The Billable Hour is Dead to Me (And Why it Should Be Dead to You, Too)
Time for some straight talk. Big Client, you might want to sit down. Your trusted fiduciaries, i.e., BigLaw (pick your favorite, they are all equally guilty), have been stealing from you, for as long as both you, or they, can remember. Not just squeezing you for a few extra ducats, but backing-the-armored-truck-up-to-your-bank-vault-and-cleaning-you-out kind of highway robbery. Who says, thieves don’t prosper? These fat cats are living the high life, all because you’ve given them the ultimate hall pass. You should be ashamed of yourselves. I would have a hard time looking at myself in the mirror every morning.
What’s at the bottom of this gigantic pull-the-wool-over-your-eyes Big Swindle? It really all just boils down to one single little white lie, told over and over, by just about every lawyer to every client, over the last 50 years:
Legal matters are simply too unpredictable to accurately plan and budget. Because of this we have no choice but to bill you by the hour.
Really? We can send a man to the moon, but we can’t figure out how to scope and price a lawsuit? Law is somehow more complex than rocket science?
We can build the Eiffel Tower in less than two-and-a-half years, which had 18,038 different parts joined by 2.5 million rivets, using only 300 people on site. Must have been too hard to plan for, right? Uh, no, there was plenty of pre-planning – 1,700 general drawings and 3,629 detailed drawings – all requiring each rivet hole to be specified within 0.1 millimeters. You give the Eiffel Tower project to an AmLaw 100 firm and they would put 18,038 timekeepers on it and bill 2.5 million hours. Then they’d send you 17 detailed bills with 3,629 general block-billed time entries. Because they didn’t plan, they would have to scrap (settle) the project right before the public unveiling, because it would have a 50-50% chance of collapsing (losing at trial). Of course, they’d get fully paid for this rudderless and bloated project, whether it remained standing or not. Sound all too familiar, right?
So, are legal matters that much harder to plan and budget for than moon landings and the construction of world-famous monuments? Of course not. Yeah, but, well, uhhhhh……..then why doesn’t my law firm do it? The answer is again, surprisingly simple. Ready? Because by not doing it they get to bill you whatever they want to, need to, or can just plain get away with. By not requiring any upfront planning and budgeting, you enter a very dangerous and uber-costly world controlled by Parkinson’s Law and its nefarious corollaries. And trust me, none of these stomach churning variants end well for you, the paying client.
For those weak of heart, you may want to locate your nitroglycerin pills. Parkinson’s Law, which at first glance appears so harmless, was first postulated by Cyril Northcote Parkinson in The Economist in 1955:
Work expands so as to fill the time available for its completion.
Sounds tame enough to me. If you have 4 hours to complete a project, you get it done in 4 hours. If you are given 6 hours, you will use the 6. But what happens when you have no deadline and you charge anywhere from $300 to $1250 an hour? A macabre storyline right from Game of Thrones, unfortunately, as revealed by Parkinson’s legal corollaries below:
I. Parkinson’s MBHQ Corollary:
Work expands to magically fill (or exceed) a time keeper’s minimum billable hour quota, whether per day, week, month or year.
Here’s where things get downright nasty. Let’s say I’m a BigLaw associate and I only have 3 cases to bill on, but I need to get an average of 9 hours a day in to meet my 1900 minimum billable hours per year quota. Let’s say in a normal situation, i.e., one without quotas, I could do everything needed on those cases in 6 hours a day. Fantastic, that leaves 3 hours for social media, long lunches and general workplace stuffing off. Or, if I was an exemplary employee, I could use the rest of my day on business development and pro bono work. In the real BigLaw world, I absolutely, positively, have to bill those 9 hours, whether the work is needed or not. I have a couple of options:
- First, I could actually do more work on the cases (although not needed).
- Second, I could pull out my trusty magic-bag-of-associate-tricks and morph an honest 6 into the required 9 (rounding up, multiple 0.1’s for every email read and phone call made, unnecessary conferencing and file review, etc.).
- Third, I could just make up the extra 3, the first few times promising myself that I’d make it up later (yeah right.) From the client’s perspective, however, all three options result in an extra 33% of unnecessary time. But that extra 33% of unnecessary time to the client, is the vig or juice that feeds the BigLaw machine.
Like I said folks, unchecked Parkinson’s Law is not your friend. Don’t believe me? Then you haven’t seen the bills that I have. Teams of associates (and partners!) billing an average of 9 or more hours a day (sometimes up to 19!), month after month. And they weren’t in trial, they were reviewing and re-reviewing this and that document and engaging in endless conference calls among themselves. For almost 3 years and counting – no end in sight. Did I mention this little $30 million matter didn’t, and doesn’t, have a budget. Not a penny spent on project management. Although I could find plenty of great project managers who would work for far less a day than just 1 hour of 1 partner’s hourly rate, and deliver a massive ROI on that investment.
II. Parkinson’s HRMR Corollary:
Work billed at a higher rate produces more revenue than work billed by a qualified lower-rate time keeper.
Rational clients want work to be done by the lowest-rate qualified person. Thus, for basic commoditized work like document review, the client would prefer $30 per hour contract attorneys to perform the work rather than $300-$800 per hour associates. However, given the fact that there is no budget to adhere to, or project management trying to best utilize resources, managing partners much prefer to use higher-billing associates for the work, and to do as much as is humanly possible (or inhumanly possible, if allowed – see above and below.)
III. Parkinson’s WTMCCAP Corollary:
Work expands to whatever is the most the client can afford to pay (or will tolerate).
This is the default law that comes into play when there has been no upfront planning and budgeting. The managing partner goes by gut instinct to determine what any given client will find acceptable. Just how much blue Kool-Aid will the client drink. This can become especially dangerous to clients in a “bet the company” case, where the firm is essentially given a blank check because of the importance of the matter. When client’s doth protest too much, the partner may even grant “discounts” to appease the client who walks away feeling vindicated, as the partner simply adds an extra timekeeper to make up the difference.
As you can see, Parkinson’s Law, and it’s money-sucking corollaries, all act to unfairly fill up BigLaw’s coffers, at the expense of the paying client. There’s no getting around the laws of human nature – work is always going to expand to fill the time available for its completion, just like the sun is going to rise in the east and set in the west. But while you can’t change the first part of the law, you can effectively manage and control the second part – “the time available for the completion” of any given tasks or phase of the matter. Taking this step is the key to real legal spend management, and I’ll discuss exactly what this looks like in my next installment.
Despite what your attorney wants you to believe, the vast majority of the law isn’t rocket science, and even if it was, you can still plan and budget just like NASA did for those moon landings. In fact, I know of a few firms that can do more than just give you a budget – they will give you an upfront value-based price for any matter. And guarantee it.
Part Ia – The Billable Hour is Dead to Me (highly recommended for the picture alone)