Comments on: Guest Opinion: Is it time to kill the billable hour?

By: Christopher G. Hill

Christopher G. Hill — Mon, 28 Sep 2009 15:15:57 +0000

Interesting thoughts. I agree that the billable hour may not be the best possible method. However, given the difficulty of a withdrawal and the contingencies that are a part of all litigation, I am not smart enough to come up with a different method. It is up to attorneys to efficiently use the time that is entrusted to us by our clients with a billable hour method and to make sure we keep the prize in mind, i. e. an efficient resolution to the client’s issue.

By: Jerry Samford

Jerry Samford — Sat, 26 Sep 2009 17:37:19 +0000

The tyranny of the billable hour is not unique to the legal profession. I ran a geotechnical consulting firm for 20 years. Most work was done on an hourly rate basis (plus expenses). Occasionally we would be able to work on a “lump sum” basis. I can identify at least three problems with that approach. A flat fee — base it on perceived value to the client — is workable when the project is well defined. When the parameters are vague and poorly defined, coming up with a reasonable fee for perceived value is a shot in the dark. Go into a rezoning project, for example, and predict up front the level of opposition you will face, and be forced to overcome. The project may go very easily and “anyone” could have done it, or your particular skills and expertise in negotiations may have been a critical factor that gained success where nobody else could have. The second issue is having firms compete on a flat fee basis makes it very easy for the consumer to select someone based on price alone, making the business of (law/engineering/whatever) a commodity rather than a profession. We still have an obligation to try to educate our clients regarding why we are more qualified than the next person, but gee, the other firm is $100 cheaper, so ….. And lastly, using flat fee structures has to be implemented with a change in internal culture of the typical organization. When you get close to the end of the chargeable fee, you have to be willing to continue to do what’s necessary for the project and the client and not fall prey to cutting corners to save costs and keep that fee profitable. (I know, the alternative is the opportunity to keep tacking on hours even when no work is necessary because there is no limiting fee and you can bill whatever you want.)

My bottom line is that there is no one system that is always the best. Each has its merits and the competent business will use whichever – or even some third model – that best fits their, and their client’s needs.

By: Thomas L. Bowden

Thomas L. Bowden — Fri, 25 Sep 2009 22:05:59 +0000

I meant “hourly rates hide market information”

By: Thomas L. Bowden

Thomas L. Bowden — Fri, 25 Sep 2009 16:49:46 +0000

David, thanks for the response. I respectfully disagree with your statement that no one has devised a more broadly reliable measure in the billable hour. It only seems broadly reliable because it’s broadly used. The way the value, and therefore price will be determined in a non-billable hour marketplace is through market mechanisms. The fact that there is no easy calculation or book of standard rates actually makes the case for leaving it to the market, rather than the reverse. There are plenty of firms doing all sorts of litigation off the billable hour not necessarily using contingent fees. Check out the Shepherd Law Group in Boston, for example. I don’t know how they set their first price, but I guarantee they got better at it the more they did it. And of course, any discussion of market mechanisms must take into account the effect of information. In other words, ultimately the price will be set by fully informed consumers and providers of the service. In today’s world, only the largest clients (if any) can be considered “fully informed.” And of course, not all clients will have the same opinion of value, nor the same need for service. So there will certainly be clients no lawyer would want to represent, and lawyers that no client would want to hire. That’s what makes the demand and supply curves. And finally, if potential clients don’t really know the true value of legal services, lawyers have themselves to blame for hiding behind hourly rates. Hourly rates at your marketing information, because they presume that each time-consuming activity has the same value, which is clearly not the case. In a non billable hour world, attorneys have much more incentive to delegate tasks, and focus on whatever it is they do that clients really like. I can pretty much guarantee it’s not proofreading filling the file with academic memos.

Finally, if a lawyer, or any professional or other knowledge worker really believes that all they have to sell is their time, they are in the wrong business. Leveraging knowledge can be infinitely more profitablethan leveraging time which is of course, limited.

Thanks for adding to the debate, I welcome further comments from any perspective.

By: David Boelzner

David Boelzner — Fri, 25 Sep 2009 14:13:11 +0000

I think most lawyers would be delighted to be freed from the tyranny of the billable hour. The difficulty is finding another way to “value” the work of a lawyer. In transactional work, perhaps, or work that is repetitive enough to anticipate how much effort will be required on average, fixed fees can be charged based on a reasonable estimate. But what is the value of a lawyer’s 250 hours of work on a trial that ends in a loss for the client? $0, because she lost? Some cases are lost despite perfectly good lawyering. How does the lawyer get paid fairly for five weeks of her time? A system of fees contingent on result works only where cases are screened carefully to insure a sufficient number of winners to keep the doors open and the copiers rented. Only the most legally sophisticated of clients will have sufficient insight into how lawyers work to agree to a fair fee based on something other than time. Mr. Bowden dismisses as nonsense the adage that the lawyer has only his time to sell, but it’s close to the truth: what the lawyer sells is his expertise devoted to the client’s concern; alas, nobody has devised a more broadly reliable measure of that than the time spent.