Any evidence that billable hours will disappear?

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PLATONiC
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Any evidence that billable hours will disappear?

Postby PLATONiC » Fri Dec 25, 2009 2:32 am

Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).

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Kohinoor
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Re: Any evidence that billable hours will disappear?

Postby Kohinoor » Fri Dec 25, 2009 4:40 am

PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).

No.

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PLATONiC
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Re: Any evidence that billable hours will disappear?

Postby PLATONiC » Fri Dec 25, 2009 8:46 pm

Kohinoor wrote:
PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).

No.


Anyone have a more in-depth analysis of the question at hand?

Anonymous User
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Re: Any evidence that billable hours will disappear?

Postby Anonymous User » Sat Dec 26, 2009 7:21 pm

PLATONiC wrote:
Kohinoor wrote:
PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).

No.


Anyone have a more in-depth analysis of the question at hand?


NO :twisted:

06072010
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Re: Any evidence that billable hours will disappear?

Postby 06072010 » Sat Dec 26, 2009 7:29 pm

PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).


You will see firms offer alternative arrangements, especially while the economy sucks, but the billable hour will never disappear completely. Firms and partners make their money on leverage and that means billable hours. You would need a systematic client push back from inhouse to do this, and most of those cats come from biglaw. They are accustomed to the billable hour practice and probably aren't good enough businessmen to work on flat rate and not be assured of getting boned in the long run.

I certainly think there is opportunity for some firms to yoink work from established players by offering alternative billing schemes. In response, I think big firms will offer deep discounts off bills rather than abandoning the billable hour wholesale. The model just doesn't offer the same profitability unless you can leverage juniors.

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Mon Dec 28, 2009 2:05 am

PKSebben wrote:
PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).


You will see firms offer alternative arrangements, especially while the economy sucks, but the billable hour will never disappear completely. Firms and partners make their money on leverage and that means billable hours. You would need a systematic client push back from inhouse to do this, and most of those cats come from biglaw. They are accustomed to the billable hour practice and probably aren't good enough businessmen to work on flat rate and not be assured of getting boned in the long run.

I certainly think there is opportunity for some firms to yoink work from established players by offering alternative billing schemes. In response, I think big firms will offer deep discounts off bills rather than abandoning the billable hour wholesale. The model just doesn't offer the same profitability unless you can leverage juniors.


Yet the most profitable firm in the US does not use a billable hour model, no?

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Kohinoor
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Re: Any evidence that billable hours will disappear?

Postby Kohinoor » Mon Dec 28, 2009 2:15 am

Alea Iacta Est wrote:
PKSebben wrote:
PLATONiC wrote:Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).


You will see firms offer alternative arrangements, especially while the economy sucks, but the billable hour will never disappear completely. Firms and partners make their money on leverage and that means billable hours. You would need a systematic client push back from inhouse to do this, and most of those cats come from biglaw. They are accustomed to the billable hour practice and probably aren't good enough businessmen to work on flat rate and not be assured of getting boned in the long run.

I certainly think there is opportunity for some firms to yoink work from established players by offering alternative billing schemes. In response, I think big firms will offer deep discounts off bills rather than abandoning the billable hour wholesale. The model just doesn't offer the same profitability unless you can leverage juniors.


Yet the most profitable firm in the US does not use a billable hour model, no?

How are you measuring profit?

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BradyToMoss
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Re: Any evidence that billable hours will disappear?

Postby BradyToMoss » Mon Dec 28, 2009 2:25 am

Pretty sure Wachtell uses billable hour, as do the rest of the AmLaw top 10 in PPP.

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Mon Dec 28, 2009 3:50 am

PPP (Not sure if you mean to suggest there's a better measure?)

WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).

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nealric
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Re: Any evidence that billable hours will disappear?

Postby nealric » Mon Dec 28, 2009 4:04 pm

Some law firms are already charging clients with flat fees and what not, but is there strong evidence that law firm economics will transform entirely (namely, the billable hours scheme disappearing).



From my somewhat uninformed opinion:

I really don't think that's the case. A lot of firms have and will offer alternative fee structures for clients that request them, but most don't really like to do so. For large deals, it just requires too much estimation. A given proposed deal or case could end up a huge billable cash-cow or a small matter depending on various contingencies that can't be necessarily predicted when the firm is first approached about the matter. Really, there are only two reasons, from a firm's perspective, to offer alternatives to hourly billing:

1. Possibility of a huge payout through a contingency fee. This is very common in plaintiff's side litigation because clients are easily able (and willing) to pay if they win a huge recovery. However, it's rare in other venues because the client won't necessarily get cash out of the deal or get much immediate monetary gain.

