This is in response to presiding partner at Cravath, Swaine & Moore LLP Evan Chesler’s article in Forbes.com about killing the billable hour, which I posted on earlier.
Here’s an interesting statement:
In the United Kingdom, lawyers and clients have never had the same all-consuming obsession with hourly billing as their American peers. Still, over the last 20 years hourly rates have become the dominant currency here as well, and the tide slowly is turning—some British companies and firms are much further along in making the change.
This has certainly not been my experience talking with CFOs from the Magic Circle firms. I did a program in Ireland with a room full of these CFOs, trying to convince them the billable hour was sub-optimal pricing. They defended it to the hilt, said their partners were making to much money under it to change, etc., etc.
So I remain skeptical of this author’s claim the British firms are not obsessed with billable hours. How many of them have trashed their timesheets? My guess is America (along with New Zealand and Australia) has more firms that have done so than Britain.
The article does mention one firm that doesn’t bill by the hour at all, Slaughter and May, stating:
Slaughter and May has never billed clients by the hour, nor do partners and associates have any targets for hours worked. ‘At the end of a deal we sit down with a client and ask, ‘How good a job do you think we’ve done?” explains senior corporate partner Nigel Boardman, the relationship partner for ITV.
Alright, that’s impressive. But so what? One firm does not a diffusion make. America has Wachtell, Lipton, Rosen & Katz, which also doesn’t bill by the hour.
Citing how individual firms are transitioning to alternative pricing arrangements with some customers is also not a major diffusion. Again, so what? They are still billing by the hour for a majority of their other work. Worse, they are still maintaining timesheets to compute hourly rates.
The article mentions another law firm partner predicting that “over the next five years we’ll see firms and in-house counsel looking at arrangements other than hourly rates although I don’t think clients will completely abandon hours.”
Therein lies the problem. It’s not up to the “clients” to abandon the billable hour. It’s up to the law firms.
The Brits are no further along than America when it comes to burying the billable hour.
But I’ll gladly admit to being wrong if someone can show us some empirical evidence to the contrary.