Wednesday, January 14, 2009

What's the problem with the billable hour?

As the battle to eradicate the billable hour wages on, I can't help but think that, in spite of all of its warts, it is still a pretty efficient way to compensate lawyers for their work. Yes, it can reward inefficiency. Yes, it emphasizes quantity of work, not quality of work. But isn't frustration with the billable hour a symptom rather than the problem? Does that particular billing method produce a negative impact on the delivery of legal services? Are clients getting bad work because of the billable hour? I cannot imagine a situation in which that were true (but welcome correction). 

Isn't the real problem one of value, trust and service? When clients say they are unhappy with the billable hour method, aren't they saying they feel like they're paying too much for their legal services? That the perceived value of those services does not equal the cost they've been asked to pay? Legal services have to be paid for, and by-the-hour is a reasonable way to do it until you think your lawyer spends unnecessary time on your matter, or charges too much for her time, or isn't telling you the truth when she says it will take 20 hours to resolve your problem. And if that's the case, then the billable hour isn't to blame. 


  1. The Billable Hour is the problem if the economic theory it is based upon (Karl Marx's Labor Theory of Value) is the cause of the client not seeing the value -- in other words, clients to not see value in time increments. This is no shock. Exemplar does not bill by the hour and have not had a single client in the past 4 years ever ask us "Sir - I'd like to buy ten six-minute increments of your time". People do not want to buy time, they want results!

  2. Marketing 101 - Sell (meaning put on the invoice) what your customers buy. Customers (I know clients) buy results, not effort. Sell results.

  3. I agree with both of you: results are what clients seek and what they must get. But it is very difficult to value results. What if your client gets precisely the result she wants? How do you value that on the invoice? It's hard to dispute that the amount of time spent provides a good guide for determining the amount of work required. Billing rates are easier to dispute, but they're not (in most cases) completely arbitrary, generally reflecting experience, specialization, market forces, etc. The Billable Hour isn't a perfect system by a long shot, but does work and satisfy both client and lawyer in many instances. How does Exemplar bill for its work?


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