Alternatives to the Billable Hour

The dreaded “billable hour” is played out mercilessly in countless lawyer jokes. The perception of lawyers charging for the smallest increments of time is part of our popular culture. It might come as a surprise to some to hear that the legal world’s notorious billable hour was not always the ruling standard. It was not until the 1970s that this method of billing overtook other approaches. The progression of technology further fed the growth of the billable hour with software programs enabling easy tracking across multiple devices and platforms. Jokes aside, what effect has this unrelenting billing method had on lawyers themselves?

Alongside the cultural perception, the pressure of the billable hour can also have a harmful impact on the well being of lawyers under its regime. In their 2015 study, “What Makes Lawyers Happy,” Lawrence Krieger and Kennon Sheldon found that the practice of required billable hours “had the strongest negative relationship with well-being.” One of the primary reasons for this negative correlation was the perception that it decreased an individual’s autonomy by prioritizing external rewards over an individual’s unique worth and value. More so than simply working long hours or high-pressure positions, the requirement of a billed hours quota had the most damaging effect on a lawyer’s well-being. That statement is chilling and should be cause for re-evaluation of this decades-long billing standard.  

While still the most prevalent approach, there are signs of movement away from the billable hour in favour of alternative methods. One study reported that 22 percent of all transactions were attributed to ‘alternative fee arrangements,’ up from just 5 percent seven years ago. San Francisco based firm, Fenwick, LLP. is one example of this alternative fee group with the creation of their FLEX program. FLEX offers quality, in-house counsel on demand, allowing clients to purchase blocks of time which can be utilized for a variety of legal services. While the program is client-focused in its flexibility, the benefits also seem to flow inward as Fenwick was named one of the best places to work in the Bay Area by both the San Francisco Business Times and the Silicon Valley Business Journal.  Another alternative approach is “Value Billing.” Instead of running the meter at the same rate, regardless of the task, value billing takes into consideration the specific action taken on behalf of the client and assigns an appropriate valuation. In-depth trial preparation, along with a favourable trial outcome, for example, are combined actions with a high value to the client. A lawyer should charge premium rates for premium work. Value billing highlights quality over quantity. These are just two examples of billing approaches that break away from the standard billable hour.

Doing away with billable hours isn’t necessarily the answer across the board. Some firms successfully use this method without tying it to an individual’s worth as a lawyer or colleague. Regardless of the methodology, what should change is the perception of billable hours as the default measure of someone’s value. If a firm stays with traditional hourly billing, then it should be backed by a company culture that still supports value-driven work.

Derek LaCroix
Derek LaCroix, KC, joined LAPBC as our Executive Director in 1996.