The Billable Hour is Dead
Done. Toast. El Finito. Sayonara. Stick a fork in it. Elvis has left the building. Don’t-let-the-door-hit-you-in-the-backside-on-the-way-out kind of dead.
Yeah, but some of you will say, “How can it be dead, when it is still everywhere around us?” We only need to look to the fate of the dinosaurs to answer that question. Just as BigLaw and the Billable Hour ruled the Legal World for the last 50 years, the dinosaurs were Kings of the Cretaceous Era, right around 66 million years ago. But instead of a devastating asteroid impact, BigLaw was hit by the similarly earth-shattering Great Recession of 2008, which forced clients to wake up and take a closer and deeper look at their ever-escalating legal spend. What everyone saw, however, was as equally terrifying as the mass extinction of the dinosaurs. We have seen the ruthless and greedy pursuit of BigLaw profit take precedence over the delivery of value to the hand that feeds, i.e., the client. It is no coincidence that the “holy grail” metric for BigLaw is PPP, or more accurately, PEPP (average profit per equity partner). The only problem with PPP from the client’s perspective, at least, is that there is no correlation between high PPP and good lawyering. Rather, the reckless chasing of PPP has hyper-incentivized the worst ills of the billable hour model. Steven J. Harper, former BigLaw partner extraordinaire, and author of “The Lawyer Bubble,” cuts to the chase in a New York Times’ Op-Ed:
The billable-hour system is the way most lawyers in big firms charge clients, but it serves no one. Well, almost no one. It brings most equity partners in those firms great wealth. Law firm leaders call it a leveraged pyramid. Most associates call it a living hell.
Since the Great Recession, BigLaw has somehow managed to maintain, if not slightly increase, its average PPP. It has done so in a most gruesome manner, through brutal layoffs, de-equitization of partners and a screw-turning increase to an already over-leveraged system. All of this mayhem has been aimed at maintaining their own fat slice of the pie. None of these desperate measures, by the way, have any relation to delivering better value to the client – quite the opposite. Rather than offer any real legal project management and/or more effective process, BigLaw slashes non-billing positions like legal secretaries and other support staff.
Which brings us back to the end of the dinosaurs. It is estimated that over 75% of all species on Earth vanished within a very short period of time, yet the vast majority did not perish from the great explosion itself, but rather from starvation caused by the resultant impact winter. But this devastation and extinction also provided stunning evolutionary opportunities for those more nimble. In the wake of the extinction, many groups underwent remarkable adaptation, producing a myriad of new and beautiful species such as horses, whales, bats, birds and fish.
The Great Recession of 2008 was BigLaw and the Billable Hour’s fiery asteroid. It didn’t kill most of them directly, but they have clearly begun to starve from the fallout. They are too big and lumbering to adapt. Into this desolation, many new and exciting groups have emerged that are not only surviving, but which are beginning to thrive in the new world order. I’ll discuss these new species and their ever-increasing role in the final death knell of the Billable Hour in my next post.
All is not lost for BigLaw and the Billable Hour. After all, some have speculated that lizards may have also evolved during the long, miserable, impact winter, thereby providing a potential niche market for the smaller and leaner ancestors of the once mighty dinosaurs.