The Assault on the Billable Hour Back in the News

The Billable Hour is still under attack in the nation’s press and real change seems to be taking hold. According to several recent blog posts and the Wall Street Journal, corporations are using the recession to structurally change the way they acquire legal services.

Document Assembly is one technology amongst many that can increase the efficiency and productivity of a corporation by automating high volume documents such as sales contracts, services agreements, licensing agreements, etc, AND of a law firm by accelerating the speed of complex document creation. This increased efficiency drives lower and more predictable costs that can then allow law firms to remain profitable in a fixed price environment.

In the Wall Street Journal Nathan Koppel and Ashby Jones wrote about U.S. corporations pushing their outside counsels for flat fee contracts.

“The companies are ditching the hourly structure — which critics complain offers law firms an incentive to rack up bigger bills — in favor of flat-fee contracts. One survey found an increase of more than 50% this year in corporate spending on alternatives to the traditional hourly-fee model.” Pfizer, American Express and Cisco are all cited in the article has having done very creative fixed price deals with the outside law firms they use.

“Flat fees a growing trend among firms big and small” in the Minnesota Lawyer by Associate Editor Michelle Lore states that “St. Louis lawyer, writer, speaker and entrepreneur Matthew Homann believes that any case can be priced on a flat-fee basis if the attorney has the experience to properly evaluate the matter and has the systems in place to handle it economically.” Mr. Homann also has a blog about this subject called “The [non]billable hour”.

Law Office Technology by Roland Schorr & Tower, talks about how technology can help law firms bridge the gap between the billable hour and fixed pricing. “Tech can bring efficiencies. Ironically firms have long been wary of technology specifically BECAUSE of the billable hour. If you use document assembly software that cuts your time to compose a particular document down from 3 hours to 1 hour…well, you’ve just cost yourself TWO billable hours! But in a value-based system, that’s a GOOD thing.”

It’s not news to us that good use of good technology brings efficiency.

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