Once more on the pros and cons of tracking internal time and charging it back to clients

In the minority of law departments, lawyers track their time and charge it back to clients. A controversial practice it surely is, so let’s look at why you might and why you might not (See my post of Jan. 13, 2006 for a first cut at pros and cons, including that time tracking allows a law department to negotiate levels of service and it gives punch to a plea to hire more lawyers.).

Since opponents of time recording and charging have largely prevailed, let’s start with the disadvantages. Lawyers despise recording their time, so it chips away at morale. Time tracking and billing requires administrative time, which may be considered low value as it is simply shuffling costs between internal units. Recording time inevitably creates competitiveness among lawyers, especially to the degree they think that their billable hours are a component of their evaluation and bonus. Time tracking emphasizes the passage of the hours rather than the results obtained. If law departments dislike hourly billing by law firms, why would they want to subject themselves to the same dysfunction? But the most common objection is that some niggardly clients may avoid lawyers because of being charged for their time, when the clients indeed need legal advice.

Those general counsel who spur time tracking ride a good management steed — measure what you want to manage. Clients are less likely to abuse the law department with trivial requests for services if there is some market discipline in the form of a bill. Hours spent on various kinds of matters help provide key metrics and convey the amount of effort to clients on their behalf. Time tracking also lets a law department compare its internal investments with the efforts and hours of outside counsel. No matter what, a department can choose to track its time in grosser units than a law firm does and develop a picture of where its efforts go.

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