Although Toby is the master of this discussion, I thought I’d chime in with some open-ended questions of my own. There has been a lot of talk about attorneys moving away from the billable hour method and look toward either flat rate or some type of maximum billable rate in order to coax more clients (or more of a specific client’s work) to themselves and the firm they represent. But, my issue is this: What Does That Mean for Me (the non-billable guy)???
Here are some (very simplistic points) of the benefits that attorneys and clients get from a flat-rate, or similar alternative billing method.
- Motivated to get client’s case completed
- Potential ability to take on additional cases
- Profits are not determined upon the number of attorneys on the roster
- Ability to manage the client’s matters rather than looking at the time spent
- Leverage different billing approaches to attract business that may have gone to competitors
- Ability to determine exact costs of legal representation
- Simplify the billing process (less time reviewing those billing invoices)
- Use leverage of different billing approaches to determine what works better for their issues
So, if we look past all of the complexities and paradigm shifts that will need to take place in order to get to alternative billing, what does it mean for the support staff of a law firm?
Right now, the way a firm makes money is by charging more hours to a client. The more “billable” people you have on the matter — the more hours you bill — the longer you take to finish the matter — the more you make. Since raising rates this year seems to be off limits, the only way to increase the bottom line would be to hire more billers. And, we seem to see that that isn’t an option either.
There is one word that gets tossed around a lot when you talk about alternative billing — Efficiency. We all seem to agree that the billable hour promotes inefficiency because the attorney will actually lose money by finishing up a matter too quickly. If alternative billing requires that matters be handled more efficiently, then that should push for tasks to be pushed down to the level that can handle them in the most time and cost efficient manner. It should also push for automated tasks when possible and the ability to find the most experienced people to manage the tasks.
Tasks that do not require a licensed attorney to do, should not be taking up an attorney’s time. Why pay someone the equivalent of $80 an hour to do the task that someone paid $35 and hour can do? Tasks will be pushed down to the level that creates the highest rate of return. If that means a paralegal does the work instead of an associate, then the paralegal should do it.
Tasks that can be automated should be. This is something that the folks in Knowledge Management have been touting for years, but have not had total success in implementing due to the fact that if a task is automated rather than handled by a biller, then the firm cannot make money off that task. In an alternative billing world, there would be a push to automate these tasks, and train the attorneys and other staff on how to use the automation efficiently.
The end game of alternative billing is to enable the firm to handle more of the client’s work in a shorter amount of time, and charging a rate that allows the firm to make as much or more than they were with the billable hour rate. The client wants the firm to handle more of the work in a shorter amount of time, and to have a standard rate charged on each matter that will allow the client to predict the money spent for legal work.
If the firm plans to take on more work, it absolutely has to make the handling of the work as efficient as it can. Finally creating efficient methods, standard procedures, and automating tasks when possible. This should encourage firms to finally implement some of the projects that KM has been discussing for the past few years. It is also a golden moment for well knowledgeable staff to step up and take on take on those tasks that they are qualified to do.