Introduction
Mention the term “billable hour” in the context of the practice of law and you’ll typically be met with reactions ranging from a wince to a jaded, perhaps even conspiratorial, smile.
What you probably won’t encounter is anything very positive. Although the billable hour dominates the way in which legal services are charged, remarkably few people speak about it with any enthusiasm.
Across large parts of the legal profession — as well as among clients and law students — the billable hour is widely criticized, often loathed, and even ridiculed. During the past 10 years, moreover, some of the sharpest criticisms have been heard from within the heart of the legal establishment. With this has come growing interest in alternative forms of billing.
Despite that, few predict the billable hour’s demise. The legal profession is, for the most part, reluctant to mess with the golden cow that feeds it.
Why read this book?
So given that criticism of the billable hour is already widespread, and given that the system is unlikely to go away, what’s the point of reading this book (or, for that matter, of writing it)?
Part of the answer is that the book critiques the billable hour from a different angle. The criticism that is commonly heard is that lawyers have come under pressure to bill too many hours. Often, the concern is expressed from the point of view of what this does to the quality of lawyers’ lives, rather than from the perspective of what it means to the client. That is a legitimate concern, but it doesn’t address the inherent flaws of charging for legal services by the hour.
Excessive hours make the problem worse. But the problem goes much deeper than lawyers not being home in time to put the kids to bed.
As I’ll show, the issues of excessive billing targets and inherent flaws are separate but interrelated (and I’ll be examining both). What I’m trying to do is to challenge the assumption that — even with reasonable annual targets — the billable hour is rational or desirable as the dominant form of billing.
So what’s the problem?
The billable hour is touted as a clean system in which clients pay for what they get in a transparent and linear manner. In practice, however, the process of recording billable time involves a host of arbitrary, irrational, and suspect practices. Far from transparently reporting time expended, it distorts it.
This isn’t just a matter of deliberate bill padding (although that is the “elephant in the dining room” whose presence in the profession many would prefer to overlook). Rather, the problem results from the nature of the time-recording protocols that are inherent to the process — for example, the assumption in just about all lawyers’ hourly billing systems that the lowest increment of recordable time known to humankind is six minutes and the belief among many lawyers that it is actually 12 minutes.
Then there are the arbitrary decisions about when the meter is turned on and off. Not to mention the ethical issues involved in selling the same time twice. And so forth.
Only by looking at the minutiae of how time is actually recorded in different situations in which lawyers find themselves can one fully understand the billable hour’s intrinsic flaws.
But the problems with the billable hour extend to more than its inherent distorting effect. The whole system rewards the plodding, inefficient lawyer and penalizes the skilled lawyer who completes a task quickly and effectively. Furthermore, it takes no account of value delivered, nor of the nature of the task performed. In addition, it chills the attorney-client relationship.
Making a difference?
Will this book make any difference? The answer is that nothing — let alone one lawyer’s book — is likely to prompt a mass exodus from hourly billing.
But change can come one lawyer at a time. Those with small-firm or solo law practices are especially able to redefine the way they charge for their services. Law students have choices as to how they want to spend their careers, and they can begin to look for those corners of the profession where the billable hour does not reign supreme. Clients have choices, too.
I know that alternative billing can work. I have a law practice that eschews the billable hour. In my practice, I generally offer flat-rate billing. But there are other alternatives, too, and this book walks you through a number of them.
Bit by bit, alternative billing can make advances, not to the extent of toppling the mighty billable hour, but by chipping away at it and establishing that there are other ways. My hope is that this book will encourage readers — be they lawyers, clients, or law students — to think about some different choices.
The alternatives
This book is subtitled A Lawyer’s Guide to Better Billing. And, as indicated, the book is not just about criticism, but also about examining alternatives and applying a critical eye to them, too.
That said, the bulk of the book is taken up by an attack on the billable hour — the book’s main title suggests as much. This isn’t negativity for negativity’s sake. The reason is that the need for alternatives rests largely on the flaws of the status quo. It’s not that the alternatives are flawless. It’s more that the billable hour is worse. “Better billing” requires an understanding of that premise.
Ultimately, my conclusion is that no form of billing is perfect — although some are less flawed than others. It may be that some form of hybrid is the best solution in many cases.
Some might argue that this book is “biased,” because of the opinions it expresses. Actually, it isn’t. I make no apologies for expressing opinions, but I came to this subject with an open mind.
Nonetheless, I expect to receive some flak for the views I express. That’s fine. It goes with the territory of speaking out against the norm. Actually, it’s encouraging — if a book like this doesn’t get under some people’s skins, it isn’t doing its job.
A note to law students
For the most part, law schools don’t do much to educate students about billing practices in the legal profession. The first exposure that many students get is if they are hired by a law firm as a summer associate. But this is when the law firms are on a charm offensive. Summer associates will likely be spared the more brutal and demoralizing aspects of the billable-hour regime.
