"Kill the Billable Hour"

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Nulli Secundus
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"Kill the Billable Hour"

Postby Nulli Secundus » Fri Aug 20, 2010 3:43 am

Re: "Kill the Billable Hour", an article by the presiding partner of Cravath, Swaine & Moore. More and more people seem to support this idea, and according to an Economist article, a computer program just cut some sort of lawyer work's billable hour amount from 40+ to 1. My question is, how do you see the future of compensation for lawyers, in light of these developments?

270910
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Re: "Kill the Billable Hour"

Postby 270910 » Fri Aug 20, 2010 4:28 am

Unchanged. The billable hour is like democracy - the worst, except for all of the alternatives. Legal issues can be unpredictable, and billing by the hour is a great way to keep track of the complexity and effort required for any given matter. The death of the billable hour is prophesied frequently, but it's pretty reliant.

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SplitterPride
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Re: "Kill the Billable Hour"

Postby SplitterPride » Fri Aug 20, 2010 6:29 am

You kill the golden goose thinking it a parrot. As the previous poster said, you choose the lesser of the evils.


Cravath MP pays lip service by calling death to billables. His firm is the poster firm for billables. remember it was a cravath partner than billed 27 hours in a 24 hour cycle because he was working during a flight. This type of stories have made the firm legendary and lends to its prestige.

Yes they do make alternative arrangements for its most demanding clients, but dont fool yourself. If anyone knows the compensation game best, its Cravath. Afterall, they call associate salaries on the "Cravath scale", dont they?

Billables arent going anywhere. If he believes something ought to be done, he ought to establish it at Cravath first.

ViIIager
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Re: "Kill the Billable Hour"

Postby ViIIager » Fri Aug 20, 2010 6:46 am

There are some seriously successful law firms that don't base their invoices on billable hours, and instead use a fixed price per case. They're rare, but not unheard of. In DC, Zwillinger Genetski is one that offers the option (fantastic rep, though admittedly small).
http://www.zwillgen.com/pricing.php

I don't see why the option can't be there; consultants, accountants, etc. have used the option of firm-fixed price contracts, time and materials contracts, and assorted blends for a long time. Each type presents a type of risk--fixed price = overages, but with potential for fantastic profit; time and materials = getting things done too quickly and netting less than expected, but boasts protection from overages.

All that said, I'm currently a consultant, not an attorney. Is there a good reason why law firms can't utilize the same contract types?

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SplitterPride
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Re: "Kill the Billable Hour"

Postby SplitterPride » Fri Aug 20, 2010 6:55 am

ViIIager wrote:
All that said, I'm currently a consultant, not an attorney. Is there a good reason why law firms can't utilize the same contract types?



When you are a behemoth, and V100 firms are giants with hundreds of high salaried mouths to feed, change does not come easy.

The keyword you used was SMALL. Small is nimble. Small is flexible. Small moves where giants can go.

ViIIager
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Re: "Kill the Billable Hour"

Postby ViIIager » Fri Aug 20, 2010 7:16 am

SplitterPride wrote:When you are a behemoth, and V100 firms are giants with hundreds of high salaried mouths to feed, change does not come easy.

The keyword you used was SMALL. Small is nimble. Small is flexible. Small moves where giants can go.


No doubt that change is hard. However, hundreds of high salaried mouths can't compare to the thousands of high salaried mouths at firms like Booz Allen Hamilton, PricewaterhouseCoopers, Northrup Grumman, etc. that use different types of contracts. I'd expect that law firms, though having a relatively high inertia, should give new ideas a try at some point, especially those that offer increased profit with lower headcount (to use the OP's example, an IT system severely reducing the time required + fixed price agreement with client = respectable returns).

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Re: "Kill the Billable Hour"

Postby 03121202698008 » Fri Aug 20, 2010 7:35 am

What is the title of the economist article?

http://www.economist.com/node/16646318

Because if it's this one, they purport the exact opposite (the billable hour isn't going anywhere anytime soon) of you and the computer program they discuss help lawyers keep track of their billables not reduce them.

