Couple of posts this week testing the "billable hour = bad / value based pricing = good" narrative
I'll say up front that my view is that, on balance, the billable hour is bad and value based pricing is good
But a lot of the discourse over-paints the billable hour as a strawman, and then contrasts it with a reasonable (rather than equally extreme) version of value-based pricing
In the real world, the excesses of the billable hour are tempered by other factors (the topic of this post) and value based pricing can be as bad (if not worse) than the billable hour if taken to an extreme (next post)
So broad disclaimers aside...
The principle complaint of the billable hour is that it encourages inefficiency, over-working of files and dragging matters out
And when you lay on high billable hours targets for individuals, and firm or partner level revenue incentives to do just that then, in isolation, that is what will happen
And that is bad for clients (no ifs or buts!)
...but...
The billable hour doesn't exist in isolation
From a client perspective, there are three main factors that can (and are) applied to control the amount of time recorded on a file:
Fee estimates and billing negotiation can curb the worst excesses of over-working a file. The majority of fees (at least for UK firms) have some sort of estimate, or client price expectation, against which time on the clock is judged. Even in Big Law it is rare to have a truly, unconstrained matter
Deadlines associated with matters (be those court deadlines, or client deadlines to complete deals etc) limit the time window available to record time against a file
Name and limit the number of individuals staffing a particular matter. This will limit the amount that can (reasonably!) recorded against a file
And from the other side of the fence, from an internal / firm perspective, the biggest constraint on a lawyer honestly recording time to a file is the fact that they rarely have just one client or matter on the go at any one time
So even if there was an opportunity to work an extra, unnecessary couple of hours on a given file, there are all the other files that also need attention competing for those couple of hours.
In most cases, the work that needs to be done will trump the work that could be done
High case loads and utilisation clearly come with their own issues, but they do negate the temptation to over-work a single file to the detriment of a client
The trick with all of this is to hold these competing factors in healthy tension with one another - and it is this point that I think is missed when we say "billable hour = bad"
It is possible to have a billable hour based legal practice that doesn't exploit either staff or clients
I'm deliberately sidestepping dishonest time recording. Frankly, it doesn't matter what your pricing model is if the firm or the lawyer is dishonest - all bets are off!
Welcome comments (I'll put the tin hat on!)

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