Not Snow, Nor Sleet,
Nor Gadget Boom Will Kill the Billable Hour
The manager of a computer systems at a major Los Angeles law firm had what he thought was a brilliant idea: require the 25 members of his tech staff to log their time, on timesheets, just as the lawyers in the firm did. Within a few days, he had to cancel the plan--he had a large-scale rebellion on his hands.
"I wanted my staff to understand how hard the lawyers work and why attorneys go berserk if the network crashes, even for a short time," the manager explains. "Tracking time certainly gave them those insights."
As technology began to spread, many analysts predicted that automation would allow attorneys to work more efficiently. Thus, time-based billing would be replaced by value billing or other methods. The American Bar Association published task- and project-based billing codes.
Combination systems, such as a blending of contingency fees with flat fees, beckoned.
Yet hourly billing lives on. Says David Hambourger, director of the ABA's Legal Technology Resource Center, "The vast majority of lawyers who used to bill by the hour still do. For the most part, technology has not entered into...the way they value their services."
Even one of the strongest critics of the billable-hour system, Richard C. Reed, a former litigator and author of Beyond the Billable Hour and other books on alternative fees, says that hourly billing still reigns supreme.
Now a Bellevue, Wash.-based management consultant, Mr. Reed says his surveys find "some movement towards alternative methods, but in terms of predominant use and frequency, the billing is still hourly." He notes that there is a small trend away from unrestricted hours: "They control it by caps or maximums, or discounts."
He explains the persistence of hourly billing as "inertia in the profession, and fear of the unknown."
But high-tech lawyers wedded to the hourly rate don't seem to fear change. Barry D. Weiss, a partner on the management committee of Chicago's 25-lawyer Gordon & Glickson P.C., represents many high-tech clients. The firm employs four part-time lawyers who do nothing but handle technology, constructing precedent and forms files to reduce time spent researching prior work.
Despite the investment in efficiency, the firm's primary billing method remains hourly. There are occasional flat-fee deals for existing clients, or a discounted fee in exchange for a stake in a start-up company, says Mr. Weiss, but attorneys' time sheets generally determine bills. "I don't think there's anything horribly wrong with the hourly rate approach, unless it's not managed well," says Mr. Weiss. "The key thing that clients want is predictable billing, and value." After working with consultants, Mr. Weiss says the firm learned to provide "reasonable up-front estimates" to avoid inflicting "sticker shock" on clients.
Far from feeling pressure from high-tech clients to move away from hourly billing, Mr. Weiss says, he has heard the opposite. "If lawyers work on a contingency or alternative fee basis and a matter settles quickly, the client knows that the lawyer has [invested] few hours," he observes. "The client says, 'If this had been done on an hourly basis, you'd have earned $20,000 an hour.' Clients feel ripped off" under such systems, he says.
Tech Tools to Bill More Time
Even as it become possible to work more efficiently, investments grow in technology that allows lawyers to bill more time.
A system called Attorney TOM, or Total Office Management, developed by lawyers at Edwardsville, Ill.'s Burroughs, Hepler, Broom, MacDonald & Hebrank, has many components: calendars, file and document management, and even an automatic telephone dialer. But name partner Larry E. Hepler says the use of the product has most affected his practice by "recapturing my billable time." Formerly, he says, he could sometimes only account for four or five hours in a busy day. But Attorney TOM's internal clock captures what is on his computer, he says, and pop-up screens allow him to enter phone calls, meetings, and other tasks continuously.
"It has greatly increased accuracy and reduced guesswork. I'm not losing good, solid hours," he says. It also helps his management: Partner modules allow him to view associates' hours and compare their monthly and daily time records. "Associates feel it is a good review," he says.
The system includes the ABA's task-based billing codes. Recently, at his own initiative, Mr. Hepler used the codes to print out a pie chart for a client whose four-year-long litigation the firm was handling on a contingency fee basis-- a rare departure from hourly billing. The charts displayed what each attorney did at each phase of the case, the lawyer's hourly rate and the cost of each stage or activity, from imaging documents to questioning witnesses and negotiating the settlement. "The client was pleased."
Since the system tracks both time and task, would the firm ever use the task-based billing method as its primary fee system? "Probably not," says Mr. Hepler. "The billable hour is an accepted mode of billing....It works for us."
Perhaps hourly billing has come to define a legal professional, e-mails LaVern Pritchard, a sole practitioner in Minneapolis who also runs an Internet business. "One's station in life can be conveniently assessed by resorting to one's hourly rate....Doesn't the hourly rate of every high- powered Beltway lawyer...always make its way into the press?"
Critics of the hourly fee remain vocal. Radnor, Pa.-based consultant Jon E. Klemens, a financial adviser to companies serving the legal profession, says he has spent his career analyzing how lawyers work. "Plumbers are more appropriately compensated on an hourly basis," he says. But, Mr. Hepler notes, even in the legal profession, there's a lot "that requires rolling up your sleeves, too."
This article is reprinted with permission from the August 31, 1998 edition of The National Law Journal. © 1998 NLP IP Company. LawNewsNetwork.com.