What is the top priority for law firm leaders?

Annual billable hours – for many years that has been the measure by which lawyers have been judged.  

However, things are starting to change. Law firm leaders appear to be looking for something different – at least according to a recent report from LexisNexis. Nowadays, client feedback and overall productivity seem to be the key markers of success for firms, showcasing a massive culture shift in how they measure success.  

Only 34% of law firm leaders now believe that billable hours should be the key measure of individual performance. This was in contrast to the profitability of work (63%) and client feedback (51%), which leaders now see as much more valuable. Even for associates, the billable hour has now been overtaken by the profitability of the work (56% for the former, 58% for the latter), showcasing how much the opinion on this topic has changed. While some may speculate that the changing demands of employees at firms are causing them to shift in culture, the report says that these changes are being driven more by clients looking for more flexible billing and payment models. While the report still has the billable hour as the most common arrangement (87% of firms are using this model), there is now a wide variety of alternatives that reflect clients' changing desires and needs. Respondents to the LexisNexis survey seemed to focus on data and technology to better measure results – with one advancement being focused on more than any other.  

Artificial intelligence (AI) seems to be having a huge effect on the change away from billable hours. 86% of lawyers at medium & large firms are using AI in their work or are planning to use it in their work. While these numbers are not a huge surprise (reports into this topic are coming out frequently), what is surprising is that the same is true of the other side. 71% of any in-house teams expect their external counsel to be using generative AI – showcasing just how much has changed in a short space of time. Indeed, 39% expected to adjust their billing practices because of this, up from 26% the year before. However, few believe AI will be the killing blow for the billable hour – just 17% think that it will bring it to an end. In fact, what might cause more firms to change models will be the drive to invest in and retain talent, which is a key concern for over half of respondents. The key ways to attract these associates are seen as competitive salaries (75%), career development opportunities (54%) and a good work-life balance (52%). However, there are concerns about whether people are looking to progress from associate to partner anyway. Only a quarter of associates are looking to make partner in the next five years, with 49% of law firm leaders noting that younger generations were less interested in becoming partners. If anything, the need to attract younger and newer talent might be how the billable hour model is changed rather than introducing new technologies.  

Firms are changing the ways they measure their output, that is certain. However, what these measures look like is in flux, and what changes are made will depend on their employees' and clients' demands. It will be interesting to see if more firms, across the course of this year, adjust their models and change the measures of their success.