Time To End The Billable Hour?

There was a story on the front page of the New York Times last Friday which discussed that many Law Firms are starting to reduce the importance of the concept of the Billable Hour. For decades, law firms have billed their clients based on the number of hours it’s taken to accomplish a task, often to the tune of hundreds to thousands of dollars per hour worked. Firms judge the performance of their associates based on how many billable hours they put forward. It’s been the standard for decades, and it’s deeply entrenched in the current law culture.

But has it’s time come?

My older sister works for Garvey Schubert Barer in Seattle, WA. As a new Associate, she’s apparently required to put in 1750 Billable Hours per year, which was apparently one of the lower hours requirements she was presented with. However, her interests mean she’s likely to do a fair amount of Pro Bono work, for instance right now she’s working on a case involving police mistreatment of the local homeless population. Clearly, the firm is not being financially compensated for this work, but my sister was able to get the partner’s to agree that her work on this case would count toward her billable hours quota.

Many firms would not have done that. Which could be incredibly difficult for a lawyer with a deep background in human rights issues. But should most firms deny that sort of request? I would argue no. The press interest and good will generated by working this case is going to extend far beyond the homeless population of Seattle.

But it’s deeper than that. Most people, including a lot of smaller companies, don’t want to deal with the uncertainty that ‘billable hours’ creates. I had a conversation with Spokane Lawyer and Family Friend, John Clark, of Crary, Clark, and Domanico, regarding this issue yesterday before the Superbowl kicked off, and he was ecstatic to have seen the NY Times article, though he was immensely disappointed that so few had seemed to have read it.

John’s practice, which involves a lot of DUI cases as well as Legal Malpractice and other Personal Injury-type cases, has long pushed the fixed-fee method of billing clients. In fact, if John qoutes you a rate, he’ll take your case to court if necessary, even if he didn’t think he’d have to when he made the quote initially. I think is probably the main reason John has proven to be such a popular lawyer in the Spokane area, customers know what he’s going to cost up-front. This works out well for John, because while some cases take longer than he originally thought, most don’t, so he ends up doing well overall.

Now, I still do programming consulting, and I have had several clients that I have made hourly arrangements with. However, I try to make available a flat-rate service, only going the hourly rate when it is expected that my service will be ongoing, and they want some flexibility in changing their priorities. If I bid well, I can get the job done at a price that keeps the client happy, but results in good income for me. If I bid poorly, I’ve at least made the customer happy, and I’ve learned something that will make me bid more effectively next time.

Plus, by bidding a flat rate, I am have no desire to drag out completion of the job. I’ll still want to deliver quality, since a happy customer is the best form of advertising in the world, but I at a flat rate the faster I can produce that quality, the better off I am. And my customer can benefit from my speed as well.

As in Law, I think that the time of hourly billing in my field is going to filter away as well. It will always be an option, but customers (business and otherwise), are likely going to want to know up front what a job is worth to them. Sure, I’ll misjudge my proposals sometimes, but just because I might occasionally mis-estimate, doesn’t mean my clients should suffer. The bid should only fail if the bid actually changes.