The Kiwis fed up with the billable hour

Another hat tip to Stephanie West Allen for sending me this article, “Billing By the Hour—Is There A Better Way?”

I’m sometimes accused of making general, sweeping statements, such as “there is enormous empirical evidence that customers dislike the billable hour,” or “there’s an incredible backlash against the billable hour.” But these statements are true, backed up by endless surveys and studies, which I have cited extensively in my books and on this Web site.

This article provides some more updated evidence, such as this:

The ACLA/CLANZ Legal Department Benchmarking Report 2008 shows that when asked for fee estimates, law firms were consistently on or below budget just 2 per cent of the time. Only a third of the corporates surveyed reported that firms met their budget more than half the time.

But the key area of concern is the hourly billing. Only 3 per cent of general counsel surveyed considered billing by the hour to be the best basis upon which to price legal services.

Nearly 40 per cent of those surveyed considered hourly billing to be “not very appropriate” or as “rewarding inefficiency and providing no incentive for success”, or “not at all appropriate” and “totally outmoded.”

Certainly internationally, nowithstanding all the talk of flat fees, contingent fees and success fees, most corporate lawyers (between 90 per cent and 100 per cent) still bill by the hour.

To me, the most interesting part of the article is the conclusion, from Ron Pol, a consultant to the legal profession from Team Factors, who said:

“Finding a good alternative is not easy. People have tried before, and nothing’s yet taken hold on sufficient scale to break the billable hour stranglehold. But when it does, and it really is only a matter of time, the client who brought it about would become an overnight business guru, and the law firm’s name would become synonymous with the new methodology replacing the infamy of hourly rate billing.”

Well, Mr. Pol, there are firms doing it, especially in New Zealand, thanks to our Senior Fellows Peter Byers and Yan Zhu. Not only have they ditched the billable hour, they’ve trashed the timesheet as well.

There are also firms here in the USA, such as Chinn and Associates, Shepherd Law Group, and of course our own Chris Marston of Exemplar Law Partners, among many others.

These firms are pioneers, but they don’t get the recognition they deserve because their colleagues think they are insane, as is typical with most innovators. It really speaks volumes about the lack of intellectual curiousity of lawyers, and those who consult with them, that these firms are not better known.

Far from being overnight business gurus, they are outliers, lone voices in the wilderness. But they will continue to march forward, blazing the trail for others to inevitably follow.


  1. I agree. Some firms have migrated beyond value billing. I have also ditched hourly billing, mostly, in my own practice. When in-house a few years back, managing the litigation function for New Zealand’s largest listed company, I introduced a value billing system, to considerable resistance from law firms. Perhaps as you suggest such actions were indeed ahead of their time. I was also appointed by the ABA, apparently as its only representative outside the US, following the 2002 ABA Commission on hourly billing in the profession, yet was any firm onto it then? Not over here at least. Yes, some firms do it already, more than dabbling lipservice, and some do it well. The point remains though that it has not yet taken hold. Like the “Du Pont model”, I expect someone else may well have pioneered many of its key principles, yet DuPont did what they did perhaps just at the time that others started to realise its value. Similarly with removing the ironically disabling perceived crutch of hourly billing. You are well ahead of your time; even me, starting really only a decade or so ago, merely follow in your footsteps, yet also ahead of its time. It will come. And some client or firm in the future (hopefully not too distant, for clients and their firms) will become recognised as ‘starting’ the shift. Bring it on.

    Ron Pol,

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