In this presentation, Linda Artesani of Artesani Accounting and The Proper Trust explains two core attorney productivity key performance indicators (KPIs) – utilization rate and realization rate – and why they matter for law firm overhead and profitability. She defines utilization rate as the percentage of an employee’s total working hours that are billed to clients, shows the simple formula (billable hours ÷ available hours × 100), and notes that real‑world utilization is affected by meetings, training, lunches, and other non‑billable activities. Artesani cites the Clio Legal Trends Report, calling it her “little Bible,” and points to a 76% utilization benchmark for Florida firms, while acknowledging regional variation. She then introduces realization rate, which measures the proportion of billable hours that are actually paid, highlighting its similarity to utilization but focusing on paid invoices. The talk discusses write‑downs (uncollected or discounted hours), their common causes (client expectations, lack of collection responsibility, senior‑junior instruction), and how they can distort both metrics. Artesani emphasizes the importance of tracking these KPIs to understand firm overhead, set realistic expectations, and improve billing and collection processes. She encourages law firm owners to review related articles on billable hours and write‑offs, and offers her firm’s services for KPI tracking and productivity improvement.
Chapters
Hi there. Linda Artesani, Artesani Accounting and The Proper Trust. This week we're going to talk about some more KPIs, and this one is probably the one we discuss the most. It is most likely the one— when you look at expenses in a law firm, one of the largest expenses you have is your wages. So we're going to dive into some attorney productivity as our KPI of the week. So the first part of tracking This particular KPI is something we call the utilization rate, and really you're monitoring the billable hours from your staff, the hours that are getting billed out, and monitoring that as opposed to the hours that they work. So if they work an 8-hour day and there's 4 hours being placed as billable, whether they're a timekeeper or an attorney, it's an important metric to, to know. There's things in the day, in the workday, that will definitely affect how many hours are there, how many hours are you compensating your staff for, but also looking at the staff as how much is billed out to the client for client work. So that utilization rate is the percentage of an employee's total amount of working hours that are spent that are billed against the client. And no one really works 40 hours in a perfect world, right? Utopia, 40 hours will be billed out, but that's not what happens. Sometimes we have meetings, we have lunch, staff meetings, financial meetings, trainings. I mean, there's lots of things that can come and get in the way of the working hour, the working day. But it's a really good metric to track, especially for the partners or the owner of a law firm, to see if a staff member is not producing. And once that's revealed, it's pretty vital to have a conversation about the production around the hours that are worked for the client, And also looking at whether some of those hours are written down. That's also an important thing to look at as well. So how do we calculate the utilization rate? Let's go here. I'm going to share my screen. I'm just going to show you a very simple metric to track. But it's really a vital one. Tracking this metric, as you can see here, it's a very simple math equation. It's to calculate the utilization rate. It's equal to the billable hours divided by the available hours at a returning would work. And of course, to get that percentage, you multiply it by 100. Utilization rate is a very simple math problem. It is— your utilization rate is your attorney's hours worked divided by their hours billed out to their clients. Very, very simple. That's an important metric to know because if you, if you know this number, this is part of your overhead. You really— every attorney should know what it costs them bare bones minimum to run their firm. That's important too. So it's a very critical number to know that, but also to know in your firm how all the attorneys are producing, how well are they doing? And that's really the reason why you wanna look at that. If you look at the Legal Trends Report by Clio, which I like to call my little Bible, I love it. A 76 is what the average law firm in Florida should be striving for with a utilization rate. But it varies by where you are, and there's also realization rates in there. So you want to look at what the other firms around you are doing as far as that goes. Which brings me to the realization rate. So realization rate truly is another piece that you really want to look at. And it's very similar to utilization rate, except that you're not going to look at anything billed overall. You're going to take a look at that math equation against bills that have been paid. So how many hours worked against how many hours are of hours that were billed and paid. So it's a real finite number to take a look at to know if your firm is doing well. It's really important. And because of the fact that there are write-downs and things that can affect the billable hour, when you're looking at billable hours, sometimes it's not a great metric to check with, only because if you have a firm that a lot of people are writing down hours, and I've got a good blog post on that, the effects on the overall equation are eye-opening. It's really quite a statistic. And a lot of times attorneys just write down because they don't want to collect, or they feel that the client will never pay it. But then you really need to target in on what caused the hours to be inflated. What, what was the reason behind it? Did you not set the expectations with the client at the original meeting time, or did something go awry in the, in the whole process? Or do you have them working with a new attorney and it involves some instruction by the, by the partners or the senior attorney? So those are all things you want to factor in. Obviously, we all start somewhere, so sometimes it does take a little longer for us to be able to navigate working with staff. But it's something you want to really look at. You want to look at whether or not, especially with the realization rate, if all the attorneys on staff are responsible for collecting and getting their invoices paid, that's where you want to take a look, because that sometimes is a place where you start to see those write-downs or write-offs. It can really be critical to your— the number, uh, the utilization rate or the realization rate. It can be a critical number and can really affect the number if you're having all these hours and then they're really not happening when it comes time to billing. So I hope that's helpful. Really knowing your overhead is key here and knowing what it costs to run your firm, but also really targeting in these 2 particular metrics are really driven by how well the attorney is performing at the staff level. How much are they billing out? There's a lot of factors that go into this, a lot more detail in the article. So I hope you get to read the article and really follow along. And then there's a couple of click back to a few other articles to go into billable hour and write-offs and what that looks like. I hope this was helpful. If you are interested in hiring a firm like ours to do that kind of work, we do this. This is part of our scope. We do with a lot of the law firms and the attorneys that we work with. Feel free to reach out. We're just a quick phone call or an email or a contact form away. And on that note, I hope you all have a wonderful, wonderful week. Bye now.
