FIRST

never

a screaming retard holding an alarm clock--now that's a guy I could talk shop with.

This story has been done every year for at least the last 20 years. My memory does not go back farther than that.

Who cares about first. Look in the toilet.

Isn't the point of a blog that it provide breaking news? The Wall Street Journal front page article was delivered to our office at like 6 this morning. I read it three hours ago over coffee.

So where is the news? At fucking 12:30 this shithole finally gets around to reading yesterday's news. Thanks for the update.

Oh, and this comment contains no typographical errors, assuming "shithole" is spelled write. Or is it more properly "Shithole?" Mr. Shithole?

You certainly can measure performance objectively on a non-billable hour system. Our firm charges clients on a flat-fee basis. The firm still counts the number of hours it takes each associate to complete an assignment. Associates who complete the work in the least amount of time realize the greatest profits for the firm when the matter is flat-fee. Those associates are rewarded. Quality control isn't an issue because supervising partners and in-house counsel still review the work - so the work still must meet their standards.

#5 is right. Every year or two this comes up, but most clients simply aren't willing to switch to a fixed fee arrangement. Not I trust most lawyers to figure out how to price legal services effectively. Anyway, it's mostly lawyers complaining about having to bill in the first place, and they're right; it does suck.

I guess managing your associates and being aware of the quality of their work is too difficult of an evaluation method for lawyers. It is ironic that a profession adept at manipulating statistics would rely on them for internal assessment.

7

A race to turn out product reviewed by a partner who most likely doesn't take the time to thourghly review the product is a recipe for disaster. This would only really work if the partner was on the hook for the errors, i.e. a classic aprtnership.

"But what about measuring productivity? Once you abandon the billable hour, you need to come up with some other criteria by which to measure your productive associates against the low performers. All of the firms that are moving strongly away from the billable hour are looking at a hodgepodge of associate evaluation factors that seem utterly subjective."

Christ!

Most corporations and business people use subjective evaluations.

Egg head lawyers are too socially retarded & autistic to take their noses out of the grindstone and actually take the time to make an ACTUAL BUSINESS JUDGMENT about productivity that doesn't rely on bullshit, padded numbers.

That's why firms are going down the toilet.

Is Georgetown an ivy league school?

T10 MBA STUD

Nothing prevents a law firm from requiring associates to keep track of their hours, they just don't have to bill the client on this basis.

-- Former BigLaw partner, now in house counsel.

What in the fuckety fuck is this billable hour people keep talking about?

COUCH SECURE

Nothing prevents a law firm from requiring associates to keep track of their hours, they just don't have to bill the client on this basis.

-- Former BigLaw partner, now in house counsel.

@6, "write" should be "right". Throwing stones. . .

Elie "Shithole" MysTTTal

6 - I bet you give great advice to everyone from the back of the back. How sheeplistic of you to rant on about the timeliness of the blog. You missed the point oh master of the bloviation.

We live and die by the billable hour. I have come to realize that peer firms are resistant to adopting my "hybrid tough love" package because it involves reducing associate salaries, which will then engender a call for a reduction in hourly rates. Peer firms need to hire accountants and consultants to determine whether we would be better off slashing starting salaries and thus, reducing our hourly rates or remain in the status quo.

Only real way to measure productivity is the hour even if alternative billing is implemented. Need a way to measure everyone against everyone and figure out a "cost" for the project. I think software solutions that track time and productivity like Chrometa.com will help the transition.

6-

"Shithole" is spelled "s-h-i-t-h-o-l-e," not "w-r-i-t-e."

Schmuck.

The first firm to change to this system will rake in the clients.

@21,

...but not the profits.

Love,
Billables-4-life

It doesn't matter if the billable hour dies. It exists because, long ago, clients would get pissed when they got a bill from a law firm without any real explanation of cost. So, clients demanded that law firms create the equivalent of an itemized receipt. Law firms thought the easiest way to do this was via billable hours and the clients agreed, so they started charging that way.

If the billable hour dies, in 5-10 years, clients will then start complaining that the bills are too high and demand itemized receipts, and the process will repeat over and over again. So, I say it doesn't matter at all, things like this come in cycles.

10

At my firm, the partners are on the hook. The buck stops with them.

7

Whether this will happen all depends on if Evan Chesler will put his money where his mouth is

What's a "billable hour"?

