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October 08, 2007

The Billable Hour "Cockroach" is Being Exterminated....One Law Firm At a Time

(UPDATE:  10/9/07 Meet Jay Shepherd, who authors the Gruntled Employee and read his post on how since he abandoned the billable hour his revenues have doubled!)

A Boston based law firm has taken the unusual step of banning the billable hour...if their clients want billable hours, they tell them to find another firm.

And this is by their choice, not because their clients are pressuring them into it.  The lawyers don't want to sell time for services anymore, don't want the restraints of the clock. 

Shepherd, a five-lawyer firm that specializes in employment law, charges its clients a flat annual fee or flat price per task. Clients can call the firm as often as they want to discuss legal issues, although some services, such as training and litigation, cost extra. The new approach helps clients determine legal costs in advance and often prevents legal problems from escalating because clients are no longer reluctant to seek advice out of fear of incurring a hefty bill, said Jay Shepherd, the firm's founder.

"Hourly billing is wrong and it's anti-client," Shepherd said. "There's a disincentive to be efficient since you get paid more if you take longer to finish a matter - even though the client wants it to be finished as fast and efficiently as possible."

The American Bar Association concluded in a 2002 report that hourly billing is at the root of much that is wrong with legal practice: brutal hours, lack of collegiality (since time spent chatting with colleagues is time not spent billing), fraudulent billing, lawyers who intentionally stretch the time it should take to finish a matter, unpredictable costs for clients, little time for friends and family, little time for community service, and a system that rewards lawyers for quantity over quality.

I salute them.  While they are not the first, they are one of the many saying, 'no more.'  And as more and more law firms, big and small, say 'adios,' eventually the tide will shift, the consumer will become more educated as to the benefits of not paying a lawyer by the hour and client/attorney relationships will improve, lawyer career satisfaction will improve and maybe, just maybe, the image of the profession will improve in a noticeable way.

Because quite frankly, I'm tired of seeing our profession being reduced to almost tabloid-esque style headlines proclaiming the birth of the $1,000.00 per hour rates, associates committing suicide unable to meet their billables, people leaving the profession in droves as they are asked to sacrifice their entire personal lives to the almighty clock.  It's a profession-created cockroach and as such it can be exterminated, one lawyer, one law firm, one educated client at a time.

And to new solos, try to not get started on this path.  Learn alternative fee arrangements from the beginning.  Seek out those knowledgeable on value based billing.  Start your practice with the right habits.  If you are in an area of law that requires hourly rates, time to put pressure on the courts to see the light.  It's hard work  But nothing worth having is ever easy.

Links to other posts of interest:

The Cockroach of the Legal Profession - 8/13/07


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Stephanie Kimbro

I agree that dropping the nonbillable hour can help a solo firm grow. I've run a virtual law office for over a year and have intentionally offered fixed prices for my services. My clients are better able to fit this type of pricing into their budgets and I find that I do not have trouble collecting online payments from them with the fixed fee billing. I think the key to making it work for your firm is really knowing how long it takes you to handle a certain legal matter and realizing that for every one that it takes you longer, there will be another that you will complete sooner than expected. The balance will work.

Sam hasler

I split between hourly and flat fee and have working on moving over totally to a flat fee basis. However, I have had more clients in the past month ask what is my hourly rate and when I try to explain I charge flat rates they become very confused. I am of the opinion that the problem is not just us but also the client's knowledge and expectations.

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