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The insidious nature of the billable hour

The insidious nature of the billable hour

December 01, 2009 Jamie Wodetzki Document Generation  

From the You Cannot Be Serious! file:

"LAWYERS face a national crackdown on over-charging that could end the practice of billing clients for sending them Christmas cards and reading thank you notes."

This is the opening sentence in Over-charging by lawyers under scrutiny, an article in The Australian newspaper. Do some lawyers truly charge for these activities? Do they disclose this to their clients?

Hourly Billing 101

It's certainly true that lawyers are, in the most part, measured on their billings. You (usually) receive revenue for billable work (such as research, advice, drafting and negotiation on a matter); you don't for non-billable work (such as investing time now creating processes and systems that will enable you to do all future work more efficiently).

When accounting for every six minutes in their day, lawyers are constantly deciding (often automatically) whether an activity is billable or non-billable. It doesn't take long for new lawyers to conclude that billable work is 'valuable' (to the firm, not the client) and that non-billable work is worthlessnot. Accordingly, the bigger the bill, the more valuable the work.

The Impact on Document Assembly

As noted previously, Exari has law firm clients using document assembly to great effect. However, there's no question that those firms are still viewed as innovators. A recent Twitter conversation captures the thinking about what's holding back other firms, as well as potential catalysts for change.

Ron Friedmann: @VMaryAbraham @jeffrey_brandt Outside investment via LRA in UK is likely legal IT game changer. eg, Widespread document assembly at last?

Jeffrey Brandt: @VMaryAbraham @ronfriedmann I agree outside $ investment is huge game changer. 2 get widespread doc assembly, u need to change comp formula.

Mary Abrahamham: @jeffrey_brandt @ronfriedmann To get widespread doc assembly, U need high volume low margin work . And, clients who insist on fair pricing.

Jeffrey Brandt: @VMaryAbraham @ronfriedmann I'll disagree w/U. In order 2 get widespread D/A U need lawyers updating rules, a tradtionally nonbillbale task.

Mary Abraham: @jeffrey_brandt @ronfriedmann Lawyers do nonbillable tasks, provided there is an immediate & obvious payback. Applies 2 document assembly 2.

Ron Friedmann: @VMaryAbraham @jeffrey_brandt D/A requires much non-billable 'knowledge engineering' hence need for outside capital. What lawyer invests?

Doug Cornelius: @jeffrey_brandt @VMaryAbraham @ronfriedmann The billable hour is the enemy of document assembly for law firms. You can't get a positive ROI.

Ron Friedmann: @DougCornelius Billable hour _is_ doc assembly barrier.... that's why PE investment in UK could change market.

Unsurprisingly, the billable hour was a big focal point.

What Next?

Even though clients and law firms don't particularly like it, they understand the billable hour. They know where they stand. So, I don't see it disappearing any time soon. I agree with Jay Sheppard's comment: "it's the end of the beginning. But there's a long way to go." That said, it will be interesting to see the impact of outside investment in UK law firms when that happens.

Where do you stand on the future of the billable hour?

jamie

Jamie Wodetzki is Exari’s Co-founder and Chief Product Officer.