quite apart from the potential human benefits of dialling down the ‘G’ in GTR.

There will, of course, be obstacles

• For an existing law firm of any size, the cultural change will be tough to understand for many individual lawyers, leading to potential stability challenges.
• Some clients used to the traditional approach may tend to cherry pick. That is, to welcome more predictable pricing while undermining it by demanding ‘shadow billing’ of hours spent. My experience of shadow billing suggests to me that it incentivises work practices which show the client a ‘discount’. There has always been an element of co-dependency about GTR, hence its resilience.
• The grip of time recording has become so strong that it has even inveigled itself into court procedures (e.g. in England & Wales) for assessing the reasonableness of costs. That sort of entrenchment will take time to challenge: there has at least been a recognition in recent years in England & Wales of the need for restriction of budgets in litigation, though the rest of the system has not yet been adjusted satisfactorily to make this work properly.
• Cost bases (e.g. salaries, rent) are still largely time-based and still have to be covered. Creating a divergence between revenue and cost models is in some ways attractive but imposes pressures of its own.

Concluding thoughts

I don’t have a magic solution to offer (sorry).

However, the potential benefits of liberation from the accidental tyranny of time recording are significant enough to make it worth at least thinking about answers which go beyond simply removing time entry frictions.

In reality, I suspect that GTR will be with us for a while and that it will be automated in ways that go too far. Departing from it will be really hard, perhaps practically impossible where it’s already established.

That said, for a new, or at any rate smaller, law firm or a non-partnership legal services provider, it should be easier to build a business not dependent on GTR. Such an approach could differentiate the firm in a positive way, for both clients and team.

And for more established law firms, maybe that’s a motivating, disruptive threat worth at least reflecting on.

Human nature is such that no system will ever be perfect, but I offer this article as a contribution. My aim has been to recognise the very real needs which time recording seeks to address as well its problems, and to discuss the options with a degree of nuance which I believe has sometimes been lacking.