Is Hourly Inherently Bad?

Kudos to you Tom Collins. We need more discussion about alternative billing. It is not surprising that 90% of revenue generated by law firms is on an hourly billing basis. However, the reason for that at least in part is because most firms don’t offer any alternatives, any real alternatives to hourly billing. Further, most clients don’t understand that there are alternatives in the market.

You note that “most law firms focus on the client and not on one or a few will defined package services” having worked for numerous hourly billing law firms, I would say that most law firms are not focused on the client. Most law firms are focused on generating hours to bill. This is unfortunate since it certainly has the potential to affect the relationship between the law firm and the client. Clients sense this dynamic but many feel there is nothing they can do about it.

I also agree that many clients will prefer the hourly billing method or at least perpetuate it out of momentum. I would also agree that the hourly billing system in and of itself is not that problematic. The real problem is the way that law firms implement that system, driven by almost ravenous efforts to find more ways to bill the client. In addition to considering alternative arrangements, law firms need to rethink what they bill to the client. We all know that clients hate bills with line item charges for sending basic transmittal letters or for short phone calls. Law firms which hope to thrive will reconsider that approach and work hard to show the client that their billing practices are both reasonable and that their internal culture is solely focused at solving the clients problems instead of billing more hours.

Finally, I agree that each and every attorney client relationship is different. You do have to match the client’s problem with the appropriate billing relationship which creates incentives between the lawyer and the client to solve legal problems while at the same time paying value for value provided.