RSS SyndicationIt’s been business as usual for law firms despite the evils of the billable hours fee model, as pointed out in the ABA’s Billable Hours Report issued in August, 2002. The Report neatly summarizes some of the problems with the model:
– provides no predictability of cost for client
– may not reflect value to the client
– penalizes the efficient and productive lawyer
– discourages communication between lawyer and client
– fails to discourage excessive layering and duplication of effort
– fails to promote a risk/benefit analysis
– does not reward the lawyer for productive use of technology
– puts client’s interests in conflict with lawyer’s interests
– client runs the risk of paying for:
· the lawyer’s incompetency or inefficiency
· associate training
· associate turnover
· padding of timesheets
– results in itemized bills that tend to report mechanical functions, not value of progress
Douglas McCollam opines in an article in The American Lawyer that the billable hours model is so integral to the structure of traditional law firms that they would collapse if it were to change:
“The question remains then: If the billable hour is so unpopular, why hasn’t it been replaced? For starters, it’s a huge moneymaker for firms. To a large extent, reliance upon the billable hour is responsible for the pyramid structure of the modern law firm. With legions of associates toiling away on behalf of a narrow band of partners, the modern megafirm generates huge revenue. Take away the billable hour, however, and the foundation of the pyramid collapses. If the basic commodity sold becomes knowledge, not time, then the modern megafirm suddenly begins to look like an obsolete smokestack industry.”
I agree with Dennis Kennedy (quoted in Adam Smith, Esq) that the push for change must come from clients. “Without client pressure, there is little reason to expect many lawyers or firms to change the current system on their own.”
Clients, however, need alternatives. The good new is that alternatives are available. Some firms, usually smaller boutique-type law firms hungry to bite off a piece of big firm business, may offer “fixed pricing” or “value pricing” models. The General Counsel, LLC offers fast growth to mid-sized companies a per day rate for an experienced former general counsel who actually works for the client at its office. Other placement agencies supplement existing legal staffing levels at law firms or clients themselves.
While these alternatives cannot accommodate all needs, they can significantly reduce costs in appropriate situations. If you are a corporate consumer of legal services bent out of shape over the high costs of traditional hourly rate law firms, stop complaining and chose or demand an alternative.