A lot has been written about the “death of the billable hour”. However, sadly, it’s not dead yet.
In the last year, I’ve made the move from private practice at a large firm to senior counsel at a larger national company. Professionally and personally, it’s been an amazing and challenging transition. One of my responsibilities has been to manage outside counsel and negotiate fee new agreements. It’s a task I’ve found very interesting, particularly given my prior experience on the other side.
From what I’ve seen both in-house and in private practice (and that of a number of colleagues I’ve worked with), the billable hour does not promote efficiency within law firms. If you’ve ever examined a bill from a law firm (or better, analyzed them across multiple law firms), it’s always fascinating to see that different lawyers can take vastly different amounts of time to do a similar task. I’m not impugning the work of any of those lawyers – in my experience, most lawyers are honest about their billing practices. However, the same task, carried out by lawyers of similar experience, should take the same amount of time (or at least cost the same), regardless of the lawyer.
If only billing by the hour, what incentive does a lawyer or law firm have be efficient? I’ve implemented some monthly retainer agreements for general advice and staged fixed-fee agreements for standard litigation (human rights, workers’ comp) to help increase efficiency and predictability (which helps with budgeting). Similarly, blended rates help with with budget predictability and force firms to push work down to the right (more junior) levels, where appropriate.
In my relatively short experience, large law firms won’t offer “alternate fee agreements” (AFAs) without being pushed by their clients. However, once pushed, they can be very inventive. Clearly, there’s a lot more to be said on the subject than can be contained in one blog post.
Have any SLAW readers has similar experiences? Does anyone feel strongly that the billable hour is still a useful and necessary tool?