What’s Wrong With Billing by the Hour?

Brian J. Ritchey has a post over at morepartnerincome that asks: “What has the billable hour ever done to deserve such lament?”

It’s basically all about how attorneys need to record their time extemporaneously in order to bill accurately and timely, thereby not violating trust with the customer. Here’s my favorite paragraph:

On the other hand, I know of attorneys who don’t have this problem at all. They never write time down, they never discount, and they never have a client question their bills. The client trusts that what they are being billed is the actual work that the attorneys performed. What are they doing differently? Are they value-billing? No. They enter time as work is performed. They use timers. And they are disciplined.

The flaw here is not the merely the absurdity of a knowledge worker with multiple stop watches around their neck, but the idea that there is a relationship between hours spent and value created.

Brian obviously is mired in the labor theory of value. Since there is nothing more practical than a good theory, no matter how accurately attorneys record their time, it simply has nothing to do with value.

That’s what the billable hour has done, Brian, and why it deserves such lament. There’s simply no right way to do the wrong thing.

The attorneys you claim to know who never receive a complaint, or never write down, are also the ones leaving an enormous amount of money on the table by not capturing the value they create for customers. Why? Because they are mired in the mentality that hours = value.

Folks, this is why this change to Value Pricing isn’t merely about “how to.” It’s really about “why to.”

The why to is the theory behind what creates value. If you believe hours do, then there’s not much we can do except try to illustrate the flaws of the labor theory of value.

If you become convinced of the subjective theory of value, there’s no limit to the way you can implement Value Pricing. But it all starts with the theory. No theory, no learning.

Something Brian J. Ritchey, apparently, hasn’t learned yet.

[Thanks to Stephanie West Allen over at Idealawg for alerting me to Brian’s post].

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