If you rely on hourly billing, you might as well go ahead and change your firm’s name to Dumb & Dumber LLP.
So says law management consultant John Chisholm, who predicts the “selling time” business model will soon go the way of the dodo.
“Rather than wait for clients and external disruptors to kill it as will happen, as a profession we are better moving to a different business and pricing model ourselves,” he says in this interview with LegalTrek.
Chisholm says clients hate time billing. They think it’s a rigged game: good for lawyers but bad for them.
As a result, they are abandoning firms that bill by the hour in favor of those that offer flexible, value-based pricing.
“Clients love it and have absolutely no problem adapting to non-time based billing. It is the lawyers that have the problem and we just need to get over it: experiment, take risks and learn what is best for you and your clients,” he says.
Six Minutes of Misery
To illustrate his point, Chisholm – who is originally from Australia and has spent his career with biglaw firms – has created the fictional firm Dumb & Dumber LLP. On the faux-firm’s website, Chisholm collects things he’s heard lawyers say in defense of a billing practice he deems indefensible.
Here’s a sampling:
- “All clients are equal – so let’s treat them all the same.”
- “Let’s recruit the brightest and most creative talent – and then make them account for every six minutes of their day.”
- “Let’s invest in IT to make things happen quicker – but let’s keep billing by time.”
- “Yes we know everyone fudges the numbers in their timesheets, but it is okay because the lies cancel each other out.”
- “Let’s devote more than 10 percent of firm resources to tracking time and 0 percent to understanding the value we deliver.”
- “Let’s divide each day into billable and non-billable six minute intervals to inspire our people.”
- “Let’s do something our clients will love. Let’s retrospectively price everything.”
- “Let’s have the same hourly rates as our competitors – that will differentiate us.”
- “We are going to be different, but only a tiny wee bit different.”
- “To help inspire our lawyers, we will email their weekly chargeable hours to the entire firm every Friday afternoon at 4:45pm.”
- “Of course we love travelling to see clients – it means we can charge them for travelling, while phoning other clients and billing for that at the same time.”
- “We have implemented a comprehensive project management tool. The quality of our time recording has gone up by over seven percent.”
- “We have an annual strategic retreat where all partners contribute to setting the aims of the firm. Fortunately other than those two days a year we don’t need to do any of that planning stuff the consultants go on about.”
The Ah-Ha Moment
Chisholm says he arrived at his dislike of time billing honestly.
“I guess I was never a good time recorder to start with as a practicing lawyer. In fact I think I became managing partner of my law firm in 1990 just so I didn’t have to fill in timesheets but make every other lawyer in the firm fill in timesheets! Seriously, as an MP and CEO of Law firms that ran on the business model of leveraging people x time x hourly rate (which was financially successful for the firms I might add) there were increasing occasions when the time my lawyers spent on something was not always appreciated by the client and didn’t add value to the client.
Invariably this would lead to a discussion with the client and more often than not some compromise on the fee. On other occasions there were times where I thought billing by time left a lot of value on the table. We flirted with other forms of pricing at the firms – mainly fixed fees and mainly when a client insisted. Although I became increasingly uncomfortable with the model it was not until I started my own consultancy practice in 2005 that I seriously investigated other pricing models.”
There is nothing exotic about value pricing, according to Chisholm. It’s simply a matter of inviting your clients into the decision-making process. “Value” is viewed from the perspective of the client, not the lawyer.
The biggest benefit of ditching time billing?
“Lawyers actually enjoy practicing law again,” he says. “They are no longer working just to feed the Almighty Billable Hour Beast.”
- Legal Trek https://legaltrek.com/blog/2015/08/john-chisholm-lawyers-have-got-to-stop-selling-something-clients-dont-buy/?utm_source=linkedin.com&utm_medium=social&utm_campaign=american_bar_solo_small_firm
- John Chisolhm Consulting http://www.chisconsult.com/dumb-dumber-llp-if-jim-carrey-jeff-daniels-ran-a-law-firm-50-things-they-might-say/#prettyPhoto
Jay Reeves a/k/a The Risk Man is a 1981 graduate of the University of South Carolina School of Law and has practiced in North Carolina and South Carolina. Formerly he was Legal Editor at Lawyers Weekly and Risk Manager at Lawyers Mutual. Contact him at firstname.lastname@example.org