Curbing those long, lucrative hours

In the article “Curbing those long, lucrative hours” in the latest issue of the Economist the billable hour is said to be “not dead, but many people would like to kill it”. “More and more firms’ in-house lawyers, who typically hire and manage outside lawyers, have turned to alternatives to the billable hour since the beginning of the global recession in 2008. In 2009 44% of the members of the Association of Corporate Counsel asked for alternative billing to cut costs.” Evan Chesler of Cravath, Swaine & Moore has commented that the primary cause of this trend is not to “screw down fees, but rather to aim for predictability and fairer, not just lower, bills.”

Gordon Perchthold, author of the book “Extract Value From Consultants” has added a wise comment that “Whether it be the legal profession or the consulting profession, the issue with the ‘billable hour’ is not the cost but instead, what value did it deliver? Too often, clients, whether of lawyers or consultants, enter open ended arrangements, not necessarily in terms of scope, but in terms of which and how resources will be billed against such scope. Low-value tasks conducted by inexperienced practitioners end up consuming so many hours of billable effort as to often overwhelm the true expertise that was sought after in the first place. While automation may eliminate the billings for a percentage of the menial activity, how is the broader business model going to change so that clients can consistently derive more value (rather than billable hours).”

In the Economist article the use of automated processes is discussed as a solution to the fee problem: “Many legal tasks, although not quite easy, are variations on a theme. The production of a certain document does not differ vastly from one instance to another. So more firms are using document assembly software to reduce time needed to put together a certain type of document. Automating the automatable stuff allows lawyers to spend more time talking to the client. Everyone wins.”

DP Robert has commented that “Technology acts as an equalizer. It allows corporate clients to monitor, compare and intelligently price services – premium price for premium work and commodity pricing for commoditized work and everything in between.”

A new groundbreaking approach to alternative fee arrangements has reportedly been taken by Cameron McKenna who now offers its clients a ‘pay what you think it’s worth’ option, please see “Cameron invites clients to pay what they want for legal work”. A bold and innovative approach to say the least. It will be most interesting to see the outcome of this and if more law firms will follow.