The end of the billable hour?

The front page of the Wall Street Journal this morning has an article called “Billable Hour Under Attack.” Apparently, many companies are using the recession as the impetus to push their outside counsel to bill flat fees rather than for each hour worked on a contract.

I think this is a great idea. Time is an absolutely non-renewable resource. While you can always hire more lawyers to bill more time, even the best lawyer only has 168 hours in a week. Tales are legion of lawyers double- or triple-billing their time, but still. Time is a scarcer resource than (if you’ve got smart people) ideas and solutions.

Consequently, in order to maximize billable hours, the incentive is to waste this scarcest resource. If you can do a 10-hour job in 10-hours, great, but better to do it in 12, since you can bill two more hours. Incentives are on the side of inefficiency.

Long term, what this does is create a culture that rewards the lawyers who value their non-working time least. There is a reason that even at the law firms that make Working Mother magazine’s “Best Law Firms” list, the percentage of female equity partners is seldom over 20%. Though this is changing, for a variety of reasons women often place a greater premium on having time for a life outside of work. This is partly because men are often judged primarily on their income (alas) and women still carry the bulk of childcare responsibilities, sometimes even in families where the mom is a highly-paid attorney. Some amount of this is choice, and some is social pressure, but there it is.

In other words, it is not unreasonable to believe that the billable hour model has helped keep women from becoming a proportional share of equity partners at top firms. Women have made up close to half of law school classes for years — long enough for about half of new equity partners to have been women for much of the last decade if women and their firms thought that was a good plan. It hasn’t happened.

In general, working longer can lead you to land more clients, but there is a point of diminishing returns. The billable-hour model creates an incentive to work past that point. So it’s time to see it go.

Leave a Reply

Your email address will not be published. Required fields are marked *