2. Cost cutting for flat fees. This has certainly gotten more common in the recession, but I'm not sure it will really persist. It works well for very commodified work, but creates a lot of estimation problems. The client won't be happy if you end up charging a princely sum for only a few hours of work because the case settled early. The firm won't be happy if it ends up doing a gazillion hours of work for something it thought would be a small matter. True, there are ways to mitigate this, but that can result in a complicated fee structure that may not be so client friendly.

In any event, besides perhaps WLRK, there really aren't any biglaw firms that get most of their revenue outside the billable hour- even ITE. I don't see any forces that would cause that to change in the near future.

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Re: Any evidence that billable hours will disappear?

Postby bahama » Mon Dec 28, 2009 5:21 pm

WLRK can get away with not billing strictly by the hour for the same reason Yale can get away with having not having real grades. What they do (or what Yale does with grades) doesn't apply to everyone else in the same way...

06072010
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Re: Any evidence that billable hours will disappear?

Postby 06072010 » Mon Dec 28, 2009 5:23 pm

Alea Iacta Est wrote:PPP (Not sure if you mean to suggest there's a better measure?)

WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Tue Dec 29, 2009 1:33 am

PKSebben wrote:
Alea Iacta Est wrote:PPP (Not sure if you mean to suggest there's a better measure?)

WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.


And you propose measuring profitability by . . .
(and moreover, does your new proposed measure -- if any -- really make a difference to the idea I am proposing?)

Edit: Also, relevant or not, you were still mistaken regarding how they bill.
Last edited by Alea Iacta Est on Tue Dec 29, 2009 1:41 am, edited 2 times in total.

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Tue Dec 29, 2009 1:38 am

bahama wrote:WLRK can get away with not billing strictly by the hour for the same reason Yale can get away with having not having real grades. What they do (or what Yale does with grades) doesn't apply to everyone else in the same way...


You may be right, but this is debatable. Ironically, your analogy is pretty flawed -- HLS, SLS, and (less so) Berkeley have essentially the same grading system as Yale.

Perhaps it is possible that the WL system of billing creates an environment that encourages performing services more efficiently and at a higher level -- not that the billing system is a resulting luxury of that excellence.

06072010
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Re: Any evidence that billable hours will disappear?

Postby 06072010 » Tue Dec 29, 2009 1:48 am

Alea Iacta Est wrote:
PKSebben wrote:
Alea Iacta Est wrote:PPP (Not sure if you mean to suggest there's a better measure?)

WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.


And you propose measuring profitability by . . .
(and moreover, does your new proposed measure -- if any -- really make a difference to the idea I am proposing?)

Edit: Also, relevant or not, you were still mistaken regarding how they bill.


My measure would be a combination of things -- revenue per lawyer, revue overall

06072010
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Re: Any evidence that billable hours will disappear?

Postby 06072010 » Tue Dec 29, 2009 1:50 am

Alea Iacta Est wrote:
PKSebben wrote:
Alea Iacta Est wrote:PPP (Not sure if you mean to suggest there's a better measure?)

WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.


And you propose measuring profitability by . . .
(and moreover, does your new proposed measure -- if any -- really make a difference to the idea I am proposing?)

Edit: Also, relevant or not, you were still mistaken regarding how they bill.


Mistaken in how "who" bills? Wachtell, Law Firms? V100? Be more specific, counsel.

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Tue Dec 29, 2009 2:01 am

BradyToMoss wrote:Pretty sure Wachtell uses billable hour, as do the rest of the AmLaw top 10 in PPP.


Alea Iacta Est wrote:WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


I dunno dude, you tell me "who" I was referring to.

PKSebben wrote:That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.

***

My measure would be a combination of things -- revenue per lawyer, revue overall



As to profitability measures, you do understand the difference between revenue and profit, right? And therefore why a measure of profitability that uses revenue is kind of silly?

You could argue that profits per lawyer is better, fine. Only makes WL even more profitable compared to the others. This is an irrelevant tangent you're milking because you were wrong on how WL bills in the first place, counsel.

