Without travelling east to west, 169.

One of the more read posts on this blog was something I wrote back in August 2016 – ‘Why asking someone to work 2,000 billable hours a year will kill their spirt‘ . I had reason to re-read this post early this week following the publication of a post on the asialawportal.com website by Matthew Kelly – ‘Work life balance across Asia – and how things are changing‘.

Matthew’s post follows on the back of an article published in Business Insider earlier this month that ‘South Korea is trying to stop overwork by limiting the maximum workweek to 52 hours‘. The gist of the BI article was that President Moon Jae had recently legislated that the maximum working hour week in South Korea had been reduced from 68 hours a week to 40 hour per week, but with the option to do any additional 12 hours per week ‘overtime’. All sorts of reason for why South Koreans work so hard were also mentioned, including that South Koreans need to work overtime to supplement their salaries (which, if true, is a rather sad reflection on the society).

Leveraging off of this, Matthew’s post argues that attitudes to long hours and presenteeism are generally shifting at law firms in Asia.

My View

On the one hand, I would agree with Matthew. Attitudes towards presenteeism are changes in Asia. Partners and senior managers at law firms are more tolerant of the agile approach to work-life balance. The days of sitting in the office as a junior lawyer and waiting till your partner had left do seem to be on the way out.

That said, with the reduction in the number of junior lawyers (relative to previously) working in private practice and the increased use of technology to be able to draft advices and contracts on the go has, in my view, led to an increased expectation around the number of billable hours lawyers are expected to work in the Region.

For some time now the number of billable hours required in order to qualify for law firm bonus pools has been on a slow upward trajectory. A little over a decade ago this sat – as an industry average – around the 1,400 hours a year mark and now it is probably closer to 1,800 (with US law firms being north of 2,000 hour per year).

While this increase in the overall number of hours required to be billed per annum may not seem massive, in day terms it really isn’t uncommon now to see junior lawyers today with billable target hours of around 7 to 8 hours per day.  And as Yale University has pointed out for a number of years now, asking someone to do 1 billable hour is a lot different to asking them to do 1 working hour (‘The Truth about the Billable Hour‘).

Once again though, you may ask why all this matters?

Well in the first instance, and probably most importantly, in a time when ‘wellbeing’, ‘mindfulness’, ‘flexibility’ and ‘agile’ are vogue in law firms, it would seem counter-intuitive to ask someone to work to a set number of billable hours per annum.

But in addition to this, asking someone to work to any set number of billable hours, even if that is one, assumes that ever dollar of revenue is equal. And we all know that’s not true. So it is actually a pointless target. But it is a pointless target that also causes serious mental health issues for lawyers. So it is actually cruel.

And for all those reasons it is time we moved on from billable hour targets and utilisation as reward/budget metrics and came to some consensus on a different metric by which we could reward private practice lawyers that actually inspired them to develop their skills, their practice and remain engaged in the profession,

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Last week saw the latest publication of the Commonwealth Bank’s Legal Market Pulse Report. What was a quarterly report, became half yearly, and would now appear to be annual (a great shame if true as many of us saw this report as an important benchmark of how the industry was tracking).

Anyhow, leaving that aside – and despite some changes to the structure of the report (it seems to be missing growth practice and geographic areas for example – which I loved), it remains an important read for those of us in #Auslaw.

But now a brief rant:- as you would expect of a report researched/undertaken by Beaton (which I understand is the case), it’s almost zealous like in its consideration/debate of so-called ‘NewLaw’ versus ‘BigLaw’ (do a search of the term ‘NewLaw’ and see how many hits you get if you don’t believe me!).

And I don’t get this ongoing fixation.

And yes, I was part of the twitter conversation that saw the birth of the term NewLaw by Eric Chin (who was then at Beaton) and thought it to be an interesting term/concept at the time.

But I’m starting to seriously wonder if we haven’t moved on from all this? If, indeed, once again, we are having the wrong conversation.

So what I want to ask is this:

Shouldn’t we start to have a real discussion about whether or not your firm is ‘full service’ (BigLaw) or ‘specialised’ (NewLaw) – and what that actually means; rather than NewLaw versus BigLaw, with all the inferences that come with that around old ways of doing law versus new ways?

Because I genuinely believe that in a market that is increasingly hard to differentiate in, this is a far more important question.

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Last month the Association of Corporate Counsel Australia published its ‘2017 Benchmarks and Leading Practices Report‘. Two leading take-outs from this Report being bounded about are:

1. ‘the average total legal spend for ANZ in-house legal departments has increased from $3.1M in 2008 too $4.3M in 2017’, and
2. ‘[average] external legal spend has increased from $1.8M in 2015 to $2.6M in 2017, representing a 30% increase.’

In what many, including myself, have called one of the world’s most competitive legal environments, with most reports showing flatline revenue levels for law firms at best; the fact that a report by in-house itself shows that there has been a significant uplift in external legal spend over the two years between 2015 and 2017 should give us comfort. But for some reason that doesn’t seem to be the case. Clearly this uplift isn’t being shared equally among firms and there appears to have been some significant winners, with rather more losers.

Other take-outs from the Report include:

• More than half (51%) of GCs time is spent on ‘urgent high importance/highly strategic work’ – with the most essential skills and attributes required to being a successful GC being ‘the ability to translate complex information into simple communications, active listening, strategic thinking, broad business understanding and influencing skills‘. I would argue that many of these skills need to be top of mind for private practitioners too.
• 80% of organisations rate project management as an important tool for improving the efficiency of in-house legal departments – yet more than half of in-house legal team (63%) have ‘no formal workflow management system‘.
• Worryingly, the dominate project management principle used for ‘complex matters’ briefed out to external providers is, to ‘scope the work‘ (49%) [‘Obtain quote(s)’ is number 3 among cited project management practices]. I believe that if external legal providers are genuine in their declared aim of being trusted advisors to their clients, they may want to look at helping in-house up-skill in this clearly important area.
• The top three considerations used to determine when matters should be outsourced or in-sourced are: (1) Whether external expertise is required (82%), (2) Current and projected internal workloads (59%), and (3) Amount of budget available for outsourcing (30%).
• Work types most likely to be briefed externally are (1) tax (33%), (2) litigation/arbitration/ADR (19%), (3) employment/workplace relations (17%), and (4) banking and finance / capital markets (17%).

All importantly, in such a competitive market, the primary reasons behind in-house legal departments choosing one firm over another are:

• ‘the chosen firm demonstrates an understanding of their requirements’ (72%),
• ‘has specialist expertise’ (67%)
• ‘provides good value’ (53%)

With the drivers of satisfaction being:

• ‘demonstrated understanding of the role of in-house counsel’ (91%)
• ‘demonstrated understanding of the organisation and its goals and priorities’ (89%), and
• ‘the provision of commercially applicable advice’ (89%).

On the issue of billing:

• 42% said that ‘hourly billing was not ideal’, but no alternative was provided,
• disappointedly, 71% cited ‘discount hourly rates’ as the most common form of billing arrangement, but
• the adoption of AFAs has increased from 28% in 212 to 42% in 2017.

Nonetheless, 88% of in-house counsel are ‘satisfied with their top provider’, meaning it remains extremely difficult to break an incumbent relationship.

One final take-out from the Report that needs to be seriously taken on-board by external (private practice) legal providers is this: – “women now account for 50% of head of legal functions“.

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