That said, summer associates will probably be told something like: “Record all your time.” With that imperative, law students enter the world of private practice. But those four words do little to explain the numerous practical and ethical issues that recording time actually involves.
If you read this book, you’ll learn more about the billable hour in practice than you likely will from any law school class or law firm recruiter. It might well put you off the billable hour. But you might decide to enter the world of the billable hour nonetheless — even if you agree with much of the criticism expressed.
And the reason is that a lot of cutting-edge and interesting law is practiced in environments where that type of billing is the norm. Even if you don’t want to spend your entire career recording your actions in six-minute increments, you may decide to experience that world before making other decisions later on.
So I wouldn’t necessarily advise against working in environments where the billable hour dominates. Just go in with your eyes open. Use this book as a guide. And set your own standards.
If you do decide — now or later — that you don’t want to work in a billable-hour environment, there are opportunities in private practice to escape it. But one of the best sanctuaries is, of course, government service. Along with the retirement benefits, freedom from the billable hour counts as one of the great perks of public-sector law practice.
An important proviso for clients
This book is written primarily for lawyers and future lawyers. However, it’s also good reading for clients of lawyers. The message is the same whoever you are — the book is not about trying to advocate a system of billing that makes sense for one constituency based on short-term interests but, rather, to invite everyone with an interest in the practice of law to think about what is rational, fair, and sustainable all around.
But there’s one important proviso about this book that clients should keep in mind: It would be foolish to choose or reject a lawyer or law firm solely because of the method of billing. This is a book about billable hours, so there’s much discussion about that subject. But, ultimately, of greater importance than the method of billing is the quality of a lawyer’s work. In some ways, the billing culture can impact quality of work, but there is far more to good lawyering than good billing.
There are many excellent lawyers who — although operating with what I consider to be an intrinsically flawed hourly billing method — do perform excellent work and, often, for reasonable prices. If you are a client, and you are happy with the service you receive and feel that the price is fair, you may not really care all that much about the method by which the bill was calculated.
Let me give a couple of examples from my own experience (although I should add that this book is not littered with my personal war stories).
Before I became a lawyer, I owned and ran a niche publishing company, which I eventually sold. I used the services of a lawyer who billed by the hour to represent me in the sale. He did an outstanding job. His bills were fair. Frankly, I wasn’t bothered by how the bottom-line numbers on his invoices were reached.
I would much rather have paid him by the hour than to have gone to some below-average lawyer who happened to offer “alternative billing.” (And, as a reminder, half of all lawyers are, by definition, below average. As are half of all dentists and car mechanics.)
Likewise, when I became a lawyer, and before I set up my own practice, I worked for a law firm that generally billed by the hour. I did good work for its clients. Other lawyers in the firm did so, too. Indeed, I continue to refer clients to them.
But not all clients have unbridled admiration for their lawyer. Often, clients stick with a lawyer as a devil they know, but question whether they are getting great value or brilliant service. And, often, their doubts are justified.
In cases such as that, the type of billing method can swing the difference between there being, overall, a satisfactory or unsatisfactory experience. Moreover, as I will show in this book, billing cultures and methods do impact quality of work when lawyers are stressed more by “making their hours” than by getting results for their clients.
The billing method may not be the be-all-and-end-all of the practice of law, but it is a key aspect. The more debate there is on the methods, the better.
Where is the counter to this book?
Which brings me to another point: Where is the book that defends the billable hour?
With all the criticism of the billable hour, there is remarkably little out there written in its defense. That is why I end this book with a challenge.
The structure of this book
The book you are holding is divided into four parts. Part One provides a short introduction to hourly billing and shows how we got to where we are today — it turns out that the billable hour only established its grip on the legal profession in the second half of the twentieth century.
Part Two dissects the billable hour, pointing out its flaws — both those that are intrinsic and those that have arisen or have been exacerbated as a result of the increasing numbers of hours that lawyers are expected to bill.
Part Three shows how there has lately been a backlash and asks why the billable hour continues to be so strong despite criticism and a general lack of enthusiasm. It also discusses the rules governing the practice of law that impact billing.
Part Four examines the alternatives. This includes a list of better ways to bill by the hour for those who cannot wean themselves off the clock, as well as analysis of completely different methods that shift the focus away from time and onto value.
Finally, the book wraps up with a short conclusion.
Enjoy the book. If you’re a lawyer, battle on while enjoying the practice of law — one way of doing so is to think differently when it comes to billing. If you are a law student, take it from me that it is a great profession and you can find corners where you can get away from aspects that you find off-putting. If you are a client, choose your lawyer with care.
John Derrick
Santa Barbara, California
Entire contents © 2008 John Derrick