Most legal businesses still run on the billable-hour business model. Here are five reasons why this approach has passed its sell-by date.
1. TAKING CARE OF YOUR ASSETS
There are many ways to skin a cat, figuratively speaking, of course. There’s no one size fits all when it comes to running a business, even if your industry has been doing the same thing for decades because “it works, so why change it.” It’s because we’re constantly evolving and learning from our mistakes trying to improve what we had before and grow with the times not against it.
Change is scary but it’s necessary.
“To improve is to change; to be perfect is to change often.” – Winston Churchill
It’s increasingly evident that how law firms have been working, isn’t working. According to this study, “A law firm’s most important asset is its people. When they struggle, the organisation suffers. When they’re at risk, so is the firm’s success.” Most firms don’t realise this because of the high turnover of staff, but overworking staff can have a bigger impact than they realise.
The authors go on to say, “Recent national reports indicate lawyers suffer from especially high rates of depression, anxiety, and substance misuse, as well as high rates of attrition, particularly among women.” This didn’t happen overnight, so change won’t happen that way either, but rather late than never.
2. LAWYERS ARE SICK…AND TIRED
2.1. Who decided we should only work 40 hours a week?
During the Industrial Revolution in the 1800s, it was common for employees to work 100 hours a week until the National Labor Union asked congress to pass a law mandating the eight-hour workday. This didn’t pass immediately. Although people started working 8 hours a day, they still continued to work on a Saturday, causing 48 hours a week.
Henry Ford removed one of the required workdays and realised people were more productive working only 40 hours a week. In 1938 it became law in the US for 40 hours of work a week and anything over 44 hours would be paid overtime.
When lawyers’ performance is measured by their billable hours, the BCEA flies out the window. It’s a combination of competitiveness, losing your job and how compensation rises and falls when targets are reached or not that flames the fear and makes them step over the ledge.
According to a study in 2015 on what makes lawyers happy, it was found that well-being decreased as lawyers were required to bill more hours. The pressure of working almost 7 days a week and the high-stress environment can cause more than just a lack of sleep.
The International Bar Association surveyed more than 3000 people in the legal field and found that lawyers’ well-being is a global concern. It’s not by coincidence that one in 10 lawyers under 30 years of age experience suicidal thoughts.
‘Clients don’t come first; employees come first. If you take care of your employees, they’ll take care of your clients.’ – Richard Branson
3. USING BILLABLES AS A PERFORMANCE MEASUREMENT IS EVIL
Being in constant competition to overperform and produce more billable hours isn’t just bad for you emotionally, but also physically and mentally. There are other healthier ways of measuring an employee’s performance that won’t keep them awake at night. Here are some alternative performance measurement methods:
- KPI (Key performance indicators);
- Performance appraisals;
- 360-degree feedback;
- MBO (Management by Objectives);
- PDP (Personal development plans); and
- Reward and recognition programmes.
4. THE CURE IS IN THE CAUSE
The hourly billable rate is causing this never-ending circle of sickness and finding a cure for it is to first look at what’s causing it and then find a solution or alternative.
If charging your client by the hour works for you, by all means, use it, but some alternatives are still used today with similar or more success. Here are a few other billable methods that won’t just ease the client’s nerves, but also prevent employees from overworking and being measured for performance according to their billable hours produced.
4.1. Flat fee
Charging your client a set fee for a specific service. Depending on the type of service you deliver, this can be a highly effective way of billing your clients and it’s growing in popularity. It’s appealing to businesses and customers because it’s so simple. Before you buy something, you’d like to know what it will cost so you can make provision for it, the same with paying for a service. You’d like to know upfront what it will cost.
4.2. Contingency fees
An agreement that you’ll receive a set fee or percentage of the recovery amount for whatever service you deliver (no judgement here) … pun intended.
4.3. Blended fees
A combination of these methods on one account. If you charge a client a flat fee for a service and there’s additional work to be done, you can agree on a percentage of the amount as a success fee.
4.4. Budgeted fees
This includes a capped fee that’s agreed on and if the account goes over the cap, it gets suspended. This amount is then discussed after the service is delivered. Whether the client receives a discount, it gets written off, or the full amount is payable.
4.5. Fee cap
You foresee that the service you deliver will only cost the client a specific amount you agree to as the cap. The account is billed hourly as normal, but you stop charging the client and run into your own time that’s not billable anymore when you reach the cap. This billing method will also motivate staff on reaching targets, meeting deadlines and get the job done.
4.6. No success, no fee
This method is not very popular unless you’re Jason Statham or Liam Neeson and know that you’ll achieve what you set out to do for your client. This method is mainly used at tracing agencies. If you’re successful at tracing someone, your client must pay the agreed amount, but if you’re not able to find them, they don’t have to pay you. If you’re confident in the service you deliver, this is a clever way to draw clients because who wants to pay for something they don’t get?
‘Coffee is there for the things we can change and wine is there to accept the things we cannot.’ – Anonymous
5. THERE IS STILL HOPE
After reading this, you’ll hopefully feel some of these solutions and alternatives still give you hope. To help in the interim, we have developed our own wine label called Billables & Burnout. You can order Inter Alia (a Pinotage) and For The Avoidance of Any Doubt (a Sauvignon Blanc) here. The label doubles as a fun ‘find the jargon’ puzzle. You’re welcome.