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TMG's Take...on The Death of the Billable Hour
A perspective on legal management issues from The McCormick Group.
From time to time, calls are made to do away with the hourly billing system under which most legal business in this country is conducted. In the latest call for the end of the billable hour, Evan Chesler, Presiding Partner of Cravath, Swaine & Moore wrote an opinion piece for Forbes Magazine (“Kill the BillableHour” January 17, 2009), saying that “the billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.”
Chesler does reveal a fairly perverse result of the current system. As recruiters, we often find it ironic that some white-collar criminal lawyers become more marketable if one of their clients gets indicted, and they get embroiled in full-fledged criminal litigation. Getting your clients off during the grand jury phase might make you a hero in your client’s eyes, but it doesn’t produce that many billable hours.
On the other hand, it's interesting that this call comes from a leader of a Wall Street firm. Perhaps Chesler, facing a difficult economic environment and clients who are becoming more vigilant about controlling costs, is yearning for days of yore, when firms like his would routinely send clients bills simply noting “for services rendered.” And let’s face it, Cravath’s legal business plate is primarily made up of bet-the-company matters in which the concept of “value” can be more easily ascertained than the typical matters faced by other AmLaw 200 (and smaller) firms.
Chesler’s viewpoint is not shared by most in-house counsel. Indeed, law firm leaders tell us that their efforts to embrace value billing are often opposed by in-house counsel, who often fear that value billing is a way for outside counsel to boost fees in a way that can evade effective oversight. Even the American Corporate Counsel’s recently unveiled (and sorely underpublicized) "value challenge" focuses much more on factors such as the heavy use (and billing) of inexperienced associates and the high level of attrition at law firms rather than the evils of the billable hour.
We've been hearing about value billing for a generation now, and certainly there have been some inroads in looking at alternatives. And there are probably more situations that can be efficiently addressed by value billing. But merely putting hatchet to the billable hour won’t really address the fundamental causes of escalating legal costs.
TMG's Take is a regular e-mail advisory produced by The McCormick Group. The company's Law & Government Affairs and Law Firm Services groups combine the expertise of more than 15 Consultants to help law firms fulfill all of their lawyer and administrative recruiting needs. TMG's Take covers topics across the spectrum of law firm management, including associate and partner compensation, growth strategies, marketing and business development, operations and facilities management, finance and accounting, professional development, and technology. Please direct all inquiries to Steve Nelson, Managing Principal, at 703.841.1700 or snelson@tmg-dc.com. |
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