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Nulli Secundus
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Re: "Kill the Billable Hour"

Postby Nulli Secundus » Fri Aug 20, 2010 8:25 am

software such as that made by Basha Systems; Seth Roland, the company’s founder, says that his company’s software reduced the time needed to put together a certain type of real-estate lease from 40 hours to one.


For the software I mentioned.

Since there is clearly a demand for an alternative to the billable hour, you would expect someone to supply it. And indeed, this is starting to happen.


For the part I referred to.

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Duralex
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Re: "Kill the Billable Hour"

Postby Duralex » Fri Aug 20, 2010 8:44 am

A lot of this is hype being pushed by the document assembly (and other work-flow automation)
vendors, which is the technological shift that is supposed to "unshackle" attorneys from the billable hour.
(Google "document assembly law disruptive technology".) Document assembly isn't going to have as
immediate effect at the top as it will in the trenches. One doesn't go to a top-flight restaurant for a Happy Meal.
And even in the trenches there's plenty of resistance. After all, it's the attorney that has a law degree and license,
not the computer. (Which is why California attorneys outside of family law like to LOL @ DissoMaster, which enjoys extremely
wide adoption and appears to be doing much of the divorce attorney's job. Not that is has precipitated
any change in billing.) Once adoption of this kind of stuff becomes transparent enough it will be yet another
reason to drive down rates and take more work in house or to captive firms.

Here's some hype from RapidDocs (which also likes to publish white papers and fund studies)

Rapidocs™ Solo and Professional 2.2 - the Easy Document Assembly Authoring System:

Rapidocs Solo and Rapidocs Professional are the same authoring system. Solo enables you to
publish for a small group up to 4 users, but not you will not be able to publish to the web. With
Professional you can publish for any number and directly to the web.

See detailed set of features below for advanced analysis

As easy as 1-2-3

1 Using Rapidocs™ Professional or Rapidocs Solo, simply take your standard document, remove
existing static text such as names or addresses and add the intelligent questions that will be asked
during document assembly, prompting the user to "fill in these blanks". Similarly, provide the text and
related questions for the different options you require. This may involve adding additional logic-based
questions to control conditional paragraphs where the associated wording needs to be changed to suit
the options chosen. Lastly, you may need to add rules to undertake any complex calculations involved
to make your documents truly intelligent. Rapidocs™ Professional document creation software is as
easy to use as it is powerful. Just one day's training is all it takes to get up and running.

2 Publish your Rapidocs™ document on the Web or internally on your intranet or extranet. It's now
ready for use by your employees or clients. Rapidocs™ is also an ideal e-commerce solution, since
the Rapidocs™ files and Rapidocs™ Assembler used to generate the final documents can both be
downloaded in a matter of minutes.

3 Your employee or client assembles the final document from the intelligent template you have prepared,
providing the appropriate information and selecting the options required with the assistance of the embedded
help information you have provided. Rapidocs™ Assembler is exceptionally intuitive and requires no training
for the successful assembly of even the most complex documents.

Documents produced in a word processing package are static, and therefore do not have the ability
to change or arrange themselves automatically according to pre-set criteria; Rapidocs™originated
documents are 'intelligent and dynamic', effectively acting as an expert system, making it richer and
deeper in content than traditional, static documents.



I'm no luddite, and I think this kind of tech definitely has its place, but I'm not ready to celebrate
the death of the billable hour until we get a better idea what it's going to be replaced by.

I can't get the full text from where I am, but here's the abstract of a law review article I like on this topic:


Disrupting Conventional Law Firm Business Models using Document Assembly
Darryl R. Mountain
International Journal of Law and Information Technology Vol. 15 No. 2 , Oxford University Press 2007
Document assembly software is a technology that is fundamental to disrupting law firms. This article
uses the framework set out by Clayton Christensen in The Innovator’s Dilemma and subsequent books
to examine the range of business models that use document assembly software, from those that
are sustaining in relation to law firms to those that are disruptive in relation to law firms. It looks at
three barriers that slow down the pace of disruption: a shortage of the right people, rules against
unauthorised practice, and inadequate capitalisation of law firms. These barriers will be overcome
on a piecemeal basis as disruptive forces advance and undercut the billable hour.


screen cap showing a DissoMaster report, as I'm having trouble finding meaningful images of pure doc assembly suites.
Image
Last edited by Duralex on Fri Aug 20, 2010 9:25 am, edited 2 times in total.

