All Billable Hours Are Not Created Equal
It sure is tough being a billable hour these days. Despite all the uproar about the evils of the billable hour, perhaps a gun slogan analogy is helpful: Billable Hours Don’t Overcharge Clients, Attorneys (and the Status Quo) Do. I see two fundamental problems with the billable hour, one of which is always discussed, and another which is rarely discussed. Many, including myself, have argued that the high billable hours quotas required by most firms today are unsustainable and almost certainly lead to bill padding and rampant overbilling. The 1300 hours the ABA felt could be reasonably billed per year has somehow risen to anywhere from 2000 to 2400 per year at most firms today. If you are using one of these firms, it’s safe to say you are being overbilled.
The second fundamental problem, which is rarely discussed, is that there is no real basis for an attorney’s hourly rate being fixed (no matter what his or her customary hourly rate is), i.e., all work done by the attorney is billed at the same hourly rate. I came across this concept in a great post by Mitch Kowalski, “The Lost Art of Pricing for Legal Services“:
Sadly, this “lost art of pricing” was thrown overboard by the ease (and feigned business-like process) of simply billing for every minute spent on a manner, despite the fact that not every minute spent on a file was equal in value.
As a result, the billable hour has created a false reality for lawyers; that a lawyer’s mere presence, or any activity undertaken by the lawyer, no matter how mundane, is worthy of compensation at a very handsome rate.
In other words, the amount of skill and experience needed to initially advise a client on a complex and risky matter, which may indeed be worth more than $1,000 per hour, is far different from the amount of skill and experience needed to make a telephone call, read an email, or review a box of routine documents, which could and should be done at a much lesser hourly rate, all the way down to no charge for administrative and secretarial work.
It’s time for clients to take responsibility for their bills and to wake up their lawyers from the “false reality” that all hours are equal. Clearly, they are not. Whether you accomplish this through litigation guidelines, budgets and proper staffing, or through well-designed AFA’s, the bottom line for a smart client is to only be billed at the rate appropriate for the work being done.