Talking about Hourly Billing is Like Dredging up Bad Memories

I was one of a three-person panel recently speaking about law firm profitability.                  

I had not anticipated the emotional toll which would be had as a result of having to think about hourly billing.  The audience was mostly large or niche firms in the hundreds of attorneys who are getting their CLE credit and learning about how to increase gross revenue in an hourly billing environment. 

Before reminiscing down hourly billing lane, I want to say that the other two presenters were phenomenal.  I would recommend either one to any law firm looking to improve profitability. 

But here’s the problem.  I wake up in a world that is dominated by value billing.  Even on complex litigation, we always propose a flat fee alternative to the client.  I do not believe I was able to impress on their hourly billing brains that the difference between value billing and hourly billing had almost nothing to do with billing.  It has to do with incentive.  One post presentation question asked how it could possibly be ethical for me to receive more than what my hourly rate could spit out on a monthly bill. 

Value billing is really about making every hour deliver value.  But value is expanded beyond the sixty-minute hour.  The concept that a client would rather pay for hours than defined deliverables will be a difficult concept for most lawyers to grasp for a long time to come. 

Sure, I post on the Greatest American Lawyer Blog.  I’ve been doing it now for five years.  There are few bloggers who have driven as much content.  It has been an eye-opening day for sure.  I take my days for granted.  Hourly billing is verily a distant memory.  The feel of it as you walk in the office at the morning and as you try and leave at night is something I can’t feel any longer.  I have to say I was probably a little on feisty side.  The talk of hourly billing just gets my ire up.  I felt like I was trying to insight a revolution and knew every person on that call knew exactly what I was saying when I told them how I remember it used to feel when my spouse would call and after a few minutes I could only think about the fact that I was wasting billable time.  The mere concept of being unleashed by the obvious constraints of hourly billing must be a compelling thought, even though most would never admit it to be true. 

I also know there were people on the other end of the line who probably wanted to take me by the neck and strangle me.  What I was saying suggested nothing less than anarchy and risked that the fat cat who are doing very fine thank you, might have to answer to either clients or associates. Luckily, the only five people on the line who could speak out loud were the other two presenters, the sponsor of the webinar and the moderator from the online webinar provider.  Talk about a captive audience. 

I started off the presentation acknowledging that what I achieved was in part made possible by the fact that I started my firm from scratch and did not have Army Divisions of cynical and egomaniacal groups of partners to convince.  It made me believe, once again, that companies in the service business especially which are large will continue to have a hard time competing against smaller, more nimble and risk tolerant smaller firms which can implement and deploy technology on moments notice. 

I need to tell you one of my other favorite questions today.  It was how you pass the cost of technology on to the client in a flat fee system.  Of course, I answered that in a flat fee system, the law firm benefits based on value proposition for the client as against the firm’s ability to generate quality deliverables as efficiently as possible.  Efficiencies provide greater profits for the firm.  I explained of course that you would never pass that cost on to the client under our model.  You would simply purchase and deploy as quickly as you possibly could, and get everyone trained as part of a firm-wide process.  I wondered once again “too big to not fail?”

I’m not saying it can’t be done.  I truly believe that a law firm of any size with the right leaders can implement a cultural change where employees are valued for being able to continue to learn and advance skill sets surrounding the functionality of the implementation and function of technology.  Employees that were adverse to change would be disfavored at bonus time.  That is really what technology is all about.  Every day, new forms of communication collaboration are born on the internet.  Cell phone technology and the built-in digital dictation system on my Blackberry Curve provide me the instant ability to work any place, any time.  But a law firm has to breed a mentality which accepts the challenge of perpetual and continuous improvement and efficiency.  Law firms have become obsessed with hours.  It is all they can think about.  That’s only because hours can be like a virus.  At some point, neither your mind nor your body can fight it off.  It seeks to perpetuate itself. 

Anyway, I’m sure I’ll be saying a lot about some of the things I’m being forced to think about these days.  The next time I get invited to a presentation to a group of lawyers about the opportunities of more innovative business models for law I willknow to have a drink on-hand for when I am finished.  Tomorrow I’m going out to lunch with a local attorney who is interested in our business model.  No rest for the wicked!