Quality vs. Quantity - the billable hour mousetrap

Billable hours have become a vicious task master hanging over lawyers’ heads, encouraging them to abandon all life outside of the office in quest of squeezing the most hours, and thus the most money, out of the day. It discourages efficiency of work by definition (why finish a project in 8 hours if you can stretch it out to a 20-hour billable project?) and has no correlation to the “quality” of the work product. “Quality” is defined here as something of value or use to a client. Is the 20-hour brief a “higher quality” than the 8-hour brief? At best, the client will never know. At worst, it is blatant fee gouging.

These facts seem self-evident to many, including veteran attorney Evan R. Chesler in the Forbes article "Kill the Billable Hour":

The billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.

Of course it is nuts, but these self-evident facts are still lost on far too many involved in the legal profession. In the January 2009 issue of the California Bar Journal, the article "Will a bad economy force more changes in the profession?", cites Richard Gary of Gary Advisors, a former chair of Thelen, Reid and Priest, as thinking the billable hour isn’t going to disappear.

“We’ve been thinking about going to a different model for 20 years and it’s never happened. Maybe young people will come up with a different mousetrap.” However, [Mr. Gary] added, “I still think it’s the best way to measure value because it is a mechanism of measuring the amount of work that a lawyer did for a client on a particular matter.”

With all due respect, hogwash! The amount of time spent on a project is not an accurate reflection of the end product’s value. Lawyers have forgotten that basic truth.

Early in my career I found myself as plaintiff’s counsel in a small civil matter against a defendant who was a part-time lawyer who seemed to revel in the opportunity to “practice” law. I vividly recall receiving a 25-page, single-spaced motion to dismiss the case. I can only describe reading the verbose brief as exceedingly painful on the eyes and brain. My opposition brief was one page, double-spaced, setting forth the statute supporting my position. I won the motion. Which brief was more “valuable”? The one that took at least 25 hours to write or the one that successfully convinced the judge?

In a more recent example of overkill, a federal judge in New York City found a $100,000-a-day fee application from law firm Dewey & LeBeouf for receivership work to be excessive. U.S. District Judge Denny Chin said that the fee request was “excessive in the context of a securities receivership where hundreds of victims of fraud have suffered substantial losses” and he questioned the firm’s billing rates which were as high as $950/hr for some partners, $605/hr for some associates, and $285/hr for summer associates.

Billing rates that high deserve far more than "questioning" and partial and temporary reduction in fee allowances (Judge Chin said they could reapply for the fees later in the case). Billing $285/hr for work done by law students (remember, summer associates have not even completed law school) is unconscionable by any standard.

Clients who pay such excessive fees, however, especially large corporate clients, need to acknowledge their own role in encouraging outrageous billing by lawyers. Law firm prestige, and thus the law firms that tend to attract higher net-value clients, has for too long been measured on the same scale as Fortune 500 companies – by annual revenue. Not cost efficiency. Not creative thinking. Not being able to demonstrate insightful legal opinions. Not being successful in any other arena than extracting the most money out of their clients.

Every year the American Lawyer magazine publishes AmLaw 100 and AmLaw 200 lists of supposed top law firms in the country. These lists have become the Fortune 500 equivalent for law firms. I verified AmLaw’s criteria for choosing the top law firms on their website; it was disturbing. AmLaw describes “revenue per lawyer” as being “the key measure of law firm financial success, and profits per partner [as] the metric that has turned law firm managers into contortionists.” They go on to credit increases in these metrics by “surging demand for high-end legal services and unrelenting annual rate hikes” and a continuing slowdown in naming equity partners (the top echelon of law firms) and increase in the number of non-equity associates. (see the referenced article at "Lessons of the Am Law 100 2008").

Corporate clients – the “surging demand for high-end legal services” is you, accepting the definition of “high-end” as being on the AmLaw 100 list. The “unrelenting annual rate hikes” is the price you are paying for accepting this criteria and rate hikes will keep increasing at these firms until you, the client, say "no." You are choosing “pedigree” and "prestige" over “quality” in legal services and have only yourself to blame for the outrageous legal bills on your desk.

In this time of economic downturn, with companies failing right and left, only the strong and flexible companies will survive. Finally, a substantial incentive to reinvent the antiquated mousetrap of billable hours has emerged. Corporate clients, stop paying outrageous hourly rates and look for quality legal counsel that will provide cost-efficient and useful services. Your company's survival may depend on it. Lawyers, law firms, and freelance legal professionals, take the lead in offering cost-effective, solution-based services to your clients at a price that is a good value for the money.

Here's to building a better mousetrap in 2009!

