Rethinking Performance: What Kind of Value Should a Law Firm Create?

Photo by Charles Forerunner on Unsplash

For decades, the billable hour has been the bedrock of law firm economics. It has provided structure, a means to measure productivity, and a direct link to revenue. But as the legal sector grapples with shifting client demands, increasing workforce expectations, and direct pressures to innovate, this metric has become a systemic barrier.

Calls to replace the billable hour have been getting louder. But firms that will lead the next stage in legal services evolution will not abandon this measurement; they will reframe it. Doing so starts with a critical question: What does success now look like?

The Hidden Costs of Time Targets

While the billable hour has long served as the profession’s core business metric, its application has led to problematic consequences. The systems and cultures that have developed around its use have distorted its application. High billing targets may drive revenue, but they can also foster overwork rather than efficiency, suppress collaboration, erode work quality, and undermine well-being. In many firms, the pursuit of hours has become a proxy for value, regardless of whether that time translates into the very best quality work, client satisfaction, or recoverable fees.

Moreover, much of the recorded time in law firms is never collected through billings. The financial and operational gap between recorded hours and realised revenue continues to widen, weakening the predictive power of billable metrics. Firms focused exclusively on hours run the risk of missing more powerful measures: those that demonstrate the total value and impact they deliver to clients and other stakeholders.

Targets and Tensions: Cultures Under Strain

Productivity targets, particularly individual ones, create a narrow view of performance. While such metrics can motivate, they can also increase stress, reinforce binary outcomes (target hit or missed), and contribute to unwanted outcomes, such as presenteeism or even burnout.

These issues are especially pronounced in environments where targets are tied directly to reward, recognition, or advancement. When success is measured solely by hours logged, lawyers may be incentivised to prioritise volume over quality, independence over teamwork, and short-term wins over long-term value creation. The culture-related risk that arises from billable hours targets is often material but is usually ignored.

Realising Human Potential

According to recent data from the Law Firm Maturity Index, many firms are underperforming relative to their potential. This is not due to a lack of talent, but because performance frameworks don’t fully leverage their human value. Partners and employees across all levels report that their firms don’t adequately define and manage total value, and as a consequence, much is being lost. They also report feeling undervalued and underutilised. The result is untapped human potential, enterprise risk, and poor strategic cohesion.

Table 1: Unrealised Potential: Suboptimal Business and Human Value (Source: Law Firm Maturity Index)

Forward-thinking firms are responding by expanding their definition of performance. They are reframing management metrics with a more holistic approach, one that aligns an individual’s contribution with wider strategic goals, client expectations, and growth that is inherently more sustainable.

These firms recognise wider value-enhancing activities, particularly those with broader impact, such as pro bono work, mentoring, product innovation, and operational improvement. This evolution points to a more sustainable model of performance that reconciles and supports both organisational success, individual effort, and workforce wellbeing.

Value from Inclusion

Current approaches that use hours-based targets also undermine inclusivity, directly affecting a firm’s ability to maximise human value. They assume a uniform capacity for output, regardless of individual work styles, cognitive processing, or well-being. Time-based targets often fail to account for differences in intrinsic and extrinsic motivation, as well as how individuals perceive and respond to pressure. While some lawyers may thrive under measurable targets and structured competition, others experience this as undue stress, especially when the metric feels arbitrary or disconnected from true and more meaningful value.

To create an inclusive performance culture, organisations need to recognise and manage how success is defined and achieved. Mature organisations create space for diverse strengths to flourish, encouraging not only creative thinking but also providing the time and psychological space for individuals to reflect, grow, and contribute meaningfully.

A Five-Dimensional View of Performance

More mature law firms are transitioning to multidimensional performance frameworks. These go beyond chargeable hours to embrace forms of total value management. They include the integration and a more balanced management of five interrelated value factors:

1. Quality: legal excellence, technical accuracy, and exceptional client service

2. Output and productivity: tangible contribution to business growth, team delivery (including billable hours), and client mandates

3. Efficiency: an individual’s participation in innovation, continuous improvement, and margin enhancement

4. Revenue: fee recovery, pricing discipline, and profitability

5. Impact: contribution to people, community, and planet (e.g., pro bono, environmental, and human sustainability)

This broader lens enables firms to more accurately assess where value is created, how it is sustained, and who is contributing to it. It opens up the possibility of better demonstrating value to clients and underpinning fees. It also opens up the possibility of a new approach to performance management (or value management), one that reconciles financial performance with inclusion, sustainability, and long-term value.

In practice, these types of new approaches should consider the following:

Step 1: Team-based KPIs: Using a balanced set of team indicators instead of individual targets to foster an inclusive, psychologically safe culture by encouraging collaboration rather than competition. Creating space to leverage the unique strengths of each team member while providing support for any challenges they face, reducing pressure on individuals to meet demanding targets alone. This approach promotes trust, shared accountability, and mutual respect, helping team members feel valued for their contributions and comfortable seeking support when needed.

Step 2: A holistic approach to performance: a balanced scorecard of indicators that track achievements in improving value across the 5 factors outlined above. This recognises the full range of an individual’s contributions, not just billable hours or output. This broad perspective also values diverse skills such as collaboration, innovation, client care, training, and mentorship, encouraging employees to intrinsically engage and optimise human value.

Step 3: Leadership modelling, professional development and communication: Recognise non-billable contributions and shift from narrow, short-term productivity metrics towards a more holistic and strategic view of human value. Mature organisations understand that sustainable success depends not just on billable hours but on fostering a healthy, engaged workforce, and investing time in innovation, client relationships, and cultivating a high-trust, psychologically safe culture.

The Business Case for Reframing Value

Value management is not a “nice to have”. The cost of attrition, the risk of burnout, and the strategic drag of undervalued talent are tangible threats to optimal law firm performance. As client demands grow, more complex scrutiny increases on responsibility and sustainability. Firms must evolve beyond traditional metrics to survive and thrive.

The future of law is not about time spent. It’s about the impact created. Firms that embrace this shift will unlock deeper client relationships, stronger internal cultures, and more sustainable performance models.

For legal leaders, the opportunity is clear: stop managing hours. Start managing value.