ViIIager
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Re: "Kill the Billable Hour"

Postby ViIIager » Fri Aug 20, 2010 8:58 am

For the record, I do not believe that new advances in IT will have a magical, billable-hours-reducing effect of any unbelievable magnitude. I do think that there is the potential for a significant reduction in time spent on cases as courts move towards electronic submissions and other innovations are adopted by law firms; however, it won't be a 40-hours-down-to-1 as given in the OP's example. Frankly, simple things like a wider adoption of video teleconferencing should reduce travel expenses and time.

That said, there are two issues in this thread--is the billable hour facing competition from other agreement types, and is technology a panacea for reducing billable hours? I'd hope yes and maybe.

03121202698008
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Re: "Kill the Billable Hour"

Postby 03121202698008 » Fri Aug 20, 2010 11:10 am

Eh, I've seen tons of these IT time-savers in the government. Rarely do they reduce time. You just spend it doing something else. For instance, these document assembly programs...you spend almost as much time inputting information as you would simply preparing the document. If you have anything special to add (which you always do), then you still have to manually edit. Most attorneys now type over a standard lease so this isn't exactly revolutionary.

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ResolutePear
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Re: "Kill the Billable Hour"

Postby ResolutePear » Fri Aug 20, 2010 11:29 am

ViIIager wrote:For the record, I do not believe that new advances in IT will have a magical, billable-hours-reducing effect of any unbelievable magnitude. I do think that there is the potential for a significant reduction in time spent on cases as courts move towards electronic submissions and other innovations are adopted by law firms; however, it won't be a 40-hours-down-to-1 as given in the OP's example. Frankly, simple things like a wider adoption of video teleconferencing should reduce travel expenses and time.

That said, there are two issues in this thread--is the billable hour facing competition from other agreement types, and is technology a panacea for reducing billable hours? I'd hope yes and maybe.


Why would anybody want to kill the billable hour?

I want to be able to quantify my work load. If I spend 80 hours in the office - I want my damn ~60 billable to show for it.

I say, if you don't like billable hours.. do something else. But, for law.. it's fucking genius.

03121202698008
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Re: "Kill the Billable Hour"

Postby 03121202698008 » Fri Aug 20, 2010 11:31 am

ResolutePear wrote:
ViIIager wrote:For the record, I do not believe that new advances in IT will have a magical, billable-hours-reducing effect of any unbelievable magnitude. I do think that there is the potential for a significant reduction in time spent on cases as courts move towards electronic submissions and other innovations are adopted by law firms; however, it won't be a 40-hours-down-to-1 as given in the OP's example. Frankly, simple things like a wider adoption of video teleconferencing should reduce travel expenses and time.

That said, there are two issues in this thread--is the billable hour facing competition from other agreement types, and is technology a panacea for reducing billable hours? I'd hope yes and maybe.


Why would anybody want to kill the billable hour?

I want to be able to quantify my work load. If I spend 80 hours in the office - I want my damn ~60 billable to show for it.

I say, if you don't like billable hours.. do something else. But, for law.. it's fucking genius.


The problem is, for small practitioners at least it doesn't reward being efficient and can drive business away. People use Will maker software and such because they have no idea what a will costs and most attorneys want a rather large retainer in case it becomes complicated. A real estate attorney may be able to crank out closing paperwork in an hour but it isn't to his financial benefit to do so.

