It’s the middle of January and many New Year’s resolutions have already bitten the dust. In part that’s because setting annual goals is inherently unreliable, especially when the goal isn’t accompanied by a mechanism for reaching it.
Annual billable targets for law firms aren’t exactly resolutions. In most firms they are couched as requirements that are tied to compensation. Increasingly law firms are creating tiered billable hours targets. The lowest tier is set at a level that is necessary to keep one’s job. And higher tiers correspond to higher levels of compensation.
Too often, however, the billable hour target becomes a career development milestone for senior associates and non-equity partners. When you ask such lawyers what their goals are for the year, they answer in terms of meeting or slightly exceeding the firm’s targets.
The problem with this approach is that it tends to encourage incremental thinking and subtly discourage ambitious rainmaking. If you are locked in a system that pegs compensation to billing a certain number hours or collecting a certain number of dollars, it is hard to devise a system that significantly exceeds that figure. If the billable target is, for example, 1,800 hours or the expected book of business is $1 million, lawyers are unlikely to bill or collect much more than that.
But there is a different and better way to set your billable hour goals or revenue goals for the year. When I advise lawyers who have been out of law school for 8 years or more, I suggest that they set for themselves the goal of generating enough work to keep at least three attorneys busy. This translates to generating about 5,000 billable hours in a year. Depending on the nature of your practice, the 5,000 hours could be divided among half a dozen of paralegals and other lawyers in your firm. From a revenue standpoint, 5,000 hours is roughly equivalent to a book-of-business of at last $1.5 million. In my experience, that is the level of production that provides attorneys with the maximum flexibility and control over their careers. At this level, there is an active market for the lawyer’s services and the lawyer can stay where they are, move to another firm, or start their own law firm.
In today’s dynamic legal market, it is common knowledge that a portable book of business provides career insurance. What is less appreciated is that the optimal situation is when you can keep at least three lawyers busy.
That’s why in 2016 you should seek to bill 5,000 hours.