Latest news – Billable hour dominates invoicing; Leadership skills in demand; Diversity strategies don’t always deliver

[Australasian Law Management Journal,Compliance & Risk Management,Finance & Accounting,General Management,People Management(HR),Strategy & Leadership] March 4, 2019

Billable hour still rules at mid-market firms

A new survey from Pitcher Partner reveals that, despite a shift towards alternative fee structures, the billable hour still dominates for certain law firms.
The survey of 140 mid-market sized firms found that hourly rates make up 58 per cent of invoices, with fixed rates comprising 29 per cent and value-based pricing representing just 6 per cent. The key findings from the annual Pitcher Partners Legal Firm Survey include that the law firms with the highest profitability bill by the hour for at least half their work, along with the continued reliance on partner equity as a source of firm finance. It was also noted that there has been a decline in the readiness of law firms to restructure, perhaps as the ATO’s review of professional services income becomes more complex.

Ben Lethborg, Partner in Private Business and Family Advisory of Pitcher Partners Melbourne, says the report shows that the legal sector rates staffing and people as their greatest priority. “They are addressing the challenge of retention with more flexible working and improving culture and diversity with more female hires – now 64 per cent of graduates,” Lethborg says.

The survey shows that the most profitable law firms share four key characteristics. While they mostly charge by time, they also measure and track lawyer hours, use time tracking to measure work in progress, and have enough insight into time spent to keep write-offs below 5 per cent.

“What we are seeing is that firms that pay attention to how much time is spent on work seem to have a better grip on the impact on staff utilisation, financial performance and scope creep,” Lethborg says.


Leadership skills a must-have for practitioners

New research has identified the non-legal skills that law department leaders want from their corporate legal teams. The 2019 Chief Legal Officers Survey, conducted by the Association of Corporate Counsel, reveals that more than half of all CLOs think law department practitioners should develop their leadership skills, with 50 per cent adding that business management and 45 per cent saying communication and listening are also crucial skills for corporate lawyers.

The survey took in feedback from 1639 CLOs across 55 countries. The desire from law department leaders to have certain non-legal skills varied substantially depending on the industry in which those lawyers operate. For instance, a high proportion of department leaders in accommodation and food services believe communication skills are necessary for lawyers to develop, whereas only 39 per cent of such leaders in construction made the same comment.

Project management is also seen by law department leaders as a fundamental non-legal skill for lawyers to develop (42 per cent), followed by executive presence (38 per cent), presentation skills (31 per cent), emotional intelligence (29 per cent) finance skills (28 per cent) and technical skills (21 per cent). The ACC said that the growing areas of data analytics and visualisation, along with cross-cultural awareness, are new to this year’s non-legal skills list.


Mixed findings on firms’ diversity initiatives

According to new international research, some law firms are pursuing diversity strategies that are counter-productive to their goal of propelling women up the career ladder.

A joint-venture project between Thomson Reuters Transforming Women’s Leadership in Law and legal research platform Acritas shows that the average proportion of trainees and junior associates that are female is just over 60 per cent. Female senior associates make up 58 per cent of the total on average, but the proportion of female new partners is just over half this, and women make up just over 20 per cent of the overall equity partner pool.

Certain diversity initiatives appear to have negative impacts.  A key example cited in the research is women-only groups, which could alienate men and leave people feeling excluded from the diversity drive. However, three initiatives cited as having a positive impact include making it mandatory to have female representation on pitching teams, publicly declaring gender targets, and having a quota for the number of female candidates on partnership promotion rounds.