The Downsides of Hourly Billing

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I may not work at a big firm, but the concept of “hitting your billable hours” is well-known to law students, lawyers, and fans of John Grisham novels. Smaller firms and solo practitioners might not have a threshold number, but they still know how many hours they need to bill to stay in the black.

Admittedly, hourly-billing has advantages, which is part of the reason it is so widely used. But it also has a number of downsides.

Hourly billing creates barriers between lawyers and clients

As this recent article points out, billing clients for cursory emails does not facilitate strong client relationships. In that case, a lawyer emailed a client with some amended documents. The client quickly responded and said she would review the changes later. The lawyer responded with “I hope everything is ok, take your time.”

The client was then billed .2 hours at $300—$60 for that unnecessary email. I understand needing to account for your time, but that seems ridiculous. The client felt the same way, and ultimately confronted the attorneys. The attorneys, however, simply defended their billing, and said that email took them away from a multi-million dollar case, so they had to bill for it.

It is bad enough to charge for that, but defending it is even worse. Flat-fee billing does not eliminate awkward money discussions, but they are far less frequent.

Flat-fee billing helps your focus on the big picture

With hourly billing, you may spend a large portion of your day accounting for what you are doing, rather then actually doing.

You may also lose sight of the bigger picture. With flat fee billing, the goal is to become more efficient, not less efficient. You can spend an extra ten hours on a brief because you know you will use it again. Next time, that same issue will be resolved faster and more efficiently.

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  • I’ve seen a shift locally and nationally to flat fee billing in business transactional law and some types of litigation. Yet hourly billing is still predominant in family law, where you simply cannot predict the costs due to emotions of the client or when in depth discovery is needed. I wonder how long it will be before the norm is either contingent fee or flat fee billing for all litigation. Lori T. Williams, Esq., Owner/Managing Attorney of Your Legal Resource, PLLC

  • As for my part, I never got any complaints since I practice for emails I charged at 15 to 30$ when the email had a use and was relevant to the file. I NEVER charged a “have a nice day” kinda email. Good judgement should be the norm. Charging those kind of emails aren’t the norm. If so, the practice is sick. And personaly, I don’t know a lawyer who charge .2 for an email… .2 is 12 minutes! If it takes 12 minutes for a 2 liner with an attached document. please leave the emails to your secretaries… it takes way too long.

  • If e-mails are the vehicle for transmitting substantive advice (in muchthe same way as correspondence or a lengthy telephone conference), then presumably there is client value involved the effort – and it should be billed. But the essence of the billing decision should always be CLIENT VALUE – not attorney’s time. The attorney who billed for the .2 for the polite e-mail response failed to recognize two things: First, his client received no value for the effort. Second, the fact that it actually took time was his INVESTMENT inthe client relationship – one that may have left a (small) positive impression if he wasn’t stupid enough to bill for it. Whatever return he could have realized on the investment was squandered. In fact, it was a lesson in value destruction.

  • Dan, I think you made a GREAT point. Often we see blogs and discussions over hourly billing versus task-based billing, but maybe the discussion should move more toward what you mentioned: client value. After all, people do not want to pay for things that are of no value to them, whether the actual fee is determined by an estimate of time or by each completed task.

    In the case above, the attorney seems to have trouble recognizing the difference between a legal question and mere courtesy. The client was writing the attorney for the benefit of the attorney, and the client’s email did not require any sort of response. So, the attorney was benefited because he had an understanding of when the client would review the documents, and the attorney chose to waste time by responding to the email while he was in the middle of work on a “multi-million dollar case.” After that, the attorney wanted to be rewarded for his own mismanaged time and for the fact that he had a responsive client. While this seems ludicrous when we read it, I am not so sure that this attorney’s billing method is an anomaly so it great to see that attorneys are including client value in the discussion now. Whether attorneys bill hourly or by some other method, they should always ask, “What was the value of this task or this hour for my client?”

  • Gus

    Agree with Frederick here. Use your judgment when deciding whether to bill for the sending of an email. If it’s a substantive email that the client needs to have, go ahead and bill it. The email in question wasn’t substantive and shouldn’t have been billed.

    However, I understand how this can happen. This associate is at a big firm. One thing the partners ingrain on the associates is the need to bill for EVERYTHING. So he did have to stop what he’s doing to read the email. And, out of courtesy, he had to respond to the email also. So he did what he was expected to do, keep track of his time. (Presumably, he was told, as I was, never to bill 0.1 hours for anything. I was told you have to bill at least 0.2 hours no matter what you did. Otherwise, the client thinks you’re nickel and diming them.)

    By the time the partner reviewed the bill he had a multi-page bill and he saw an entry that probably said something like, “review correspondence received from client and prepare response thereto.” The partner has no reason to think this is a courtesy email exchange and didn’t write it off.

    While I agree that hourly billing is pretty stupid and task billing should be the norm, that’s easy for me to say because I work in a small firm. In a large firm, the need a way to monitor the activities of dozens of associates. And a way to charge the client for all that work. So I don’t think the switch to flat-rate billing will be as easy as proponents say.

  • Sarah Barger

    I agree. But, I, too, work at a large firm and understand the pressure to meet certain billable goals. For what it’s worth, I had a partner recommend to me a billing guide that I have found to be an exceptional resource for billing tips and techniques: The Billable Hour (available at http://www.howtobillmore.com). The guide denounces the padding of hours with fluff entries and promotes, instead, detailed, itemized substantive billing and teaches an easy, efficient method for time-keeping. I highly recommend it.