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The Billable Hour & The Molasses Pace of Change

For nearly two decades, experts have prophesized the death of the billable hour. Thing is, it just won’t die. There are reasons for that. Some ridiculous, some worthy.

Of course the friction makes sense. Business leaders have long expressed resentment and suspicions about the very obvious pacing dilemma when professionals bill based on increments of labor and not value. Fundamentally, the model hinders the relationship between an attorney and client. Business leaders want lawyers who will pick up the phone, solve problems creatively before they arise, constantly find ways to add value, who work fast and furiously and who happily and voluntarily “eat time.”

There’s a lot of time to eat. American companies are still the biggest spenders on legal services globally, a fact that irks many leaders of those companies. According to a 2017 survey by UK-based Acritus Research, US companies spend 166% more per revenue dollar than companies around the world. According to the research, at least part of this difference is attributable to the greater use of the billable hour in the US as well as higher average hourly rates and salaries in the US. Tired of the status quo, businesses have disrupted the model by demanding free stuff (such as gratis secondments), hiring more in-house attorneys or seeking out nontraditional options that utilize digital technology and outsourcing. Last week, the New York Times, published details about Microsoft’s two-year plan to shift almost entirely away from the billable hour.

In a fiercely competitive landscape marked by decreased demand for work and increased demand for value, too many law firms seem to be making perfunctory changes instead of thinking big about ways to innovate service delivery and deepen relationships. According to Altman Weil’s 2017 Law Firms in Transition Survey, only 30% of firms said they typically “link discounted, capped and alternative fees to changes in how work is staffed and delivered.” Further, only half of law firms surveyed said “they have significantly changed their staffing strategy since the recession” and only 49% said they have shifted their approach to increase efficiency. Most concerning, only 39% of firms said they had significantly changed their strategic approach to pricing.

These figures reveal a dangerous resistance to change and perhaps a fundamental misunderstanding of a permanently altered landscape. As we’ve stated before, this is a profound cultural shift, and the key to survival is adapting. Are you ready?

We are.

Stay tuned to our four-part series: Add Value, Not Time: Client Development in the InstaAge