Upcoming NAFLP Sponsored Event

Brought to you by Legal Research and Writing Pro -

Beyond Hourly Billing:

How to Implement Flat Fee and Other Alternative Billing Arrangements
Tuesday, August 19 at 12:00 p.m. PST

There’s been a lot of buzz recently about abandoning or moving beyond billable hours, but is it possible for freelance lawyers to use alternative billing? What are the most common alternatives to hourly billing? What does "value pricing" mean? In this teleseminar, law practice management expert Allison Shields will explore these questions and more. The program will focus on which alternative billing methods are appropriate for freelance lawyers. You’ll learn how to implement those methods, even if you’re a new lawyer. You’ll learn what value billing is and how to talk about it with the lawyers who hire you. And you’ll learn the special problems encountered by freelance lawyers in using alternative billing arrangements, when it’s possible to overcome them, and how.

Click here to register, add a Silver Membership to your cart. The cost for this program is $97. NAFLP members receive 25% off ALL Legal Research & Writing Pro programs and products (the promotion code will be provided to NAFLP members directly). A recording of the program will be made available to registrants at no additional charge.

How balanced is your work-life?

This morning I found an interesting tool on the JDBliss - Balancing Life and the Law site. You input times you arrive at the office and leave the office, and then you input time spend on administrative matters, personal matters, professional development, and meals. It works for working at a law firm or working for yourself. It then calculates how many hours a year (and how many a week) you will need to work at home to meet your target hours. I was stunned by the outcome for my days - no wonder I'm so tired!

Do your own work-life balance and let us know what your results are.

http://www.envoyglobal.net/jdbliss/test/calculator2.htm

Escape the Billable Hour Trap for Good, and Win $500

I must give a heartfelt thank you to Jeff Bleich, President of the State Bar of California, for his recent article “Escaping the billable hours trap.” Several quotes are worth repeating here:

“We all know about the lifestyle burden that billable hours places on lawyers, but on a deeper level, a billable hours system is corrupting to our profession in both obvious and more subtle ways. . . .

“[the billable hour system] has cast an ethical cloud over the work we do, demoralized lawyers and degraded our efforts to train lawyers to solve problems.”

“[A]s a profession, we need to start finding billing methods that will reduce distrust and damage to our client relationships, that will refocus young lawyers on being problem-solvers again, and that will remind us of – rather than distract us from – why we are lawyers in the first place.”

The entire article, which is a very good read, can be accessed here: http://www.calbar.ca.gov/state/calbar/calbar_cbj.jsp?sCategoryPath=/Home/Attorney%20Resources/California%20Bar%20Journal/April2008&MONTH=April&YEAR=2008&sCatHtmlTitle=Opinion&sJournalCategory=YES

Mr. Bleich’s observations are not new. The legal profession has given lip-service to the problems inherent in a law firm business model that rewards inefficiency for years, but very little change has been made. So, if law firms are unwilling to lead the action to change, perhaps it is the freelance legal professionals that should make the first step.

Let’s stop talking about escaping “the billable hour trap” by actually opening the door and walking out. FreelanceLaw, Inc., a sponsor of NAFLP, has announced a contest related to this subject. FreelanceLaw will pay $500 to the freelance legal professional who produces the best marketing brochure for their services that features non-billable-hour pricing to potential law firm or inhouse counsel clients. The requirements are as follows:

1. The entrant must be a member of NAFLP.
2. The marketing brochure must be limited in size to both sides of an 8-1/2” x 11” page or the equivalent in an electronic format (i.e. for email advertising).
3. The brochure must contain an explanation of the benefits of the freelancer’s pricing structure over billable hours, and sample fees.
4. Submissions must be forwarded to mailto:melody@naflp.org on or before June 16, 2008.
5. Submissions will be judged on (1) professional appearance; (2) creativity of billing structure(s); (3) likelihood of commercial success. The winner will be announced on July 4, 2008, and the winner’s brochure will be featured in this blog and in an NAFLP press release.

This is an excellent opportunity for freelancers to take a significant step to make a positive change in the legal profession. I look forward to seeing your ideas!

Great lawyers don't work 80 hours a week

Have you ever noticed that the history of great lawyers never includes reference to the number of billable hours those lawyers accumulated? When you consider the greats -- Abraham Lincoln, William Jennings Bryan, Clarence Darrow, Gerry Spence, for but a few -- do you know what their billable hours were?

Of course not. Because great lawyers have great minds, can think well on their feet, and have excellent analytical and writing skills.

Unfortunately, even the best of intellects fray with fatigue and lack of a balanced life style, a fact that the legal profession is slow to acknowledge.

An article titled "Billable hours 'intersect' with the profession's woes" in the January 2008 issue of the California Bar Journal, contains the now familiar story of a successful big firm lawyer who, after 16 years, had had enough. She wanted a life, she wanted a husband, she wanted children. Rather than being marginalized for working part-time for a big law firm, she opened her own consulting/mediation practice and works zero to 20 hours a week. She is hardly the only lawyer that has made that choice.

Although some law firms are claiming to make some efforts to create a more work-life balance friendly environment, they have a long way to go. I recently heard a young associate from a large firm happily describe her 60% work week option as working "only 50 hours a week"!

It is up to lawyers themselves to change the profession, one person at a time. If you want to be a great lawyer (or paralegal or other legal professional), chart a career course that values your talents and abilities, rather than maximizing your hours at the office.