The 13 Worst Things about Hourly Billing

I am driving to work.  It’s 10 degrees Fahrenheit in Traverse City Michigan.  In celebration of the cold air that is rushing through our area, solidifying winters grip, I give you a list of the 13 worst things about hourly billing:

1. Reducing lawyers to assembly line workers whose product is six-minute increments.
2. The feeling the lawyer gets in the pit of their stomach when they’re out to lunch with someone who’s not on the clock, or their spouse calls during the middle of the day disrupting and invading the number of six minute increments which can be billed in a single day.
3. The reality that a shitty lawyer can make a great living for the simple fact that they can fill out and fill up a time sheet.
4. The moment a client opens up an hourly bill and realizes that the last month effort just cost three times more than she expected for the entire project.
5. The built-in and often overwhelming incentive built into the hourly system for lawyers to spin their wheels on otherwise low value or even meaningless activities.
6. The simple fact that each lawyer task is valued at exactly the same rate irrespective of quality.
7. The fact that your client doesn’t want to call you to tell you what important things are going on, because they don’t want to incur a .50 time entry.
8. The fact that every conversation with the client you must avoid topics like “how’s your family” because of the uneasiness created as to whether or not the client will get billed for telling you the answer.
9. The simple fact that the lawyer’s incentive is to keep the matter alive, so it can billed, while the client’s interest is to solve the problem and end the matter.
10. The pain and grief that is caused when any person begins to think of his or her life as measured in six-minute increments.
11. The disincentive to create efficiencies within the business model of law when all that matters is an eight-hour day.
12. The fact that the brightest and best new lawyers are taught to think like stop watch, rewarded for the same, and become blind to the thought of measuring value.
13. The lack of incentive and reward in the hourly bonus formulas for anything beyond hours billed and hours collected.

Can you think of other items that should be on this list? Especially if you are stuck in an hourly billing system, you know better than anyone what might be missing from this list.  I encourage you to add to the list by way of comment, send this to your friends, and post it to your blogs.  Let’s see if we can get the most comprehensive list of hourly billing negatives going on the web.  After we get the list in place, we’ll turn it into a poll and see if we can rate them and identify the number 1 negative impact of hourly billing.

Comments

[Suzanne]

That those of us who really love the law learn to really hate being a lawyer.

[GAL]

Great one. How can such a noble profession have become such a hourly grind?

[Jen Harris]

I can't imagine to have the passion that so many lawyers do & then be burdened by being a slave to a time clock.
How do your clients feel? Have they ever disputed the insane number of hours that you put in? I just can't imagine. Thank you for the time you do put in - clocked in or not.

[Kyle]

Clients don't pay for our time; they pay for our expertise. Why then is there such a disconnect in how most lawyers measure the value of legal expertise?

[Time Bandit]

That damn time clock is always ticking in my head, even when I am alone... with my kids/ on the weekends,,, on vacation. at night when I am trying to sleep . PLEASE make it stop!!!!

[T. Bendar]

Hmm.,.. What other profession charges by the hour. The oldest profession of course. Strange coincidence you think????

[Jordan Furlong]

I second Suzanne's observation above -- oddly enough, I blogged on almost exactly that topic yesterday: http://www.law21.ca/2008/12/17/the-failure-of-billable-hour-compensation/. Great list!

[john troll]

The dirtiest secret of the billable hour is that it forces one to be dishonest. It is impossible to advance one's career in a law firm by honestly accounting for one's time. This dishonesty is unhealthy, unfair and unncecessary.

[GAL]

Jordan: I will be doing a post on your article next week. Thanks for the link.

John: You are correct. No matter how honest you are, the wrong incentives will always drive the wrong behavior.

[GAL]

Suzanne:

It's funny. I used to think the exact same thing. The practice of law for me was bittersweet. There are things about it that I love. But back when I was in a traditional firm, I could never really get happy and motivated about my job. Something seemed to be missing. It was a big blank spot in my practice. It didn't seem right and I learned to hate timesheets. Those damn timesheets. Those billable hour sheets and six-minute increments looked over my shoulder every single day watching me and tracking my every move. And I know those in the firm with political agendas were using the timesheets to watch over my shoulder as well. Even in my office with my door shut, I answered to one god and one god only, that damn timesheet.

Needless to say, I don't feel that way anymore. I love getting up in the morning. I love going to work. I thoroughly enjoy my days focused on providing value to clients and solving their problems. While we still have some clients in litigation matters that have us bill by the hour, our hourly billing practice fundamentally different than in most firms. We don't track hours internally and we don't measure anyone by the number of hours that they work. We never bill clients for time on the phone or administrative tasks. They only get billed time for hours that are meaningful and substantive. Even when we are billing by the hour, we always work within budgets that have been discussed and predefined by the client. There is no "sticker shock" in any of our monthly billing.

The current incarnation of the hourly billing method is destroying our profession. The sooner law firms realize that they are providing incentives which are all wrong for both their lawyers and their clients, we will all be better off.

[Bill E]

Ummmm....look at all the lawyer billing software advertised on your blog. They are promoting in part computerized hourly billing time sheets! What's up with that?

[RJON ROBINS]

The "History" of the billable hour might be of some interest and help attorneys to understand why it seems that billing clients by-the-hour when we are supposed to be their advocate & trusted advisor seems like such a square peg in a round hole.

In point of fact, for more than a thousands years lawyers did NOT bill by the hour. Instead it was always value based billing. Then in the 1960's the insurance companies came along and hired efficiency experts to reign-in their legal expenses. . .

If you're interested in learning "the rest of the story", send me an email to rjon@howtomakeitrain.com and I'll send the you the whole thing back in an email. Complete with some pretty interesting citations. Fascinating stuff. Really puts everything into perspective I think.

But for me, the worst thing about the billable hour is that it takes all the fun out of the practice of law and causes lawyers to make LESS money than they otherwise could with a properly-designed value/flat-fee billing system. (Remember, before I was the Rainmaker I was a Practice Management Advisor with The Florida Bar's Law Office Management Assistance Service.)

[Jen Moore]

When you are done with what needs to be done for the day, you can't go home to your kids unless you billed enough hours.

[GAL]

Jen:

This gets to the "formal for substance" problem with most law firm business models. If you've accomplished all the things that need to be accomplished in a day, it shouldn't matter whether or not you've billed five hours or ten. You should go home to your kids. Tomorrow there will be fifteen hours of effort required. But in order to keep appearances, you need to be in your chair and that is the wrong incentive.

Law firms have become so focused on hours, that they are inevitably blinded to everything else.