The Billable Hour is Dead: Long Live the Billable Hour

“I can’t think of a more important problem facing the profession,” Justice Breyer told Washington Lawyer, “than how to maintain a life for a young lawyer that will lead to satisfaction in his or her career, that will produce time for a family, and will produce time for some form of community and public service, whether it’s the school board, whether it’s the trustee of a museum, whether it’s going to work in Washington, or whether it’s any one of 10,000 different kinds of community activities.

“The reason I got into this [issue] is, it seems to me, that older people in the legal profession [have] a strong obligation . . . to create a decent life for younger lawyers going into the firms. More and more I hear from friends of mine who are in firms that the pressures are such [that] there is no time.” Lawyers tell him, “We don’t have time for anything.”

In a cover story that spends 90% of its ink excoriating the "tyranny" of the billable hour, and then concludes by throwing up its hands at how improbable it would be for any alternative to be seriously adopted, Washington Lawyer seems to encapsulate the received wisdom on this topic.  "Can't live with it, can't live without it."  Is that really the best we can do?

The economist in me has always been perplexed at the durability of the billable hour model.  After all, it:

• begins life based on "cost of production" rather than "value to client;"
• rewards quantity over quality;
• is premised on "tonnage," not innovation or creativity; and
• creates an essentially undeniable conflict between efficiency and productivity (which clients are always in favor of) and revenue generation (which firms are always in favor of).

Then, of course, there's the merely human toll.  The article notes an associate who never even had time to get her home phone hooked up, but my favorite (from real life) is of the first woman associate to make partner at a firm where I used to work.  Nine months pregnant, she worked a full Friday, delivered her child on Saturday, took Monday off, and was back full-time on Tuesday.  Yes, a maternity leave consisting of one day.  But she made partner.  However, this blog, I will remind you again, is not about ethics, it's about economics; so the emotional and spiritual consequences of "targets" (express or implied) of 2,000 hours/year and above are beyond my remit.

Why, if it's such a perverse creature, does the billable hour endure? 

• Lawyers are risk-averse (did I say that?!—alert the media!) and the billable hour model guarantees work done will be compensated.
• Looking at the same issue from the flip-side, quoting a fixed fee or a flat rate in advance risks ending up with uncompensated, unprofitable work—not to mention the blow to a partner's self-esteem as a savvy businessman.
• I personally believe there's a certain Marine Corps Parris Island effect in play, although it may be hotly denied:  "We [partners] all billed outlandish hours to make it; now it's your turn."
• Finally, it has simply become the de facto standard, and frankly it's a good gig for law firms.

To me, these reasons add up to one conclusion:  Firms aren't going to be the ones to change.  Clients are going to have to make it happen.  (The article posits that law students will also be a "pressure point," but I'm not buying that; who wants to come off in an interview sounding like a wuss?) 

The article ends with a whimper:

As the ABA Commission on Billable Hours concluded, “There are no easy or clear-cut answers to developing successful alternatives to the billable hour."

As they say, I respectfully dissent:  The answer—fixed fees, or value billing—is staring us in the face.  We in the profession are too smart not to do better.  As the article drolly notes, even "plumbers and accountants" quote fixed fees.  (And may I point out that firms that have the traction to pursue value billing, a la Wachtell, are not exactly hurting.)  Are we that insecure not to attempt the same?

But, you object, the value of legal counsel is ineffable:  Who can put a firm price on it in advance? 

The market for legal services does not exist in its own sui generis bubble exempt from all the familiar economic considerations that govern other markets.  It is not a counsel of exceptionalism to think it does, it is a counsel of despair.