In today’s legal landscape, many firms are asking a perplexing question: Should an attorney’s value be limited to the number of hours spent on a case? It’s a question that has led many to rethink billing.
Interestingly, the billable hour is a fairly recent development — one that firmly took root following a 1975 U.S. Supreme Court ruling. This ruling held that the minimum mandatory fixed fee schedule violated the Sherman Antitrust Act. It confirmed a general consensus at the time that billable hours provided an “objective” measure that could be observed and audited.
Through the billable hour method, clients — like regular customers — could now opt to pay attorneys a higher rate for purportedly better legal advice. No matter the rate, attorneys agreed to charge only the optimal amount of time needed, which is the attorney’s ethical obligation.
At some point, however, “number of hours worked” became too influential, eventually giving birth to the unfortunate phrase, “It’s not whether you win or lose, it’s how long you take to do it.”
A review of billable-hour studies dating to the 1960s proved this point, showing that the average number of billable hours jumped from about 1,200 in 1960 to nearly 1,800 in 2010. One study reported that many firms had an average billable-hour requirement of 1,880 hours in 2010. Another study indicated an average billable hour “expectation” of 2,400 for 2006.
Do increased billing standards penalize attorneys who are efficient and innovative? If the exclusive measure of success is the number of hours billed, absolutely. In any legal case that requires days or weeks of careful review and analysis, the value of an attorney’s advice does not come from the number of hours worked, but rather how well that advice achieved the client’s interests.
Today many firms have begun offering a variety of billing methods to determine the actual value of legal services provided. For litigation, some firms are now offering contingent-fee arrangements (based upon the success of the representation) in both personal-injury matters and certain business disputes. They’re also using mixed-fee arrangements with lower hourly rates.
Many attorneys — including me — find that this flexibility and close collaboration promote attorney-client relationships that are built on a firm’s innovation and efficiency, not its ability to rack up hours. It also means that if the client does not benefit, the attorney doesn’t benefit. What client would argue with that?
Jennifer Schrack Dempsey is a partner at Andersen Banducci. firstname.lastname@example.org; 342-4411. This column appears in the Nov.18-Dec. 15, 2015, edition of the Statesman’s Business Insider magazine.