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BradyToMoss
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Re: Any evidence that billable hours will disappear?

Postby BradyToMoss » Tue Dec 29, 2009 3:19 am

Alea Iacta Est wrote:
BradyToMoss wrote:Pretty sure Wachtell uses billable hour, as do the rest of the AmLaw top 10 in PPP.


Alea Iacta Est wrote:WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


I dunno dude, you tell me "who" I was referring to.

PKSebben wrote:That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.

***

My measure would be a combination of things -- revenue per lawyer, revue overall



As to profitability measures, you do understand the difference between revenue and profit, right? And therefore why a measure of profitability that uses revenue is kind of silly?

You could argue that profits per lawyer is better, fine. Only makes WL even more profitable compared to the others. This is an irrelevant tangent you're milking because you were wrong on how WL bills in the first place, counsel.


All PK ever talked about was PPP not necessarily being the best indicator of profitability. I was the one who thought WLRK bills by the hour. Not sure why you continue to refer to this mistaken belief in your discussion with PK.

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NayBoer
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Re: Any evidence that billable hours will disappear?

Postby NayBoer » Tue Dec 29, 2009 4:01 am

It's just easier to measure work by time, even if it does create a conflict of interest between attorney and client. Project billing will at least initially be based on time worked, just hiding the billable hour rather than killing it.

Billable hours represent the firm's opportunity cost more fully. They can also help to contain clients who will otherwise overuse counsel's time with pointless communication since they won't get charged for each email and phone call. This may or may not be an issue for biglaw firms, but it is for smaller firms with more neutoric (non-corporate) clients.

It's still better than the two previous systems - the monopoly price-fixing and the 'services rendered' bill. The first was set up I think by the ABA or state bars and had a set price list all attorneys charged, struck down as anti-competitive. The other was basically just a non-itemized bill from your lawyer and might take into account any number of factors, including time, length of the relationship, outcome of the work, etc. The billable hours system is at least more responsive to the market.

Personally I think it'd be great to really step away from billable hours. The prospect of how to do so brings up its own problems.

06072010
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Re: Any evidence that billable hours will disappear?

Postby 06072010 » Tue Dec 29, 2009 11:14 am

BradyToMoss wrote:
Alea Iacta Est wrote:
BradyToMoss wrote:Pretty sure Wachtell uses billable hour, as do the rest of the AmLaw top 10 in PPP.


Alea Iacta Est wrote:WL doesn't bill by the hour. I'm sure the number of hours a deal takes go into determining the price. But they also look at size of the deal, novelty of the issues involved (if any), etc. Google turns up a lot on this (including some harsh criticism of billing in any way other than the billable hour, applicable to the discussion more generally).


I dunno dude, you tell me "who" I was referring to.

PKSebben wrote:That's a stupid measure for profitability. It's like measuring the viability of GM by seeing what their CEO makes. Plus, Wachtell is such an outlier that it's not really relevant to the law firm market as a whole.

***

My measure would be a combination of things -- revenue per lawyer, revue overall



As to profitability measures, you do understand the difference between revenue and profit, right? And therefore why a measure of profitability that uses revenue is kind of silly?

You could argue that profits per lawyer is better, fine. Only makes WL even more profitable compared to the others. This is an irrelevant tangent you're milking because you were wrong on how WL bills in the first place, counsel.


All PK ever talked about was PPP not necessarily being the best indicator of profitability. I was the one who thought WLRK bills by the hour. Not sure why you continue to refer to this mistaken belief in your discussion with PK.


Go get your fucking shinebox, Alea Iacta Est. Boom!

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Alea Iacta Est
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Re: Any evidence that billable hours will disappear?

Postby Alea Iacta Est » Tue Dec 29, 2009 5:29 pm

BradyToMoss wrote:All PK ever talked about was PPP not necessarily being the best indicator of profitability. I was the one who thought WLRK bills by the hour. Not sure why you continue to refer to this mistaken belief in your discussion with PK.


Oh, my bad. All the scrolling that the block quotes make necessary on this board make it hard to refer back, so I must've just been going off (mistaken) memory.

PKSebben wrote:Go get your fucking shinebox, Alea Iacta Est. Boom!


I'm not sure what this means. Either way, just trying to have a discussion, not sure why you are getting so upset.




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