Best-selling author Scott Turow has an excellent article in the August, 2007 ABA Journal entitled: “The Billable Hour Must Die: It rewards inefficiency. It makes clients suspicious. And it may be unethical.”
Part of me wants to say, “Well, Duh!” Richard C. Reed, author of three seminal ABA books beginning in 1989 has been making some of the same points. My book, Professional’s Guide to Value Pricing, took the argument further by not only tracing the billable hour back to its theoretical roots—Karl Marx’s Labor Theory of Value—but also questioning the ethics and morality of billing by the hour.
The problem with Scott’s article is he doesn’t have the vision or imagination to foresee an alternative to the billable hour (which is strange for a fiction writer), and in fact, he makes this spurious assertion:
Let me again make it clear that I am not calling for lawyers to band together to abandon hourly billing. The antitrust division of the Justice Department would be likely to have something to say about that, and well it should. But I am hoping that lawyers, especially litigators, will more often be bold enough to consider offering clients alternatives billing arrangements. And I hope clients will be bold enough to accept them.
Scott is contradicting himself here. If the billable hour is indeed unethical, why wouldn’t he want lawyers to move away from it en mass? The Justice Department doesn’t legislate or regulate how a firm prices, and no one is calling for a cartel to be created, or for collusion among firms. We are just calling for common sense pricing, similar to every other business on the planet (except those dumb enough to bill by the hour).
Scott claims it’s hard to devise an alternative to the billable hour, but this is absurd. We have many alternatives, and they are adaptive and flexible. He’s never heard of Change Orders, service guarantees, price guarantees, fixed prices, etc?
Scott cites ABA Model Rules 1.5 and 1.7 with respect to establishing fees and conflicts of interest, asking: “When was the last time any of us actually and explicitly set forth the problems of this system for a client, the way we do with other conflicts?” Good question, as we all know the most pernicious effect of the billable hour is that is misaligns the interests of the client and the professional.
Scott even asks us to imagine saying this to a client: “I want you to understand that I’m going to bill you on a basis in which the frank economic incentives favor prolonging rather than shortening the litigation for which you’ve hired me.” How refreshing would this honesty be?
For all the flaws in Scott’s article, I’m encouraged by it. Perhaps someone of his fame can bring this issue out in the open and foster a healthy debate. Even better, maybe his own firm will set an example and bury the billable hour.
In addition to the article, take a look at the comments beneath it. Two are from David Giacalone (#2 and #5), which I responded to (#11). I’ve debated David before and it’s just useless, so I won’t bother to continue here. His economic ignorance is beyond comprehension, and I take offense at his assertion that profits and service are in conflict. This is a zero-sum view of the world that one finds on the kindergarten playground, not a serious discussion of the economics of pricing and value.
The ABA has always been a leader in questioning the practice and ethics of the billable hour, far more than any other professional body. I applaud its willingness to continue the debate. I wouldn’t even mind if Scott signed our Declaration of Independence.