Law Practice
Jun. 19, 2002
Living by the Clock
Forum Column - By Robert E. Hirshon - A major focus of my term as president of the American Bar Association is initiating a dialogue on the economic model which surrounds our entire profession and permeates everything we do: the billable hour. I believe it has had an ill effect on our profession.
By Robert E. Hirshon
A major focus of my term as president of the American Bar Association is initiating a dialogue on the economic model which surrounds our entire profession and permeates everything we do: the billable hour. I believe it has had an ill effect on our profession.
A number of problems in our profession intersect at the billable hour. A recent study by the ABA shows that many young attorneys leave the profession because lawyering lacks the balance to allow time for pro bono service to the community. They want time for their families and time for being good citizens. Many individuals blame the tyranny of billable hours for undermining the rationale for their becoming lawyers.
Many attorneys also complain that billable hours are a crude and cloudy measure of their value to their firms and clients and are concerned about the perverse disincentive that forces every lawyer to keep the clock constantly running.
Billable hours were created 50 or 60 years ago primarily to address clients' demands for more information about a lawyer's bill. A client's desire to understand a bill is not unreasonable. In fact, an unintended consequence of a more knowledgeable and savvy corporate customer is that it is easy to fall into the trap of "drill-down valuing." Drill-down valuing occurs when the customer values legal services rendered as merely the sum of the drilled-down microspecific components. This kind of valuing certainly protects the client from blatant padding and other overcharging abuses. But in its effort to micromanage services rendered, two things happen: The client loses sight of a larger, more fundamental concept of value, and it creates an environment of incentives that run counter to the client's best interest.
If I were allowed only one adjective to describe the billable-hours economic model, it would be counterintuitive. It is counterintuitive to our quality of life, good customer service and measuring value. Certainly, billable hours are an accountant's dream. It is pure in its objectivity, in its black-and-white view of the world: "I billed 2,500 hours, you billed 2,000 hours, which means that I am a better lawyer than you by 25 percent." But is administrative ease any reason to maintain a system if it runs counter to our instincts?
The deficiencies intrinsic to billable hours are so counterintuitive that we lawyers tend to circumvent the system. Most law firm billing systems provide the opportunity to exercise discretion when drafting the final bill. We can add to or subtract from the bill based on factors such as result delivered to the client and relationship with the client.
Essentially, a quasi-value billing mechanism has covertly evolved within the billable hours arc. It is time we put an end to this nonsense and try other approaches.
There have been countless books on alternative billing methods that can help law firms and clients approach this issue of value. But as of yet, these alternatives have not established a foothold in our profession. Why? It is easier to demonstrate the billable hours of a lawyer than the value actually delivered. Also, increasing the hourly billing rates across the board for each class year means that partners need not wrestle with determining the relative abilities of each associate. And law firms accept the unproved Darwinian notion that assignments flow to the more capable lawyers and that the busiest lawyers are the better lawyers. Firms choose to ignore the fact that the system perpetuates a lack of emphasis on project management in the law firm.
Hourly billing reduces the work of lawyers to a commodity - those who produce an hour of work are more likely to be seen as interchangeable.
Billable hours will probably never be completely eliminated. I am not against using hours as one aspect of price-setting for legal services as permitted by the ABA guidelines for ethical billing. Our profession's goal, however, should be to develop a billing system, perhaps on a case-by-case basis, that is mutually beneficial to law firms and law departments. We should also consider establishing different billing rates for the same lawyer for different tasks. The value a lawyer delivers to a client is based on something more meaningful than a simple number.
For change to occur, law firms and law departments must refrain from viewing law firms as providers of specialized temporary help that sell bodies at piecemeal rates. Both the client and the law firm must agree to the value of the work. The key will be to build long-term relationships between law firms and their clients and to reward those firms which focus on delivering value with repeat business and community recognition. The more a firm learns about a client's business, the more efficient the law firm becomes.
Taking the focus away from the billable hour by placing more importance on relationships and the substance of the work will create a more satisfying experience for the lawyer involved. It will also boost an attorney's efficiency. It will allow firms to retain and groom lawyers and allow the lawyers to lead well-balanced lives that include pro bono, mentoring, community service and personal time.
The use of alternative billing methods is a win-win-win situation. It is a win for the client, a win for the law firm and a win for the hundreds of thousands of lawyers across this country who believe that the 60-hour work week should not be a goal in-and-of-itself, but an available and necessary tool to provide excellence in legal services.
Robert E. Hirshon is president of the American Bar Association.
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