Billable Hour's Death has Been Greatly Exaggerated

Admin — Mon, 03 Apr 2006 17:42:51 GMT

Daniel Lee Jacobson, a practicing attorney and professor at Pacific West College of Law, writes a scholarly and surprisingly objective review of the history of the billable hour in April issue of the California Layer. He notes that the billable hour may yet prove to be a transitory convention but objectively reports that the available statistics suggest it is not likely to disappear soon.

Lawyers understand the income-limiting nature of the billable hour. They understand that removing this income-limiting governor on earnings capability means unlocking law firm revenues from the billable time of the owners and partners, either through contingency work, fixed fee agreements, or through the prevailing method of leverage off of others. So why is the billable hour so entrenched?

There are two important influences at work. First, law firms are doing pretty well as is. Yes, they have greater potential, but things may just be good enough the way they are. Why risk a good thing for something that might or might not produce a better result? Sometimes “good” is just good enough!

Second, there is no significant counterinfluence from the legal consumer. The Law Office Management & Administration Report (LOMAR) for March noted that almost ninety percent of all fees are still based on hourly rates. Businesses have invested significantly in systems and procedures for tracking and managing the traditional hourly bill. The corporate world has too much invested sunk cost to move in a different direction at this time.

Not only are hourly rates still the prevailing norm, they are on the increase. An Am Law survey of managing partners found that firms have raised rates for 2006 by an average of six percent. According to LOMAR, midsized firms averaged a five percent increase nationally.

So while morepartnerincome.com is a proponent for taking advantage of every opportunity for fixed fee pricing at the matter and portfolio levels, you need not think you are out of synch if you depend on the billable hour in combination with leverage to drive the majority of your law firm revenues. The billable hour is well and quite healthy, thank you!

PS: Just because things are doing pretty well, doesn’t mean you shouldn’t kick them up another notch. A copy of the Law Firm Business Survey results for the business year of 2005 will give you benchmark information to compare to your own results. The comparison will indicate areas to change for “More Partner Income”. Participate in the survey today to receive your copy of survey results.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

Make More Rain : hr, alternative billing

Billable Hour's Death has Been Greatly Exaggerated