-PI lawyer

MysTTTal is in love with the billable hour for obvious reasons. If his compensation was affected by the quality of his work, he wouldnt make a dime. Hourly rates allow him to still reasonably demand that Lat pays him when he turns out absolute crap on this TTT rag.

WRT 7 and 10, 10 is generally correct IMO. Flat fee arrangements can work, if it is a very egalitarian work environment, and if cases attach to a responsible associate for their lifetime. However, in a lot of transactional work (where I've seen flat fees), some people become handy at picking up the high-margin assignments that take an hour to complete, while dodging work that is less profitable. What's more, it creates a turn-and-burn mentality that results in sub-par work and screws attorneys who spend hours cleaning it up down the line. That's not to say I think the billable hour is the answer. I will readily agree that the billable hour is a terrible metric as well, and subject to gross manipulation. But unless you're in a very small, open practice, billable hours can do a lot to level the playing field and do a better job of rewarding quality effort.

Clients want to pay less, rather than pay more. but I don't see why clients should prefer flat fee arrangements over the billable hour.

Billable hours encourage lawyers to devote time and attention to clients' matters and problems. Flat fees encourage lawyers to spend as little time on the matter as is humanly possible, so the lawyer can take on as many flat-fee matters as he can.

Since legal fees are often dwarfed by the dollar amounts at stake in representations, it seems that clients should be more willing to tolerate the inefficiencies inherent to the billable hours system rather than deal with the risks inherent to the stripped-down representations that are economically encouraged by a flat fee.

The billable hour will probably continue to be the preferred system, but clients will scrutinize bills more closely and negotiate lower hourly rates or discounts off the bills.

@26,

It's what separates the attorneys who buy foreign sports cars with cash from those who chase every ambulance hoping to make this month's lease payment on their Ford Focus.

(Pre-emptive BS on you pretending that you're one of the country's 5 PI attorneys who don't live below the poverty line.)

"For services rendered"

18 - you clearly don't know what you're talking about. If you did, you would know that the firms at the top of the prestige chart don't really bill by the hour - they block-bill, or value-bill.

Your bit is stale.

30

What is wrong with a Ford Focus? Please explain.

- Not PI

Partner profits drive the high cost of legal services. What clients need to do is send their work to attorneys who don't demand to be paid $1 million a year.

Clients only want a flat fee arrangement if it lowers their overall bills. Lower overall bills equal lower profits per partner. The culprit isn't just associate salaries, although they are a convenient scapegoat for the partners making bank and not actually doing any of the work.

The bottom line in civil defense is that you can never accurately predict what's going to happen. I can't tell you the number of times you have sloppy plaintiffs' attorneys doing crazy last minute or after tracking order deadline stuff. i.e. Supplemental expert disclosures after Daubert deadlines, moving to amend complaints after deadlines, etc and a myraid of other things......Then you have to file motions to deal with these issues etc.....

The billable hour, while subject to abuse, is still the best way to deal with this. Flat fees may work for a simple will or uncontested divroce. It will not work in complex civil litiagtion.

When I started a long time ago at Cravath, the firm had a simple billing form: For professional services rendered in connection with ________. $______

There was a very real reluctance to give the clients the raw information. Cravath certainly kept track of the hours, and associates were aware of them. However, the "For professional services rendered..." allowed the firm to adjust up or down depending on the result that was delivered.

It was a cool way to do it. Partners knew they had to please their clients-- lower bill for a broken deal or crappy product; a premium for superb work and a successful transaction.

When the laundry came out, and the back up was given to clients, hourly padding or cutting was used to justify the result. Actualization rates became the primary measure of judging productivity.

The notion was "Look if you want a quality law firm, okay we'll give it to you. And we will charge you for the result we get. Now screw off."

Somehow I think that system worked better and was more efficient than the "show how the sausage is made" system we have now. The partners knew what the work was worth and billed accordingly.

36 - they still do it.

30 hates America and the environment

The billable hour is the bane of my existence.

"Billable hours encourage lawyers to devote time and attention to clients' matters and problems."

Billable hours also encourage lawyers to be inefficient and dishonest about the hours they actually put in. The billable hours submitted by lawyers can often be considered works of fiction in so much that lawyers simply try to recreate what was done during the week. Also, at least in the insurance defense area, billable hours have become value billing meaning, you bill so many hours per project, regardless of actually how long it took. I think more needs to be made of this issue, especially if you want to kill the billable hour.

