Is it time to change how we charge for legal sevices?

Are your clients paying for time?  Expertise?  Solutions?  Peace of mind?  Is the billable hour the best  way to  charge for your services? Is the amount of time really the right measure of how much your services are worth to your clients?

Lots of lawyers grouse about being slaves to the billable hour, and lots of clients complain about it.  So who’s going to take the first step to make a change in the way we value, and charge for, legal services?  It seems to me that lawyers have to lead the way. 

As lawyers, shouldn’t we be looking for the most effective and efficient way of solving our clients’ problems, rather than looking for ways to increase the amount of time that we spend on a client’s matter?  Although I’m not suggesting that all (or even most) lawyers look at it that way, from the perspective of a client, it’s hard not to.

A recent New York Lawyer article calls the billable hour the ‘cockroach’ of the legal world and notes that U.S. firms are in danger of losing business to ‘offshoring’ – sending legal business overseas where it can be performed cheaper than it can in the U.S. for U.S. billing rates.

Services are popping up all over the internet which offer ‘low cost’ legal solutions – will preparation, trademark applications, and others.  Many of these ‘basic’ legal services are being automated and performed by non-lawyers.

Many corporations are now re-examining their legal counsel and firing attorneys or firms that have been on their panels for years.  They’re putting their work out to bid, and the bidding process is a long and complicated one.  Lots of companies are scrutinizing lawyers’ bills, or hiring auditing companies to pick over time entries, expenses, etc.

The billable hour is blamed for associates leaving large firms, for lawyers working impossible hours, for loss of family and personal time, and for the inefficiency of many law firms’ practices.  And yet, both lawyers and clients are used to this time-based model.  Inertia is at work.

Although moving away from a billable hour model would be a risk for lawyers, as with most risks, the potential rewards, in my opinion, are great.  I can sympathise with the position of some lawyers who are reluctant to move away from the billable hour model.  But it is a short-sighted lawyer who believes that in today’s legal marketplace clients are looking only at the hours devoted to the matter.  More and more, legal consumers, whether individuals, businesses, insurance companies, or in-house lawyers, are looking not only at the time devoted, but at the results.  In my opinion, firms that have been honest with their clients and worked toward a speedier, more economical resolution, rather than ‘milking’ the case for more hours, have always won out in the long run – by earning the trust of their clients and getting repeat business.  Are there successful firms out there that pad their hours and lie to clients?  Yes.  But one likes to think they won’t last long, and that their clients will ultimately learn the truth.

Another recent article looks at measures being taken by big companies to reduce their legal expenditures.  Many of the larger companies are taking steps to change the way they find lawyers to represent them.  Long time firms are being fired, and legal work is being put out to bid, resulting in alternative billing arrangements, such as fixed fee contracts. 

While fixed fee arrangements may not work for every practice or every type of law, there are creative arrangements that can be made between lawyers and clients, with fixed fees being part of the package for basic services, or for so much time, with an hourly fee on top of it, bonuses for bringing the case in for less than a targeted amount, settling early, etc.

We’ve got to keep demonstrating that our services are of value to our clients.  Perhaps the time has come to do that in a different way.  It’s time to adapt – both billing practices and how we communicate the value of our services to our clients.

By continuing to rely on the billable hour, are we telling our clients that the way to measure the value of what we provide is only by the time that we spend on their matter – that more time necessarily means more value and better service, and less time means less value and less service?  And if so, are we encouraging clients to seek only lawyers that charge the best price per hour, rather than lawyers who can provide the client with the solution they seek?