The following is the first in a recurring series of articles on the future of hourly billing, a practice that remains prevalent despite discontent about it within and outside the profession.  

The billable hour – is it like the weather, something many people complain about but are powerless to change? Or is it an addiction that, with determination and more awareness of healthy (and more efficient) alternatives, can be overcome?

Robert Hirshon, president of the American Bar Association, in 2000 appointed a presidential commission to examine the issue and promote alternatives. The commission’s report, 90-pages long, was referred to the Business Law Section for continued work, and the initiative has languished since then. Surveys indicate that the billable hours, at many law firms, remains the predominant method of pricing legal services.

However, in New Hampshire, the bane of the billable hour is getting renewed attention.  At the Future of the Legal Profession CLE held at the NHBA Midyear Meeting, and at other sessions on the future of the legal profession, including focus groups convened by the NH Supreme Court Task Force on the Status of the Legal Profession, NH attorneys from a variety of practice settings point to the billable hours system as the root of –many,  if not all – evils:

-                      the public’s discomfort with the cost of legal services, especially its unpredictability;

-                      the working conditions that prevail in law firms with large annual billable-hours requirements, creating an unhealthy balance between work and home life for many attorneys;

-                      the culture that values amount of hours billed more than efficiency and outcomes, and crowds out commitments to pro bono and community service;

-                      and more…. 

Arthur G. Greene, of Greene & Perlow in Bedford, has been a New Hampshire lawyer since 1967 and is an author and consultant on law practice management issues; he says that promoting alternatives to the billable hour is his favorite subject of discussion. His most recent book, The Lawyer’s Guide to Increasing Revenue – Unlocking the Profit Potential in Your Firm, offers details on how to structure attorney’s fees through alternatives to hourly billing. (The book is published by the ABA’s Law Practice Management Section and available at a discount or in combination with a “CLE to Go” NHBA CLE program on videotape through www.nhbar.org.) Greene cites a litany of complaints about the inefficient, unsatisfying trap that captures lawyers and law firms that rely too much on the hourly billing method. “One of the real horrors of hourly billing,” says Greene “is that there is no incentive to be efficient.”

Greene, who acknowledges that hourly billing may always exist for certain situations, says a variety of billing options are available to attorneys with the patience and foresight to develop them for their particular practices. Ultimately, Greene says, most clients would prefer other than an hourly billing method, and the profession must head in that direction.  With a rueful chuckle, the soft-spoken Greene admits that the anti-billable hour crusade hasn’t come all that far in the past few years.

Why It Persists

According to the ABA Commission on Billable Hours, the reasons why billable hours remain entrenched can be summarized as:

-                      it is simpler to administer than “value-based” systems, and it is familiar;

-                      the risk of a legal matter becoming more complex and costly rests on the client, not the law firm, while, on the other hand,

-                      corporate clients have developed an array of auditing and cost-control systems based on the hourly-billing method;

-                      an unfortunate trademark of the legal profession is its resistance to change.

Greene adds another reason. Some of the alternatives, so-called value billing, were incorrectly perceived as requiring attorneys to increase what they charged clients, to compensate for the increased risk that an attorney would incur by adopting a flat-fee or outcome-based approach to their charges. “That doesn’t necessarily have to be true,” says Greene, whose law practice management practice rests on the idea that attorneys can increase their incomes and have a more satisfying practice by investing more time and energy into better planning and more delegation of their work.

Examples, Explanations

Over the next few months, the Bar News, in collaboration with Arthur Greene, will report on various aspects of “The Bane of the Billable Hour,” looking at the phenomenon from client and attorney perspectives, and at the advantages and disadvantages of various alternatives. This series is intended to offer practical advice and tools attorneys can use to develop new billing methods that suit their own practices, as well as providing information on how to utilize hourly billing when it is the appropriate method.

Do you have thoughts on the persistence, advantages or disadvantages of the billable hour system, or can you offer examples of solutions? Contact dwise@nhbar.org with your comments or suggestions.

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