Why We Abandoned Billing by the Hour
Welcome to the very first article of Let’s Be Frank, a monthly newsletter series hosted on LinkedIn and authored by our founder Digby. If you are interested in following along pop over to the Let’s Be Frank LinkedIn page here and hit the subscribe button to have these articles sent straight to your inbox.
Keep reading if you’re:
1. A lawyer
2. Anybody in business that bills by the hour
3. My friends and family that promised they would read this
Why Change Now?
On a flight home to Vancouver in March of 2020, it was clear to me (and probably everyone else) that times were dramatically changing. Travel was about to shut down, I was going into a 14 day quarantine and businesses around the world were going to have to change how they operated.
Our law firm was no exception, but this was also an opportunity to rethink the status quo.
How Everyone Wins
I had mulled over leaving behind hourly billing for years, but it was on that flight that I drew a line in the sand and said:
“It’s time!”.
After hearing the same questions again and again, we decided to make a pivot. It was a significant change for us, but it brought huge benefits for all of our stakeholders:
Clients: get the price certainty they were clamoring for ✅
Lawyers + Paralegals: get to work in an environment where time is not the key driver of their worth ✅
The new pricing model also encourages effective systems and continuous learning, resulting in efficiencies that benefit the law firm as a whole. ✅
Eradicating the inherent conflict of interest that hourly billing created between a firm and its clients was reason enough for the change. This natural friction between lawyers trying to maximize hours to meet targets and clients attempting to keep costs to a minimum is an obstacle in the firm-client relationship.
With hourly billing gone, this is what happens:
Clients are no longer stressing out about each email or telephone call
Law firms don’t have to justify all the hours spent
Cutting out this tension allows for easier budgeting on the client-side, clearer and more consistent communication, and ultimately a better client/lawyer relationship.
Many of these advantages also pass on to the relationship between a firm and its employees, with set fees allowing the firm to leave behind the “work for work’s sake” culture that is so prevalent in the legal industry.
Repeatable systems and processes can be practiced and refined, and often streamline naturally as inefficiencies are easy to spot and trim. Collecting receivables suddenly becomes far easier as there are less discussions about price, and administrative duties are inherently reduced as hour-counting and time disputes become things of the past.
The Challenge
About 10 years ago, Digby Leigh & Co. was one of the first firms in British Columbia to migrate to the cloud to ensure that our system could be accessed from anywhere at any time. It was a significant move that required careful thought and a willingness to embrace change.
It demanded proactivity, which ultimately paid off as remote work has become an essential aspect of just about every firm and business around the world.
Leaving behind hourly billing requires that same proactivity to result in long-term advantages and sustainability. It requires resilient systems and processes that measure success beyond the number of hours worked.
Well-built pricing structures and a passion for continuous improvement fuels the transition. It sounds so simple in print, but it is like all change: it takes a mentality of:
“one step, learn, recalibrate and take another step” repeated over and over.
Many firms shy away from eliminating hourly billing because they fear they will lose money when a file naturally takes its twists and turns.
This can be controlled with clear scope of work and a comfortable client relationship where change of scope and price are discussed between lawyer and client throughout a project.
Perhaps the biggest challenge is change in and of itself. Hourly billing has been the way of the legal industry for some 70 or so years and it is generally accepted as the standard. To be honest, there is something easy about just getting hired and then going to work on a file and then letting a client know how much it really costs at the end of the project.
All I can say is just try handling a more “complex” file without billing by the hour.
To Start
Engage in a robust conversation with a client on what success looks like to them
Dig deep into the background of the matter and what goals they have
Let go of the fear that you might not be paid for every minute you spend on this file
Listen to the client as to why they want you to do the project
Ask about the budget; then collaboratively set a fee for a specific scope of work. If you enjoy the easy flow of communication throughout the project, try it again on another project.
What Comes Next
I believe this change is important for the legal industry and in future articles I will be looking at it from various perspectives. In the meantime, this article is intended to be the kicking off point of a collaborative discussion on this topic. Please contribute your thoughts and experiences and let’s see if we can lead positive change.
Until next time,
