The insidious nature of the billable hour

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 Abraham: @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?


Margaret Burrell says:

Clients want good old fashioned customer service and value for money, and if the lawyers' 'product' is packaged in this way – and actually does what it says on the tin, – clients will accept it. It's true that some clients prefer 'billable hours' because, as you say, it is a concept they understand. However, I – like many others – also offer fixed rate work to

Blane says:

Important to this conversation is the storage and retrieval of new mediums into document assembly. The content and discussions in social media play into the assembly of information for clients. This is also a utility – at least in the short term – to continue to find ways to measure a billable hour if advice or work is done in social media on behalf of a client. I do agree

Andrew Davis says:

Hi Margaret, I completely agree with your comment that firms using document assembly could “offer more flexible charging structures.” For example, one option could be to charge a fixed rate for generating a first draft of an agreement, and then charge by the hour for negotiation. This would provide firms and their clients with more predictability.

Write a Reply or Comment

Your email address will not be published. Required fields are marked *

Achieve 100% Contract Certainty™