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It is the fault of clients. If you want to pay less, vote with your feet. There are plenty of great small and regional firms full of ivy league lawyers who are as good at the big boys for all matters but the ones that require 40 warm bodies. If you don't vote with your feet, STFU and pay the big bills.

Billable hours are good for law firms, not clients.

How does the billable hour measure productivity? Let's say if you have two associates who write a similar brief of equal quality and one does the brief in 40 hours and the other in 60 hours. Which one is more productive?? Firms actually punish the person who is more productive because it means less money for them. You totally see it in doc review where some attorneys can go through documents quicker (with the same quality work) than others.

Firms can easily determine who is productive than by looking at numbers at the end of the money. Productivity is more than just being able to sit in an office longer than your colleagues and manage to look busy.

Despite the "hybrid tough love" that I regularly dispensed to my son, he still turned out to be a complete and utter joke. I wonder if it's too late to abort him...

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29 & 34 are on the right track. The problem isn't the billable hour per se, it's the hourly rates. Show me a first year associate who's really worth being billed out at $300/hr (when in fact at $160K / 2500 hours, they're making more like $64/hr gross before bonuses). And don't get me started about factoring in overhead costs. Do a secretary and office space really justify a $236/hr markup?

This comment is addressed to post no. 32.

Yes, on transactional work. However, on litigation and in this economic climate, the client demands a breakdown of time. This is not 20-30 years ago (golden age of the legal profession) where we would submit a bill and it would be paid within 30 days without question. Attorneys simply got greedy and the gravy train has come to a halt. I will give you an example. I bill about $750 per hour. I could bill at $1,000 an hour (like some of my peers) but that would be skull sodomizing the client. In the end, I prefer keeping a client happy rather than alienating them with my need to feed my ego and justify a $1,000 hourly rate.

As for being stale, I guess I have something in common with your career.

36: My NYC firm that will remain nameless uses the same system--the bill has two lines: One for total amount due for work and one for "disbursements." Otherwise, we don't go into any more detail unless the client specifically asks, which is rare, then we'll give them an itemized receipt.

28 -

Your point is well-taken but is rendered moot by the fact that there is a strong QC program in place to ensure that associates do not fall prey to that kind of mentality. The fast associates and the slow associates generally perform at the same quality level.

Also, what 41 said.

7

I want to buy a new Ferrari, but only pay $50k for it. Guess what, no one is going to sell me a Ferrari. Clients need to accept this fact. If you want a Ferrari, you need to pay for it. You most likely do not need a Ferrari. Settle for the 5 series, and save some money. Stop bitching about the high cost of Ferraris. It is your fault you desire a Ferrari.

33,

I'm sure it's perfect for you. Enjoy!

-30

Newsflash: Many large corporate transactions have been done on a flat fee basis for years, billable time only accrues to time in excess of estimated time. This is old news and comes around every recession much like Halley's Comet, just at greater intervals.

I definitely do not want my outside counsel limping along trying to finish a trial the same way the contractors limped along trying to finish my house when they realized they were over budget and were trying to preserve their margins.

- In House Counsel

52

That fails to qualify as an explanation. Please explain your statement fully.

Thank You
33

Subjectivity should rule the day, why shouldn’t it? If you work in customer service, are you judged by my how many calls you field, or how many customers you satisfy? (There is a reason for those ubiquitous “satisfaction surveys” after calling a customer service line). If you are a trial attorney, you should be judged by whether or not you won the case; discovered a key element; shook a witness; or overall made do with a bad set of facts. Yeah, that means your evaluators need to be familiar with your underlying case. They can’t just read a printout and see how many hours Johnny “worked” on a file. As someone who has worked in private practice, in-house and the government I’ve seen many attorneys just check out and go through the motions, but the only ones that were rewarded were those that wracked up a lot of time doing it.

"I wouldn't say I've been missing it, Bob."

48 - I guess ad hominen attacks are a part of tough love - I'm sure that's really effective. All joking aside, while you and others may think your posts are amusing, they often spoil the dialogue on this blog. Once in a while it's funny, but your insistence of trying to one-up everyone while spewing utter nonsense makes you look like a fool and frankly makes it difficult to enjoy reading ATL.

I have it on good authority that PE keeps a stable of young boys all named Enrique at his disposal. He supposedly pays them an hourly rate for "companionship."

