April 8, 2011 11:06 AM

A New Metric: The Misery Index

Posted by Steven Harper

Let's call it what it is.

Large law firms and their management consultants have redefined a word--productivity--to contradict its true meaning. Recent reports from Hildebrandt and Citi measure it as average billable hours per attorney.

No one questions this definition given the primary goal of large law firms--maximizing partner profits. Billable hours times hourly rates produce gross revenue. More is better and the misnomer--productivity-- persists.

The Business Dictionary defines productivity as the "relative measure of the efficiency of a person [or] system…in converting inputs into useful outputs."

The relevant output for an attorney shouldn't be total hours spent on tasks, but rather useful work product that meets client needs. Total elapsed time without regard to the quality of the result reveals nothing about a worker's value. More hours devoted to a task can often lead to the opposite of true productivity.

Common sense says that the fourteenth hour of work can't be as valuable as the sixth. Fatigue compromises effectiveness. That's why the Department of Transportation imposes rest periods after interstate truckers' prolonged stints behind the wheel. Logic should dictate that absurdly high billable hours result in compensation penalties. But prevailing big-law economics dictate otherwise.

Here's a partial cure. Rather than mislabel attorney billables as measures of productivity, an index should permit excessive hours to convey their true meaning: attorney misery. The Misery Index would be a natural corollary to NALP's survey of minimum billable-hour requirements. Attorneys now accept as given the 2,000-hour threshold that most firms maintain, even though current law firm law leaders faced no mandatory minimum levels when they were associates. That's a lot of hours, as Yale Law School described in a useful memo. But even if the 2,000-hour milestone remains immutable, the Misery Index could reveal a firm's culture.

To construct this metric for a given law firm, start with attorneys billing fewer than 2,000 hours annually (including pro bono and genuine firm-related activities such as recruiting, training, mentoring, client development, and management). Those lawyers wouldn't count toward their firm's Misery Index. However, at each 100-hour increment above 2,000, the percentage of attorneys reaching each higher numerical category would be added. To reflect the increasing lifestyle costs of marginal billables, attorneys with the most hours would count at every 100-hour interval preceding their own. Separate indices should exist for associates (AMI) and partners (PMI).

The Misery Index would reveal distinctions that firmwide averages blur. For example, Firm A has an Associate Misery Index of 125, calculated as follows:

50 percent of associates billing fewer than 2,000 hours = 0 Associate Misery Index (AMI) points 

50 percent billing more than 2,000 hours = 50  AMI points

40 percent  > 2,100 = 40 AMI

25 percent  > 2,200 = 25 AMI

10 percent  > 2,300 = 10 AMI

None > 2,400 (No associates to count above 2,400 hours)

AMI: 125

Firm B's AMI of 315 reflects a very different firm culture:

10 percent of associates bill fewer than 2,000 hours = 0 AMI points

90 percent > 2,000 = 90 points

75 percent > 2,100 = 75

60 percent > 2,200 = 60

45 percent > 2,300 = 45

30 percent  > 2,400 = 30

15 percent > 2,500 = 15

None > 2,600

AMI: 315

The Misery Index would aid decision making, primarily for new graduates. Some will prefer firms with a high one; my guess is, most won't. A Misery Index above 300 might prompt questions about the physical health of a firm's attorneys; a Misery Index of zero--no one working more than 2,000 hours--might prompt questions about the health of the firm itself. Big disparities between partners (PMI) and associates (AMI) would be revealing, too.

Data collection is problematic. NALP won't ask for the information and most firms won't supply it--unless clients demand it. (In an earlier article, I explained why they should.)

Alternatively, individual attorneys could provide the information anonymously, similar to The American Lawyer’s annual midlevel associate surveys.

Complementing the Misery Index would be firm-specific Attrition Rates by class year from starting associate to first-year equity partner. NALP’s last report — before the 2008 financial crisis — showed big law’s five-year associate attrition rates skyrocketing to more than eighty percent, but significant differences existed among firms.

The Misery Index and Attrition Rates would be interesting additions to Am Law's "A-List" criteria that many big firms heed. Imagine an equity partner meeting that included this agenda item: "Reducing Our Misery Index and Attrition Rates."

Large law firms are filled with free market disciples who urge better information as a panacea to cure all ills, as well as metrics to communicate that information. Here's their chance.

Steven J. Harper is an adjunct professor at Northwestern University. He recently retired as a partner at Kirkland & Ellis, after 30 years in private practice. His blog about the legal profession, The Belly of the Beast, can be found at www.thebellyofthebeast.wordpress.com. A version of the column above was first published on The Belly of the Beast.

 

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