It’s About Time We Rethink the Billable Hour
Most legal practices are dominated by the billable hour, but other firms are beginning to contemplate whether a new time management system might be more appropriate for the modern age.
Eleanor Weaver, CEO at Luminance, shares her thoughts with Lawyer Monthly on the billable hour and how it may no longer be relevant to the modern legal profession.
Lawyers have often held a special fascination in the eyes of those outside of the profession. Law is viewed as an industry where sharp arguments and even sharper attire combine to provide high-stakes drama. But in real life, a career in law is known for its demanding culture as well as its perks.
The reality today is that bright-eyed, bushy-tailed young lawyers enter the practice of law with big dreams of cracking open cases or closing big deals, but are too often confined to monotonous, repetitive document review work. With corporate data only continuing to increase, these budding young lawyers are quickly met with long nights spent reading and analysing near-identical contracts with little time allocated to the creative and analytical work that they actually entered the profession for. Some firms expect their junior lawyers to bill at least 2,000 hours a year even without holiday, leading to lawyers feeling unmotivated and unsatisfied, as well as displaying signs of mental distress.
And with the onset of remote working, the danger of overworking has increased for some professionals, thanks to the extreme proximity we have to our work phones and laptops. Work no longer ends with the commute and lawyers obsess about 6-minute billable blocks in their bedroom rather than the boardroom.
These billable blocks feed into the billable hour, which was first developed as a means of keeping track of clients’ fees and monitoring annual billing targets. The billable hour also bred competitiveness – as lawyers worked determinedly against the clock to deliver stellar results. But there is a fine line between determination and burnout, and with the volume of documentation legal teams are expected to review only continuing to increase, major law firms are recognising that changes to their billing model could improve employee well-being, while also strengthening the lawyer-client relationship.
Work no longer ends with the commute and lawyers obsess about 6-minute billable blocks in their bedroom rather than the boardroom.
Just recently, Osborne Clarke announced a move towards subscription pricing models by 2025. Indeed, world-leading law firms like Slaughter and May and Linklaters are also experimenting with more flexible alternatives to pricing such as fixed fees, capped fees and success fees. These pricing models work to reflect the value of the solution provided to the client and their business, not on the hours spent. This is critical in a market where the pressure to do ‘more for less’ has never been so apparent, with clients demanding to know exactly how and where their cash is being spent.
But in order to really rethink time management, efficiency must be increased, and the adoption of technology is the key to the success here. With the explosion in enterprise data, advanced AI technology has emerged as a critical enabler for law firms of all sizes, helping to speed up and enhance laborious and repetitive tasks like mass-document review in an arbitration dispute, for instance. This means lawyers are able to focus less on the mundane and more on the fulfilling tasks such as consultancy work and legal analysis, putting to use the skills they honed during law school and most likely entered the profession for in the first place.
A high-volume M&A due diligence review arriving in the form of a request for proposal (RFP) document can illustrate a challenge with traditional time management. Trainees can be faced with hundreds, sometimes thousands, of documents for a single review. On top of this, increasing quantity and complexity of legal and regulatory change, a prime example being the disruption arising from Brexit, means that lawyers must constantly assess and mitigate associated risks for their clients. If these clients are paying for advice on the hour, then there’s pressure to deliver, but law firms can scrap this model of payment while also drastically reducing the time spent on review by utilising the right software. Whether you’re using a tool that helps with document collaboration and e-signatures, reviewing datasets to uncover key information embedded in contracts, or managing workflow, technology is proven to be the greatest friend to any junior lawyer.
And beyond just improving employee wellbeing, a move to more flexible pricing models might soon be very necessary in order to remain competitive in an increasingly dynamic legal market, as Alternative Legal Service Providers or ‘ALSPS’ start to make their mark on the sector. PwC and Deloitte’s legal divisions now employ more lawyers than most law firms and 23% of large firms in the UK and US say they have lost business to the Big Four. These new players are creating a new legal service delivery model built around integrated technology platforms and delivered with value-based pricing. And it’s effects are certainly being felt – a recent survey by Thomson Reuters found that the ALSP market is now worth more than $10 billion.
In order to retain the best and brightest – the future partners and leaders – law firms need to ensure that they modernise to get the most out of their employees’ talents and meet the demands of their clients; the key to this is rethinking the rigid framework of the billable hour. By switching to outcome-based pricing while boosting digitalisation, law firms will no longer have to adopt a framework which unnecessarily constricts the way lawyers work.