Compromise solution:

Continue to use the billable hour, but only as an internal measurement of attorney productivity.

Bill clients according to different arrangements, arrangements which may or may not take into account the billable hour, but which will not depend entirely on the billable hour (unless a client demands it).

The problem isn't really the billable hour, which has its inefficiencies for sure. It is the rate. The most consistent client complaint is the ridiculous overvaluing of junior level time. That is the result of straight partner greed. They set the rates way too high for producers whose inefficiencies are the most glaring. And clients know it. That's why they routinely ask that juniors not be put on their matters, except where you absolutely cannot live without the manpower (i.e. massive transactions or cases).

If juniors didn't cost so much, maybe clients might be a little more willing to pay for some of the "fluff" involved with training new associates. Maybe not, but that's how it used to work.

Compromise solution:

Continue to use the billable hour, but only as an internal measurement of attorney productivity.

Bill clients according to different arrangements, arrangements which may or may not take into account the billable hour, but which will not depend entirely on the billable hour (unless a client demands it).

11 makes a good point.

But it's not just lawyers - many business managers also don't want to have to do the hard work of investigating and judging performance by individual personnel. That kind of laziness was typical among management the Fortune 500 company I worked for before law school. They all wanted to rely on numbers as a shortcut around actually managing.

(I do agree, however, that lawyers are particularly bad as managers, probably because most of them are naturally bookish and idiosyncratic nerds who don't want to deal much with people and who, even if they wanted to, wouldn't know how. They're sort of like I.T. managers, but with a greater sense of self-importance.)

Why is it so hard to value an associate without a billable hour? that is a bit retarded. Companies do it all the time.

The other reason the client wants a billable hour is because they can control how lock-tight they want their case or transaction to be. I am not going to put the same effort into a 10k collections matter as a million dollar dispute. My answer to the client is quite often - well, that depends, do you want the $10 answer or the $10k answer. A good attorney can take any shit and turn it into gold. But no matter who the attorney is, it takes longer to turn shit into gold than to throw shit at the other side. So, it costs more. That's the benefit to the client of a billable hour. If not for billables, I'd be throwing a lot of shit at the other side.

61

The ones who hold the bag of cash at the end of day is the law schools. 3 years, 2 of which are unnecessary, and at a ridiculous price. the big law firms somehow agree to pay the beginning salaries to make up the horrible debt.

biglaw needs to think about how it's going to get part of that cash. firms could start by recruiting from 2-year programs as a priority over 3-year programs. northwestern has a 2-year program, and many other top schools would follow the example if students and firms put some pressure on the schools.

http://www.law.northwestern.edu/academics/ajd/

61,

High rates for all attorneys (not just junior ones) is driven by partner greed.

Clients can blame no one but themselves for this situation. in-house counsel pick the "name" firm to cover themselves in case they get reprimanded for losing a case. "I hired Cravath and we still lost, so it isn't MY fault."

66 - Don't forget that often GC's are also products/alumni of biglaw and even though they're now the client, biglaw billables are the only thing they know.

66 is correct. many GCs cover their ass by hiring the most expensive firm in bet the company litigation so their decision won't be second guessed.

Clients are chipping away at the billable hour six minutes at a time by telling firms the maximum they can bill for certain activities, such as .1 for a deposition notice, and by determining certain tasks are not billable at all by anyone, such as calling court clerks.

Little work gets done on the flat fee cases until they convert to a billed case which is 30 days from trial.

Clients also restrict who can work on files - 1 partner, 1 associate, 1 paralegal and they have their names, so no one else can be recruited to help. Or if the y do help the time has to be billed under one of the 3 approved names.

53 - The only transactions I've seen on a flat fee basis are commodity transactions (such as certain securitization transactions). You still don't (and IMO will not) see a large scale move to flat fee in areas like mid-sized public company M&A. If a client is buying a $50 million business, the amount of the bill is going to be directly proportional to (i) how hairy the target is and (ii) how much the client decides to fingerf*** the transaction, neither of which the lawyer has any control over. Inasmuch as the billable hour incentivizes clients not to lawyer every deal to death, it's here to stay.

F. Douglas Raymond at DBR uses the billable hour to measure his ego. That would explain why his hours are so inflated? Or is it because he does not accurately account for his time? Well, maybe its both.

66 makes a very important point.

Fear of criticism drives the decision to hire a particular law firm more than a desire to be cost-effective.

