Death of the Billable Hour?

Bob Ambrogi and J. Craig Williams have a great Podcast called "Lawyer2Lawyer."  Their most recent program explores "The So-Called Death of the Billable Hour."

The program posits that billing by the hour is a lousy way to charge clients for lawyers services but goes on to recognize that after over 50-years, rumors of its death are greatly exagerated....  The alternative they advocate, for the most part, is contingency fees

Most of my legal practice has been non-billable - largely contingency - billing.  There are great advantages to it.  I loved the fact that I could do the work I needed to do on a file without justifying a large bill to a client.  I loved the freedom of worrying about the case and not accounting for every 1/10th of every hour.  There were certainly disadvantages:  cash flow, risk of getting zeroed, settlement has risks of adversity with the client (though so does a billable scheme), and it doesn't work on some types of cases - defending a suit may mean a win is a zero-dollar recovery and it's hard to take a contingency on that.

Billable hours give all the wrong inscentives.  Lawyers don't sell their time, they sell problem solving.  Solving a problem quickly is usually more adventagious than dragging it out.  Why then would a client want to pay by the hour? 

The reason firms are going to be slow to move away from billable hours is they don't have a good alternative.  Put more coloquialy, the lawyer or law firm is likely to respond, "I have no way of knowing at this point how much this litigation (or fill in the blank with the legal issue) will cost - it depends on the judge, the other side, and so many other contingencies."  Reading between the lines, the firm is saying "We'd lose our shirt if we didn't bill by the hour...."  They are right in a way, but only in a way.

While there are contingencies, there is a roadmap called the Rules of Civil Procedure and an even more detailed route in the judges' Scheduling Order.  The contingencies happen within that structure.  We are not lacking in the ability to quantify the general scope of the work to be done for our clients.

Granted there are contingencies, businesses face situations every day where they have contingencies and they make pricing and contracting decisions anyway.  Construction companies, software developers in particular deal with complex, long-term projects with contingencies.  While they sometimes do projects on a time and materials basis, often is is for a fixed fee for a large project.  They do it by applying Project Management techniques.

What does project management bring?  To grossly oversimplify it (squared), it provides a means of examining the project (and its contingencies) so that both the law firm and the client have a good idea what it (say a piece of litigation) will cost.  Further, project management sets markers and goals to help marshall the firm's resources efficiently and to judge progress.

The Billable Hour is here to stay unless there is a means of assessing a legal project where the firm is certain they won't lose their shirt.  Project management is the way businesses deal with the issue.  There is no reason it wouldn't work in law too and the lawyers who start using it effectively are going to have a huge marketing advantage to take cases from law firms stuck in the billable hour mentality.

I will likely be writing more about Project Management and alternative billing in the near future as I am working on a project with several attorneys and a Project Management professional exploring the application of basic project management techniques to legal projects.

- Peter H. Berge

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