Why I Hate Hourly Billing – My Column from the Nashua Telegraph – January 15, 2014

For years I have said that if someone had told me about hourly billing before I decided to go to law school, I might not have gone. Now, after over 28 years tracking my time by tenths of an hour for billing purposes, I can say it with certainty: had I known about hourly billing in 1982, I would never have become a lawyer. Why do I hate hourly billing so much? With apologies to Elizabeth Barrett Browning, let me count the ways.

            I hate hourly billing because it defies economic reality. Too often, there is little or no correlation between the hours a lawyer spends on a matter and the value of the services provided to the client. When hourly billing is the payment mechanism, the practice of law becomes that rarest of industries where one can charge $500.00 for a $59.00 toaster because it took a lot of time to build it.

            I hate hourly billing because too often bills surprise the client. Even when clients have a general idea about what a given bill might be, they still open that monthly invoice with trepidation. Unless they have called to find out, they have no way of knowing how much time was plowed into their matter during the prior month. Too often, painful surprises lurk inside that envelope. In business, nobody likes surprises.

            I hate hourly billing because it keeps clients from communicating with their lawyers. It makes one’s lawyer a person to be avoided, because each interaction generates a time entry and charge on the bill. That grim reality turns small client problems into larger problems that could have been avoided had an early phone dall been made. It also makes it hard for lawyer and client to build the healthiest kind of relationship: one based on mutual trust and respect that stands the test of time.

            I hate hourly billing because it rewards lawyers for being inefficient. Good lawyers use their best efforts to ignore the fact that they generate more revenue by pouring more time into the matter. But lawyers have mouths to feed too.  When fees are generated by time worked on the matter, zealous representation too often becomes inefficient representation. A billing mechanism that places producers in such an inherent conflict of interest ought to be frowned upon, not embraced as the industry standard.

            I hate hourly billing because it is the root cause of many of the legal profession’s image problems. Because lawyers make more money by billing more time, the public perceives them as professional gougers. In some instances, of course, they are. When pressed, every lawyer I know can recount instances where either they themselves or another lawyer or law firm deliberately drove up the legal fee. The ugly truth is it happens all the time. Hourly billing makes it easy.

            Most of all, I hate hourly billing because of how it makes me feel every day. Keeping track of every minute of my day and billing clients for what I do during each ten percent increment of my time makes the work inherently unpleasant.  Accuracy, which ought to be at a premium, is in reality quite difficult to attain. That causes all sorts of stress in my daily work life. Hourly billing, for me, makes the practice of law uniquely exhausting. Too often I feel like a slave to time, rather than an expert in my chosen field.

            I hate hourly billing because it is antiquated. Hourly billing was created by lawyers decades ago at a time when lawyers were scarce and clients were wholly dependent upon them for legal advice. Today’s marketplace is completely different. Today there are too many lawyers. Today there is the Internet, which provides access to legal information and has lifted the curtain to expose what lawyers do. Much of what used to be pitched by lawyers as unique if not magical is now available online to everyone for free.

While clients in some market sectors are demanding methods of paying for legal services other than hourly billing, most lawyers continue to resist the change that is coming. At the highest levels in some urban markets, hourly rates have actually crossed the triple digit barrier, and there are still clients that willingly pay them. But change is coming.

            The business world is evolving, and with that evolution wealth and power are shifting from their traditional locales in banking and finance to the world of technology.  The emerging generation of powerful and wealthy business leaders has been weaned on thinking outside the box and employing new ideas to increase efficiency. They are experienced at viewing the status quo with suspicion, and are unlikely to embrace their grandfather’s billing arrangements. They will demand that lawyers change. 

            Clients in the future will be seeking different billing models that better reflect the economic realities that drive healthy relationships between lawyer and client. Those models will reward efficiency, not undermine it. They will promote effective communication, not inhibit it. They will serve both parties, not just one. If lawyers are lucky, they might even make the practice of law more enjoyable.