Time and attendance
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Time and attendance
/taɪm ænd əˈtɛndəns/ (n.)
The intellectual foundation of the timesheet. A means of accounting for the value provided by professional services firms that equates it to the time taken to yield those services.
This is, needless to say, a bad way of accounting for the value of services, for it gets incentives quite back to front. Its logical corollary is: the longer something takes, the more valuable it is. No-one who has sat through the last season of Game of Thrones could possibly believe this to be true.
And nor does anyone, least of all the providers of professional services.
And yet, despite the combined intellectual horsepower of the world’s professional services guilds over a 50-year span, no-one so far has managed to come up with a better way of accounting for professional services.[1] Better in revenue-acquiring practice that is, rather than justice and autonomy-fulfilling theory.
So, time and attendance it is.
On the short side, this means professionals will definitely get paid, as long as they show up — and their gravity-defying charge-out rates ensure that they will get paid a lot, whatever it is you ask them to do.
On the long side, it means for those serendipitous moments of ineffable, fleeting genius, professionals won’t get paid nearly as much as they should. So it should come as no surprise that professional services organisations are not in the habit of having serendipitous moments of ineffable, fleeting genius: at least, not on purpose. Why would you?
Dan Ariely — he of Predictably Irrational — had a similar observation about advertising agencies, who also charge by the hour, are not rewarded for bringing existing knowledge or expertise to a brief:
“And then it struck me that one of the reasons for that is the hourly model. You get paid by the hour, not by the quality of the idea, and not by the impact. ... If an agency put 30% of its effort into creating a generalised understanding of important topics, nobody would pay for it. So the incentives are actually against agencies creating generalised knowledge and against making the effort to understand a topic, not in a specific sense, but in a general sense.”
The in-house inversion
Now there is one group of professionals for whom a time and attendance system doesn’t work, even cack-handedly: inhouse legal eagles.
Why so? Because here, the usual laws of the universe are inverted. Inhouse counsel are captives of the business they serve. The business is, likewise, rather stuck with them. They are acquired at fixed cost,[2] refugees from time recording; many chose the life internal to escape that exact tyranny.
And, for a time, they did. In the olden days, no-one really cared how much or how little time they spent working what passed for their “magic”,[3] as long as — well, as long as the football team was correctly punctuated.
For in-house legal the working theory that “the diligent accumulation of time produces something of value”, too, is inverted. Six minute units impress no-one. Boasting about how many you have taken to double-check that football team invites only a bop on the nose. The fixed cost of the inhouse legal eagle is instead “shredded”, by percentage, back to the business units most responsible for a given eagle’s ongoing occupation.
In all honesty, the in-house legal eagle’s value, if it cannot be sheeted to time spent, becomes rather hard to pin down.
Take the defence of litigation. Say a disappointed client, or regulator, declares its dissatisfaction with the firm’s behaviour, and with talk of enforcement action in the air, the litigation team is wheeled in to save the day. And, for the sake of argument, let’s say the complaint in question is without merit.
Now your litigators could communicate, from the first moment, their resolve. They are certain that there is no case to answer. They could promptly brief counsel — thanks to legal ops’ brilliant competitive bid-sniping system, at an unbeatably economical rate — getting excellent advice and, between them, conducting every stage of the litigation deftly, judiciously, and efficiently. At the conclusion of the eighteen-month process and a four-week trial, the firm could win resoundingly, on all counts, avoiding all liability and earning costs on an indemnity basis, together with plaudits from the bench as to the probity and general excellence with which it had conducted the case.
How should one measure the value the litigation team has created here? Greatly, we presume. Its superlative efficiency — the swiftness of e-discovery; the incisiveness of its interlocutory applications — boosts that value.
But then take this alternative scenario: at first mention of discord, the in-house team recommends settlement: it makes a quick call, explaining the circumstances, expressing the firm’s profound regret for the customer’s misfortune, without prejudice waiving fees as a goodwill gesture, and persuading the complainant of the fruitlessness of its case, whereupon no further action eventuates.
This costs a half-hour call and the sacrifice of a salutary benefit — the cost of preserving a relationship with the complainant — and avoids 18 months of distraction, expense and rancour.
How should one measure that value by comparison? However valuable the first outcome, this is surely worth more? It is made immeasurably harder by the very path-dependence of these outcomes. They are undecidable alternatives. In a universe where one happens, Q.E.D., the other does not. There is no universe in which both definitively happen. We can’t prove they even are alternatives, though in the abstract it seems like it.
And here we encounter the great paradox at the heart of internal legal. You can’t show value. You can’t reduce it to money’s worth, like you can in private practice.
When management announces a cost challenge, this proves a bit of a problem.
See also
References
- ↑ Of course there are some forward thinkers who have set up legal firms using different models, but while heroic, none yet has broken the stride of the magic circle, so they remain the honourable exception that proves the rule.
- ↑ Save for an increasingly salutary discretionary bonus which is awarded by the business, because it feels like it, and thus is entirely outside the control of normal billing incentives.
- ↑ “Their magic” was once code for “filing a Slavenburg”, but nowadays, it is more than that: there are football teams to check and netting reviews to do.