The Anatomy of a Billable Hour, Part 1 of 4: The One About the Drill

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dealWIP
May 29, 2018 · 3 min read

The billable hour: It’s what, and how, lawyers do. If you were to ask any number of law firm attorneys what a “unit” of their work entails, the overwhelming response would be “an hour of my time” (or, sadly, “1/10 of an hour of my time”). With few exceptions, law firms have historically used time as the gauge by which to measure the value of their ultimate output. Although critiques of the billable hour — and rumors of its demise (seriously, just Google “death of the billable hour”) — abound, the billable hour staggers on in six-minute increments, still the dominant means by which attorneys charge for their services. So what is so wrong with the billable hour? What follows is Part 1 of a four-part series of posts that probes that very question (spoiler alert: our answer is “lots”, but perhaps for reasons other than those you may be thinking of).

There is some justification for the existence of the billable hour. For example, 30 minutes of advice or consultation, never reduced to writing, cannot reasonably be identified as a tangible “product”. But for the most part, time isn’t how clients judge the output of their lawyers. Clients aren’t buying time (or for that matter, process, people, machinery, or other means or modes of production). They are buying the product itself, whether it be “work product” or a particular outcome or accomplishment. Clients don’t want to buy a drill; all they need is a hole.

Until the relatively recent rise of alternative fee arrangements, law firms have propagated the notion that billing schemes other than those centered on the billable hour are too difficult to implement. However, this doesn’t hold up to scrutiny — lawyers are perfectly capable of estimating the average time that a particular project will take. For one, law firms have hundreds of prior projects on which to base estimates (and lawyers typically don’t shy away from using precedent). Second, other services occupations long ago successfully implemented fixed fee-based billing schemes. As Mary Jutten noted at the 2018 SOLI conference on April 30, 2018, accountants have used fixed fees for decades.

That consumers of legal services are paying for their desired outcomes indirectly, by compensating attorneys for their time rather than their output, isn’t new, surprising or particularly interesting. Nor is the fact that the billable hour creates a perverse incentive for lawyers to be inefficient — it does. These are boring truths, traditionally understood as annoyances that, though they might require a bit of extra scrutiny of attorneys’ task descriptions and cause an uptick in overall legal costs at the margins, are necessary evils for high quality legal work.

We would suggest, however, that the billable hour has a much greater and more insidious impact on the nature and quality of legal work than the above “at-the-margins” viewpoint suggests. To contextualize our exploration, it will be helpful to define exactly what a billable hour is: 1) the work that a lawyer does, 2) for an hour, as measured by the lawyer doing the work. Although that definition may sound straightforward, in the posts following over the course of the next two weeks, we will explain why framing the “lawyer unit of work” this way uncovers cross-industry inconsistencies that are often hidden from the clients who pay the bills — and in some cases even the lawyers themselves.

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dealWIP Inc. is a software solutions company offering the world’s premier cloud-based workflow software platform for transactional lawyers and their clients.