Does the Billable Hour Cause Lawyer Overbilling?
The legal industry has been predicting the death of the billable hour for more than a decade. Yet, the practice remains a mainstay at most law firms. The American Lawyer article “Lawyers Caught Overbilling? The Billable Hour Shares the Blame” reflects on whether a recent case of intentional overbilling by a former Kirkland & Ellis lawyer, can be seen as a “consequence of law firms’ attachment to the billable hour” and unreasonable billing targets for lawyers.
The article cites “Altman Weil’s most recent Law Firms Transition survey” whi
ch showed that 48.8 percent of firms failed to meet their annual targets for billable hours in 2017. But, does the fear of missing billable hour targets really cause lawyers to consider bill padding?
We asked four leading legal consultants to weigh in on the question: Do you think the billable hour contributes to lawyers overbilling?
“There is no question that the billable hour model has the potential to incentivize lawyers to overbill—whether intentionally or otherwise. To make matters worse, lawyers feel intense pressure by firm management to meet ever-increasing, annual revenue requirements and squeezed by clients for fee discounts. Despite these forces, I believe any intentional acts of overbilling continue to be uncommon. Over the course of my 20+ years as a business development coach and trainer, I have had the pleasure of working alongside ethical and honest practitioners who appreciate that any short-term gain from overbilling would result in a long-term loss in stature and reputation.” –Jonathan R. Fitzgarrald, Managing Partner, Equinox Strategy Partners
“There’s nothing inherently evil about the billable hour. Its misuse is a human responsibility, borne of failed business and compensation models in law firms and intense competition in the law firm marketplace. The increasingly competitive market gives law firms a unique opportunity to refine their businesses to meet the market and provide better client value, in a system that doesn’t pressure lawyers to bill excessively, but encourages them to bill their value. Grab the opportunity!”- Roxanne Jensen, Founder, EvolveLaw
“A billable hour billing can contribute to overbilling, but in my experience, most lawyers are careful to bill accurately. The billable hour as a billing unit is not as much of an issue as the value received for the hour charged. If the final result warrants the amount charged, any billing approach is fine.” – Brian Kennel, CEO and Lead Consultant, PerformLaw
“I believe it is overly simplistic to say that the billable hour contributes to overbilling. What the client wants, and needs will generally frame how legal services for the engagement can be fairly priced. Structuring a fee arrangement that does not match up to what the client values frequently spells trouble for the relationship as well as for the collectability of the account.”- Joel A. Rose, Certified Management Consultant and President of Joel A. Rose & Associates, Inc.
What do you think? Is the billable hour inherently evil? Do excessive hourly quotas lead to overbilling? We’d love to hear your opinions for a follow-up article. Email your thoughts to firstname.lastname@example.org with the subject line, ‘billable hours commentary.’
Looking for alternative billing options that will help ease your firm’s reliance on a billable hour methodology? The on-demand webinar Legal Fee Update: Developing Alternative Fee Arrangements that Work for You and Your Clients will help you discover the types of fee arrangements firms are using today, and how to determine which AFAs might be most successful for your firm.