Peak Billable Hour

The problem was never the hour. It is that nothing gets defined before the clock starts.

Not a week goes by without a story about a legal matter that has been badly run.

Budgets out of control. Cases described as hopeless from the outset — usually by the people who took them on in the first place. Costs arguments that feel like a journey back in time to before the Civil Procedure Rules existed at all.

Meanwhile the profession conducts a long and increasingly evangelical argument about how to charge. The billable hour and its alternatives. Fixed fees, capped fees, value pricing, subscription, outcome-based — whatever is in this year’s conference programme.

It is a real argument and I have taken part in it. But it has a blind spot, and the blind spot is this. Somewhere in all of that chaos there is a client. Somebody is paying for this. They are rarely in the room when it is discussed.

After a fair few years, I can say plainly what I think. In my view we have reached peak billable hour. The era of firms billing at unchecked rates and settling up at the end is finishing.

But I want to be careful about what I mean by that, because the usual version of this argument is wrong.

Lawyers exist to make money

Let me get one thing out of the way, because a great deal of writing on this subject is coy about it.

A law firm is a business. One of its first obligations — before any of the interesting questions about models, value, ethics and the rest — is to make money. Not out of greed — because if it does not, the people who work there do not have jobs, the suppliers do not get paid, and the clients do not get served at all. I have never understood the embarrassment about saying so out loud. And too many firms have gone down owing their suppliers.

Many will tell you that law is a vocation. It can be both. But a vocation that cannot pay its staff is a hobby, and the profession does itself no favours by treating the commercial question as beneath it.

So when I say we have reached peak billable hour, I am not saying lawyers should charge less, or apologise for charging. I am saying the instrument has stopped doing its job.

The measure was never the problem

Here is the part the debate keeps missing.

The billable hour is a unit of measurement. It is not a method. And there is very little wrong with the unit. An hour is an hour, and inside a well controlled, properly managed body of work it can be perfectly good evidence of what was done and why. Even where you have to put hours in front of a court, that can be controlled. I have seen it controlled.

What has gone wrong is not the measuring. It is that in most matters nothing is defined before the measuring starts.

No scope. No stages. No agreed picture of what this piece of work actually involves, in what order, and what would change it. An open account, a rate, and a hope that everybody behaves.

Replace the hour with a fixed fee and you have changed the unit while leaving the hole exactly where it was. That, in my view, is why so many fixed fees do not stay fixed. They were never scoped. They were guessed, and then defended.

Costs management arrives too late

In litigation, the moment when somebody looks properly at cost is a case management hearing at some point after proceedings have started — or, more often than anyone would like, the end of the case, by which time it is a matter of argument rather than of planning.

That is not a system. That is an audit.

The courts have had a go at this. Costs budgeting arrived thirteen years ago and it was a serious attempt to put the question at the front. It has not been the success it should have been, and in my view that is not because the idea was wrong. It is because the form was unwieldy, the exercise was treated as a filing obligation rather than as a plan, and a great many lawyers never really understood what it was for. Change may be on the way.

And the direction of travel now is more fixed costs. More prescription about what can be recovered, and when.

This may well be attractive. I understand why. But if you impose fixed fees on a profession that has never learned to scope, you have not solved the problem. You have moved the loss from the client to the firm and called it reform.

What comes next

What is needed, before any of that, is a properly scoped and managed system. Work defined at the front, in a form a client can actually read, with the stages and the money set against them, and somebody whose job it is to hold the whole thing together from beginning to end.

In my view that front-end work is a professional service in its own right, and it should be charged for as one. There is an obvious objection to that, and it deserves a proper answer rather than a paragraph.

Peak billable hour is not the end of anything. It is certainly not the end of lawyers being paid well for difficult work.

It is the end of not knowing what you are buying until it has already been bought.

Will Whawell is the founder of T3PS Legal Dynamics — legal pricing and project strategy.