Using the Billable Hour is Like Burning Fossil Fuels

Using the billable hour is like burning fossil fuels, and the battle to move beyond the time-based legal economy is like the struggle to end global warming. Here is why.

Selling time is a profitable way to run a legal business, just as burning oil or coal is a tremendously effective way to rapidly generate energy. The flipside is that they both have multiple negative consequences. They are also both very hard to remove, largely because even though many people can see the arguments for getting rid of them, moving past our systemic dependency is really hard to do.

Systemic and Culturally Embedded

The fossil fuel industry has powered human civilisation through the Industrial Revolution, through the massive economic expansion of the 20th Century, and is now at a turning point in our history as we move through this new century.

Its use is deeply embedded, in our energy infrastructure and transport system, to manufacturing, to how houses are built to accommodate fossil fuel use, even to how people learn to drive, and it’s shaped our culture e.g. ‘hurry up, put your foot on the gas’.

And simply: it works.

Meanwhile, the billable hour is now equally embedded in the legal world, although it’s arguable that it didn’t become widespread until at least the 1960s.

It is also systemically part of our world. Legal work is manufactured and sold using time as a metric. Value is judged by the time taken for legal things to be made. Lawyers are rewarded for the time they commit to billable work and will lose their jobs for not billing ‘enough time’. Plus, a whole segment of the legal tech industry is now devoted to helping account for that time.

Much as it would be impossible for most of us to stop using fossil fuels at noon today and immediately shift to a new system, the same is true of the time-based legal economy.

Change Requires a Viable Alternative

Just as you cannot move from oil to an alternative without that alternative being developed and integrated into our civilisation, the same is true of the billable hour.

To move beyond the hour we need a system that is as good, or better, which doesn’t run on time. And that is hard to do. As explored by this site (see: Killing Time) and others (e.g. Changing Legal), some of the key things you’d need are:

  • Pricing models for the vast majority of legal work that were fixed / scoped to enable buyers and sellers to exchange ‘a legal thing’, a good, a product, rather than the time involved in the output’s manufacturing process.
  • This would enable unit prices to be developed and meaningful comparisons between manufacturers (AKA law firms and ALSPs).
  • There would have to be sets of standards that both buyers and sellers used. This is indeed possible and we are starting to see the first signs of this happening, although (see below), the road ahead is going to be a very long one.
  • Law firms would have to find new ways of rewarding and providing bonuses to their lawyers, i.e. rewards for creating value, pleasing clients, being creative and original, being good team members, rather than just for billing, and billing, and billing.

The change process would also have to be gradual. At present a relatively small percentage of work is on a fixed fee, (just as the number of electric vehicles are few in number in most cities). But that can change as the data infrastructure is built to allow standards to be formed, and then from that the meaningful benchmarking of product pricing evolves, and then fixed fees eventually become the norm in the time-based economy.

But, let’s not kid ourselves that this is going to be an easy ride. The road to a ‘net zero billable hours world‘ is going to be a very long and hard journey, not the least because – as with fossil fuels – they work, and they make a lot of money for a lot of people. Plus, as mentioned, even if we don’t like them, they are so embedded they are going to be super-hard to extract from the system.

Proving Harm

One reason why the fight against fossil fuels has gained traction is because scientific evidence has proven that they cause global warming, and that this warming leads to extreme weather events and negative environmental impacts the world over.

(That said, this has been a hard fight too. Work in this area really got going in the 1970s. It is now 2021 and even now there are those who downplay the impact, or even deny it. So fifty years of hard work on a global basis to get to here. Moreover, oil companies appear to have launched a long-term and sophisticated programme of lobbying and disinformation designed to derail and slow down any real change, just like the tobacco companies did.)

When it comes to the billable hour the reality is that at the moment what we have is not a scientific mass of data to prove its harm. What we have is some theory (e.g. as this site and others have argued that you cannot truly embrace the benefits of legal technology, i.e. driving efficiency, if you operate in a world where the more time something takes the more profit you are likely to make.)

And we have lots and lots of first-hand accounts from lawyers, and ex-lawyers, who have stated that the time-based economy made their life a misery, drove them from their jobs, undervalued them, forced them into work that had no meaning to them or their clients, and harmed their quality of life.

This site would also argue that quite simply the billable hour is unnecessarily extracting capital from the economy that could otherwise be spent on creating value inside the clients’ businesses, or even better spent at those law firms to create more value. I.e. the billable hour is creating economic harm for the clients, which in turn means harm to the shareholders, and ultimately harm to the economy at large.

