Welcome to this month's 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.

For this article I am taking a trip south (actually quite south) to Australia to find out what is happening to hourly billing in that country. I have always thought of Australia as a leader in change.

When I first started to look into moving away from billing by the hour (some seven years ago), I happened upon the firm Moores in Melbourne. They moved away from hourly billing in 2013, and when you visit their website, the excitement of their staff about this change is resoundingly clear. I am linking you to their website as hearing from the people that work there is very compelling. There are so many drivers to move away from the billable hour, but the primary one for me has always been to create a better environment for those working in the legal industry.

In my journey to find out everything I can about this topic I have had the good fortune to meet so many wonderful people. Recently, I took time to check in with John Chisholm, who lives in Melbourne and advises firms on moving away from hourly billing. Below I will share some of our discussion.

Firstly, a little background about John. He comes from a long line of lawyers; his father and grandfather were both partners in a Melbourne based law firm, one which he also served as Managing Partner for close to a decade.

It wasn’t his dream to pursue the law (he actually wanted to be a farmer) but it seems that he was destined to become a lawyer. Fast forward a few decades with bold job shifts, a sabbatical and the continual grind a lot of lawyers experience, John called time on his law career and launched into the consulting scene.

When you chat to John, you immediately get a sense for his humility, great sense of humor and his relaxed yet sharp manner. This is what John had to say.

How he got started as a consultant not billing by the hour.

“When I started as a consultant, I didn't know that an hourly rate was appropriate for a consultant, and so the first couple of projects I did, I just said, look, I'll do the project and at the end of it, you just pay me what you think I was worth. And for a couple of those projects, I've got to be frank, the firms paid me more than what I would have charged (if I were pressed to give a figure). Then I thought, hmm, that's interesting. Either they felt very, very sorry for me, or maybe I delivered greater value than I thought that I was going to.”

Why do firms move away from hourly billing?

“I've done work for firms, but really only in particular practice areas where either clients have insisted on change; you know, usually it's where the client says, well, if you don't give us fixed fees, we're not giving you any more work. And then they go into panic mode. Like any change management it's not impossible, but the larger the firm, the harder it is just to get that momentum to change.”

Are the firms in Australia moving away from hourly billing?

“So look, there's not a firm that doesn't say we will offer you fixed fees. But when you dig in, the fixed fees are usually tied to time. The scope is pretty narrow. I'm not suggesting that they don't do fixed fees, but there's not an Australian big law firm or a large firm that's completely ditched billing by time. They have some pockets where they know the market and where they will do this for a fixed fee. So I'm not saying there hasn't been change, but when you peel back the onion, the employees, the partners are still measured and rewarded by time.”

How do firms move away from billing by the hour?

“There's a multitude of different pricing models that have worked; that can be from contingency fees to a phased pricing. So it's not just a fixed fee, but that is the easiest way to start. We tend to look at the low-hanging fruit and I suppose that is what I do as a consultant. There's got to be an internal champion or internal champions within the firm. And I try to find out who that is. Sometimes they're not always the person you think it will be. As an example it is not always the managing partner. There must be people willing inside the firm who recognize that there's an opportunity for change and to practice our craft better than what we've done in the past. It requires more than just a billing model change. If it was just a billing model change it’d be quite easy. But to really go to a fixed fee or value based pricing, you have to re-engineer the firm compared to what it may have done in the past. But for most firms, it can take them two, three or four years to make the change. Others have done the change in six months, but it really depends on not just the size of the firm, but the willingness internally..”

What other innovation is going on in the legal industry?

“Let’s call it legal tech or technology. This is having some impact, but, but I also think there's a lot of pain. But I think if you're just relying on legal tech solely to drive your business model into the future without a mindset or a business model that is a problem. Legal tech should support the business model rather than the other way round. I see so many firms making changes because everyone else is doing it. Let's introduce some new, legal tech for innovation's sake.”

John is a true champion who is pioneering the way in Australia.

Time for North America to run with this lead.

Until next time,

Let’s be Frank with Australia