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    February 2nd, 2009

    ♫  Every single day
    Every word you say
    Every game you play
    Every night you stay
    Ill be watching you…

    Words and Music by Sting, recorded by The Police.

    The New York Times reports:

    ‘ “This is the time to get rid of the billable hour,” said Evan R. Chesler, presiding partner at Cravath, Swaine & Moore in New York, one of a number of large firms whose most senior lawyers bill more than $800 an hour.’

    When the managing partner at Cravath says the billable hour is dead, the paradigm has definitely shifted.

    ‘Mr. Chesler, who is an advocate of the new billing practices, said that instead of paying for hours worked, more clients are paying Cravath flat fees for handling transactions and success fees for positive outcomes, as well as payments for meeting other benchmarks.’

    I have been a long-time advocate of changing the way lawyers bill, for reasons that are connected with improved client satisfaction, increased efficiency and tying the fee closer to the results achieved for the client (output-based measurements) rather than effort (input-based measurements).  I have seen firms achieve increased effective hourly rates and increased lawyer and client-satisfaction by adopting fee arrangements that reward the law firm for increased efficiency.  By allowing law firms to reap the benefits of investing in technology, knowledge management and efficiencies of scale, both the law firm and the lawyers come out ahead.

    However, apparently not everyone sees the shift away from the billable hour in the same light.  The NYT continues and states:

    ‘Greed may also encourage lawyers to change their payment plans. Law firms are running out of hours that they can bill in a year, said Scott F. Turow, best-selling author of legal thrillers and a partner at Sonnenschein Nath & Rosenthal in Chicago.’

    With respect to Mr. Turow, perhaps greed works well for book plots, but I find the vast  majority of lawyers are conscientious, hard-working, caring and very concerned about the welfare of their clients.  After all, I am a lawyer that deals with thousands of inquiries a year from other lawyers who are looking for ways to serve their clients better.  I think that not enough discussion has taken place to date on what alternative billing could look like and how firms go about implementing it.  Most, if not almost all, of the lawyers out there today have been taught to bill by the billable hour, except for certain files that are billed on a fixed fee, a contingency fee or a success-based fee.  If we open up the dialogue then we can come up with creative solutions that meet the needs of the client as well as those of the law firms.

    I recently moderated am ABA CLE teleconference presentation by:

    Christopher B. Marston, CEO, Exemplar Companies, Inc., Boston, MA, and

    Mark Robertson, Robertson & Williams, Inc., Oklahoma City, OK  (the co-author of Winning Alternatives to the Billable Hour, 3rd Edition, published by the ABA)

    entitled Winning Alternatives to the Billable Hour. This presentation highlighted how legal engagements can be restructured to allow for greater satisfaction, effectiveness and efficiency for both the lawyer and the client.

    The best part of adopting these new billing models is being freed from a system where the client is  watching every word you say and every night you stay….

    This entry was posted on Monday, February 2nd, 2009 at 11:32 pm and is filed under Budgeting, Change Management, Firm Governance, Issues facing Law Firms, Law Firm Strategy, Leadership and Strategic Planning, Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

    4 Responses to “Billable Hours Giving Ground…”
    1. Thomas L. Bowden, Sr. Says:

      Selling legal expertise by the hour is like selling gold by the foot.

    2. David Bilinsky - Thoughtful Legal Management Says:

      [...] Billable Hours Giving Ground… Generosity, not Greed… February 3rd, [...]

    3. Barb Cotton Says:

      Hi Dave-I have been charging a flat fee for most of my legal research work for at least the last 5 years. The major benefit-by negotiating the fee up front, the clients are willing to pay the bill and my bad debt is very low.

      Take care-

      Barb Cotton

    4. Marshall R. Isaacs Says:

      I wasn’t on drugs when I wrote this. I swear it. An Interview with Mrs. Billable Hour. Hope you enjoy.

      http://theununifiedcourtsystem.blogspot.com/

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