Personally, I have no problem with law firm partners being as rich as Croesus if that’s what they really want, that’s their business. But, ‘the how’ of this wealth generation is the issue. There is no reason why a group of people who own a legal business, e.g. a law firm or ALSP, cannot be as wealthy without resorting to the time-based system. It just requires a lot of effort to make that change. And that’s the problem – a lack of will to change.

Also, let’s not hang this just around the providers’ necks. The buyers are just as much part of this, as the buyers of commercial legal services are lawyers – albeit inhouse lawyers. And here are a few choice things this site has heard over the years from senior inhouse lawyers:

  • ‘We bring so much value to the business any talk of efficiency is irrelevant.’
  • ‘I feel sorry for lawyers that get involved in this innovation thing.’
  • ‘We tried fixed fees, but went back to the billable hour as our law firms didn’t provide as good a service with fixed fees.’

On that last one, this site would say: then dump that law firm and use the incredible buying power you have as a very large company. If buyers do nothing then we cannot expect the sellers to change either.

And it’s worth emphasising that point: there is a tendency to blame law firms for all the ills of the market, but it’s the buyers who pay for time, and judge value with time….and who do not want to take on the task of analysing legal spend to create benchmarks for what legal goods they buy should cost. (Some do….its true, but many don’t.)

In short, there is harm being done, but the buyers are as complicit as the sellers. As mentioned above, it’s embedded and systemic. Change is going to be hard.

One last point here. This site would argue that selling and buying time creates ‘legal inflation’. I.e. the cost of X legal product keeps going up, even as the processes and knowledge about how to make that product all improve. And also as more tech can be implemented to improve that process and knowledge retrieval for that product. Just as fossil fuels feed carbon into our environment and warm up the atmosphere, so too the billable hour inflates the cost of legal services.

[Note: in these moralistic times we live in, some may be tempted to say if X = harm, then anyone involved in X is ‘bad’. That is of course absurd. That’s like saying anyone who has ever worked for the Ford motor company is somehow morally bad because they make traditional petrol vehicles. Although it seems that society is heading toward an almost Medieval moralistic simplicity at the moment, the real world is way more complicated. Good people are systemically part of industries that they didn’t create, and very often harm is a by-product of systems designed to do good. It’s complicated.]

The Answer

As noted above, what we need is empirical evidence that the billable hour is causing harm. Like many movements in society, we have started with theory and first-hand experiences. What we need to do now is to get this into some kind of objective framework, just as happened with the campaign against global warming.

What we need is a series of studies, backed up by quantitative and qualitative data, all around the world, to show what is happening. It would be great to think the Bars and Law Societies of the legal world would all be supportive of this – but, naturally, many of these organisations are in effect the ‘trade union’ bodies representing their members. And their members are not totally into the idea of getting rid of time.

External parties, e.g. governments, have intervened in the past, such as the case of when the UK Government under Tony Blair created the Legal Services Act, primarily to help produce a more consumer-focused legal sector. So, perhaps it will take external parties again? Or perhaps change will come from free spirits inside the legal world itself, driving change from within?

One group that really should be involved in this change are the CEOs, CFOs and major shareholders of large companies, which are impacted by legal inefficiency and the time-based legal system. Beyond the lawyers working in this time-based system, the clients and their shareholders are the ones who can conceivably provide measurements as to how the current system is costing them money.

For now, let’s leave it there. Like the campaign to end global warming, this battle will take decades to reach its goals. But, we are at least at the beginning.

(To be continued)

By Richard Tromans, Founder, Artificial Lawyer and Tromans Consulting, Nov 2021.

3 Comments

  1. Great article, Richard. I guess the big question now is, who will create these studies to measure the impact? All we have now is experience and intuition to ride on.

    I think the best place to start is by bringing other industries into the mix, and observing the trends there. As is often the case, the legal industry is simply playing “catch up”.

  2. Even those buyers who have moved to some measure of flat fee models still ultimately boil everything down to a time measure. It’s very difficult to wean ourselves from the fundamental, short-term profit generation view at most firms, which also explains in part the reluctance of firms to invest in systems and processes to raise efficiencies.

    Great article, underscoring the road ahead.

  3. How is the ‘closed’ market causing/prolonging things? In many countries, lawyer’s work is protected and free competition is blocked. This protection may be one of the bigger hurdles that obstructs innovation. It may be the reason why practitioners feel there is no need for change. Maybe removing it can help cause the willingness you are looking for. Not doing so and to expect the industry to re-invent itself without internal motivation may be unrealistic.

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