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ResolutePear
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Re: "Kill the Billable Hour"

Postby ResolutePear » Fri Aug 20, 2010 11:50 am

blowhard wrote:
ResolutePear wrote:
ViIIager wrote:For the record, I do not believe that new advances in IT will have a magical, billable-hours-reducing effect of any unbelievable magnitude. I do think that there is the potential for a significant reduction in time spent on cases as courts move towards electronic submissions and other innovations are adopted by law firms; however, it won't be a 40-hours-down-to-1 as given in the OP's example. Frankly, simple things like a wider adoption of video teleconferencing should reduce travel expenses and time.

That said, there are two issues in this thread--is the billable hour facing competition from other agreement types, and is technology a panacea for reducing billable hours? I'd hope yes and maybe.


Why would anybody want to kill the billable hour?

I want to be able to quantify my work load. If I spend 80 hours in the office - I want my damn ~60 billable to show for it.

I say, if you don't like billable hours.. do something else. But, for law.. it's fucking genius.


The problem is, for small practitioners at least it doesn't reward being efficient and can drive business away. People use Will maker software and such because they have no idea what a will costs and most attorneys want a rather large retainer in case it becomes complicated. A real estate attorney may be able to crank out closing paperwork in an hour but it isn't to his financial benefit to do so.


I don't have experience to be talking about this..

But from what I've heard.. if you charge your clients competitively, it'll result in a bigger book of business. This in turn gives you a more steady flow of income than nickle-and-diming them for all they're worth.

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legalease9
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Re: "Kill the Billable Hour"

Postby legalease9 » Fri Aug 20, 2010 12:25 pm

The only way billable hours will ever change is if the clients demand it. They are the ones who stand to gain by fixed cost, because they know exactly how much they have to pay and can budget easier. And if the clients demand it they will just have to pay a flat fee large enough to cover unexpected costs that arise during the case. So I think its possible to do it another way, but there aren't enough clients ready to pay up that kind of high flat fee to justify switching systems right now.

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Re: "Kill the Billable Hour"

Postby 03121202698008 » Fri Aug 20, 2010 12:34 pm

ResolutePear wrote:
blowhard wrote:
ResolutePear wrote:
ViIIager wrote:For the record, I do not believe that new advances in IT will have a magical, billable-hours-reducing effect of any unbelievable magnitude. I do think that there is the potential for a significant reduction in time spent on cases as courts move towards electronic submissions and other innovations are adopted by law firms; however, it won't be a 40-hours-down-to-1 as given in the OP's example. Frankly, simple things like a wider adoption of video teleconferencing should reduce travel expenses and time.

That said, there are two issues in this thread--is the billable hour facing competition from other agreement types, and is technology a panacea for reducing billable hours? I'd hope yes and maybe.


Why would anybody want to kill the billable hour?

I want to be able to quantify my work load. If I spend 80 hours in the office - I want my damn ~60 billable to show for it.

I say, if you don't like billable hours.. do something else. But, for law.. it's fucking genius.


The problem is, for small practitioners at least it doesn't reward being efficient and can drive business away. People use Will maker software and such because they have no idea what a will costs and most attorneys want a rather large retainer in case it becomes complicated. A real estate attorney may be able to crank out closing paperwork in an hour but it isn't to his financial benefit to do so.


I don't have experience to be talking about this..

But from what I've heard.. if you charge your clients competitively, it'll result in a bigger book of business. This in turn gives you a more steady flow of income than nickle-and-diming them for all they're worth.


The problem is, you don't know what a Will will cost up-front. An attorney estimates how many hours, charges a retainer of say $3K, then completes the will and deducts billable hours from this retainer. Any remainder is then returned. So, your will could end up costing $200 or $3K. It's difficult to set a fixed price up front as some wills would take 30 minutes and some would take hours. This is even worse when talking about any kind of trial or case. You might have to put up a $15K retainer. If it settles, it may cost you $2K. If not, you may burn through all $15K (and maybe need to add more).

So, while your hourly rate may be cheaper, the potential client wouldn't know a total. In some instances like wills, having a set dollar price could work. In others like trials, there would be no way to estimate billable hours before hand. Some firms like Wachtell charge a set rate...but it is millions of dollars and they are used by companies who need/want to win no matter what and don't care if it costs $3M and it settles in a week.




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