No Billable Hours? A New Wave in Hiring Outside Law Firms

Old View: Time is a lawyer's commodity. Billable hours are our product.

New View: A lawyer sells intellectual capital. The true value of which is not measured by time at all.

Scott Turow, famed author and lawyer, wrote in the ABA Journal last year that the billable hour must die.  Turow says the billable hour rewards inefficiency and it makes clients suspicious.  Well, it appears Turow's sentiment is picking up steam, although I wouldn't expect the billable hour to die any time soon.

Pfizer, Inc. recently announced that it hired just one outside law firm for all its employment work over the next two years.  The law firm's fees are capped and the law firm's is paid one-twelfth of its annual fee each month.  At the end of the year a reconciliation occurs and Pfizer has the ability to recoup any unused fees.  Other large companies have similar arrangements with law firms including Tyco International and Honeywell. 

At least one law firm, Exemplar Law Partners of Boston, has embraced the no billable hour concept completely.  Exemplar says it is the first corporate law firm in the nation to exclusively adopt a fixed price designed to align its interest with its customers while enabling businesses to better manage their legal budgets.   

Another firm, ConvergentGC, operates from the premise that most entrepreneurs really need in-house counsel but few can afford it.  The firm is an outside general counsel firm that essentially adds a senior-level attorney to the management staff.  The firm has no hourly rates, no bills for phone calls and no bills for overhead costs such as faxes.

When I had my house painted this past month I hired a contractor that gave me a fixed price.  I had a certain budget and I appreciated knowing exactly how much his services would cost.  I can't imagine I would have hired this painting contractor had he told me he would bill by the hour with an open-ended price.  And I doubt you would either.

So the next time you hire a lawyer be sure to ask at least two questions,

1. "How much am I willing to pay for the services I need?"
2. "Can I find a competent lawyer to handle it for that price?" 

It seems the best way to hire a lawyer is to determine how much you are willing to pay for particular services and then hire a competent attorney who is willing to do so for that price.  Now that doesn't mean that a lawyer should necessarily be cheap.  But usually there is a competent lawyer out there for you if you set a reasonable budget.

So I encourage you to discuss fixed billing with your lawyer.  You just might find the lawyer is surprisingly receptive to it.  After all, no one likes to be a slave to a timeclock.

- Rush on Business

photo on flickr by col_adamson

Comments

[Nicole Auerbach]

I just wanted to bring your attention to a litigation firm in the Midwest that is also focusing on alternative billing arrangements for its clients. Valorem (means "value" in Latin) Law Group, a commercial litigation firm based in Chicago opened in 2008 and is proud to be doing its part to move clients away from the billable hour. www.valoremlaw.com