The troubled economic environment has led to layoffs, office shutterings, and the dissolution of Heller Ehrman. Now, the Washington Post is trotting out the idea of the death of the billable hour as a potential outcome of the financial crisis:
Since becoming commonplace in the 1970s, hourly billing has been the subject of criticism by clients and debates by legal experts, who say they give lawyers incentive to work inefficiently. But law firms have been slow to embrace alternative billing.
That’s quite a definitive statement. We’re less certain. If there’s a fixed fee revolution going on, we haven’t heard about it. And as the article notes, this is far from the first prediction of the billable hour’s demise (e.g., Whither the Billable Hour?).
But these are desperate times, and everyone’s feeling the pressure. Is it enough pressure to push firms over the brink to fixed fee billing? More speculation, after the jump.
In-house attorneys are a major force behind the crusade against the billable hour. The in-house folks say firms’ hourly rates have jumped 70 percent between 1996 and 2005.
New efforts to jettison hourly billing are being driven by in-house corporate lawyers, who say they have grown frustrated seeing fees to outside firms soar even as they slash their own costs. They said they want more certainty in their legal budgets and worry that outside firms are spending unnecessary amounts of time on their matters.
This makes us wonder to whom you’re billing this ATL reading time… but we digress.
Alternative billing models include fixed rates, volume discounts and lower rates in exchange for performance bonuses. Most firms are opposed to the idea. But not all.
Jay Shepard, chief executive of Shepard Law Group in Boston, said his 2007 revenue doubled after switching from his firm’s $250- to $500-an-hour rates to fixed and negotiated fees the previous year.
“Before the financial crisis happened, I thought in 10 years the billable hour would be on the way out. I now think that will be sped up,” said Shepherd, who has represented Adobe, Samsonite and Costco in labor cases.
The debate rages on. What are your thoughts? Could the economic crisis really hasten the demise of the billable hour? Would a billable hour-less world be a better one? And how many of you are on the clock as you read this?
Rethinking Legal Fees for Lean Times [Washington Post]