Small law attorneys need to ease their administrative burden, optimize their profit potential

Topics: Efficiency, Law Firm Profitability, Law Firms, Leadership, Legal Innovation, Legal Managed Services, Small Law Firms, Thomson Reuters

small law

The Rolling Stones once sang “time is on my side”; however, lawyers at small law firms may not be able to say the same.

According to Thomson Reuters’ 2020 Report on the State of U.S. Small Law Firms, lawyers at small law firms only spend about 60% of their working time actually practicing law. The remaining portion is spent marketing and developing their businesses, or managing the business and administrative aspects of their firms. That remaining 40% represents lost potential profits.

Unlike their counterparts in larger firms, most small firms do not have the luxury of staff members dedicated to managing billing, developing marketing strategies, or sometimes even keeping the books. These are all necessary tasks, and without someone to handle them, the responsibility falls to individual lawyers.

This presents a problem because time is really the commodity that a lawyer has to sell. The more time spent on tasks for which the lawyer will never be paid, the greater the impact on that lawyer’s potential profitability.

The problem of allocating time

I’ve written before about how small law firms have faced many of the same problems for years, and too much time spent on administrative tasks with too little time spent practicing law is on that list. Spending too much time on administrative tasks was at least a moderate challenge to 74% of lawyers responding to the Small Law Firms survey, with almost 20% calling it a significant challenge.

Despite high numbers of lawyers recognizing the problem, and the fact it has been a persistent problem for years, only 20% of respondents said they’d implemented changes to address the issue. And a real concern is that fully half of respondents hadn’t even started making a plan.

Time is, self-evidently, not a renewable resource. Every hour unnecessarily spent on something for which a lawyer will never be paid represents a pool of potential revenue that can never be realized.

I say “unnecessarily spent” because some investment of time in administrative or even unbillable client work is inevitable. Attempts to eliminate it completely are bound to fail. The goal shouldn’t be elimination, nor should lawyers be satisfied with status quo — the goal should be optimization, and importantly, balance.

Doing more than “something”

If you’ve followed my writing, you’ve read about the concept of “relative inaction” — the problem of doing something for the sake of doing something rather than making meaningful changes to keep up with or get ahead of the world around you.

Too often, people get caught into a false binary choice where they are opting to do something or do nothing. Doing the wrong something can be just as big of a problem as doing nothing. It could potentially be even worse, depending on how much that something costs.

But what is a meaningful something with regard to optimizing unbilled time? The survey points to a few strategies employed by small firms already.

Looking to technology that meets the need

Unsurprisingly, small law firm leaders are turning to technology to help address challenges, such as improving quality and controlling costs, with 45% of survey respondents saying their firm had adopted new technology within the past two years. For solo attorneys, those least likely to have staff to handle the administrative aspects of their practice, 29% are looking to technology to help improve their firm’s operations. This puts them ahead of any other surveyed category of small law firm.

But every category of small law firm sees at least some recognition that they need to improve internal efficiency.

This is a smart area of focus. When asked about what led to better outcomes for their firm in the previous 12 months, 43% of respondents pointed to a focus on becoming more efficient. In fact, 13% said such a focus was the most important factor in their improved performance.

So, it’s a good area for focus, and many small law firms are looking to technology to help. But what kinds of tech will provide the needed boost?

The majority of small law firms currently use time & billing and financial management technologies. But far fewer take advantage of more targeted options. Case & matter management (with just 39% saying they employ this technology), eBilling (36%), document drafting tools (31%), document automation (25%), practice management (25%), and rules-based docketing (25%) are all examples of technologies directly focused on addressing some aspect of a law practice’s administrative burden. Yet relatively few firms currently employ such options. What’s more, 5% of respondents or fewer had any plan to implement any of these technologies within the coming 12 months.

It’s become a theme in this most recent series of articles, but a general lack of action by small law firms can create tremendous opportunity for those firms willing to make these moves. That’s not to say that a firm would need to implement all of these technologies in order to take meaningful action. Rather, small law firms looking to make a competitive change should look at these technologies through two lenses:

  1. Which one of these options will be the easiest to implement?
  2. Of the options that are easy to implement, which addresses the most critical need in my firm?

A tech platform that doesn’t meaningfully address a problem would be a great example of relative inaction — it’s doing something, but not something that will make a difference. Similarly, investing in a flashy tech solution that is so difficult to implement that ultimately it’s never adopted is also an unproductive effort.

But focusing time and energy on attainable solutions that address a need is exactly the type of effort that will help a small law firm compete in an increasingly challenging market, and help small law lawyers put more time back on their side.