And partners and associates who are trying to bring in clients should remember that earning their trust - i.e., showing that your firm is the safest, most reliable to hire - is more important than anything else.

30 - You've got something on your face - what is that? Oh yeah, it's your obvious insecurity over the fact that other lawyers make more money than you working fewer hours without dealing with any of the political bullshit that goes with biglaw firm culture. Now if you don't mind me, I think I'm going to go get drunk. It's almost 2.

CONTINGENCY SECURE

72,

The problem is that many GCs won't hire the "best" firms that are the most specialized in a particular area. Just ones with prestige.

In House Attorneys,

Stop whining and take your work to firms that have better attorneys and provide superior service. Ditch the national "name brand," which isn't worth anything. There are plenty of boutiques that will do better work for almost half the cost.

If you maintain the status quo, it is your fault.

66,

To your first point, yeah, rates are high because partners set them. However, the following are usually true:

a) good midlevels and seniors are usually competent to do about 85% of the work on a given matter. At their rates, those lawyers are usually providing real value to the client. Or at least are perceived to be.

b) some partners really are worth that high rate on the bill. When a partner can quickly advise a client on a specific question involving complicated facts and arcane law in a matter of minutes without cracking a book, that is pretty good value.

So, in some cases, that greed can be justified. You are rarely getting that kind of value at the junior level.

74,

You're right. They assume that prestigious is the equivalent of reliable.

Well, that's where the salesmanship of partners comes in. Not that you'll close a client the first time, but with some persistence and care, you can be persuasive. Often it's just a waiting game - as soon as the prestigious firm does something to make the client unhappy, or as soon as the client realizes that he can't afford to use the prestigious firm for every single matter, the client turns to you.

The answer is somewhere in between. Some work should be fixed fee (to encourage efficiency at the provider level) and some should be hourly (to not penalize the provider for work that truly has too many variables or a disorganized client).

76,

Do you know a partner who waits by the phone and just provides such advice on a daily basis? No. This $700 an hour partner is moving words around on a perfectly acceptable email to opposing counsel about scheduling. This partner is skimming over emails and charging as if he read them.

73,

Contingency secure? That's a contradiction in terms, you fucking moron.

-Not 30, but not about to tolerate that level of stupidity

Why can't lawyers give clients a price and then draw down from that. I work at a PR firm, where we bill by the hour like that. If the client's budget is 200K a quarter and we've already spent 180K with a month left, well, there won't be any 8 person brainstorms or some shit like that, and vice versa if they are coming in low. Of course you can always go back to the client as tell 'em to pony up if they want to keep the work going.

"I could bill at $1,000 an hour (like some of my peers) but that would be skull sodomizing the client"

PE must be day dreaming about his stable of latin studs.

79,

No, what you describe is not reality. But I also know that those types of partners usually aren't as "sharp with the pencil" as most associates are. At least not where I've worked. If they billed clients for every minute they legitimately spent on a matter, clients would go beserk. And if some $900/hour guy consistently tries to pass off entires like "retrieve e-mail correspondence from [Associate X] and review same" multiple times on each monthly bill, that client might very well start shopping around.

I've seen this from both the law firm perspective and the client perspective.

83,

If you think "retrieve e-mail correspondence from [Associate X] and review same" is how a partner would characterize reviewing emails relating to a matter, you are either an idiot or a law student/junior associate.

Please tell me what you think a $900 an hour attorney bills for in a given day?

83,

If you can't bill all of your time at $900, why not charge $700 and write everything down? Won't you make more money that way?

"But right now the most objective way to measure an associate's contribution to the firm is by looking at hours."

this is an extremely ignorant statement. high billable hours do not equate to high contribution to the firm or productivity, except perhaps in dollars (although a firm cannot always collect 100% on the overbiller/padder). all it takes is a few competent partners to evaluate associate contribution. the billable hour lives not as a way to measure associate contribution, but as a way to pad partner profits and incentivize associates to overbill.

I have tried flat fees, contingent fees, blended fees, and have given client's choices - hundreds of clients. Clients are happiest with the billable hour. The billable hour is a wonderful mechanism for clients. The most financially successful attorneys do not bill by the hour, but by contingency or flat fees. They usually do it by skimping on the quality of counsel and the clients find out too late. Kill the Billable Hour? I wish.

86,

Sure. These partners reviewing contributions will be oh so subjective.