There has been a great deal of discussion among legal commentators about the failure of hourly billing for legal services and the need for alternatives. The most recent article I’ve seen is in the CBA’s Jan/Feb issue of National. Although I’m a law student and have never billed a single hour as a lawyer, I have worked for more than a decade as an entrepreneur and I wonder … what are the alternatives, really, but masked versions of hourly billing? Given the limited amount of hours available to work in any day/week/year/lifetime, billing by the job MUST reflect the time that the task requires.
Flat fee services must have caps on the input of resources to succeed as business models and, as a result, will tend to put a floor rather than a ceiling on the cost of any given service. At best, a flat fee will reflect the average amount of time required to perform a service. Innovators can find ways of doing things more quickly through economies of scale, computer processing, outsourcing and so forth, but price reductions that service providers choose to pass on to the clients can be built into an hourly billing model just as easily as any alternative. Innovations might put pressure on hourly rates through competition, but this has nothing to do with the method of billing.
Frankly, I fail to see how alternatives to billing by the hour will change the cost of legal services. The real pressures on cost come from the the well-known forces of the marketplace … the rest is just packaging. And if clients are becoming more sophisticated, will they really be impressed by a fancy one-size-fits-all (unless you want more) gift bag?
The real issue is value. Lawyers that provide it will gain clients and those that do not will lose clients. Those who insist on talking about how the billing is done, please explain (and be nice about it): What am I missing?