It was Abraham Lincoln who famously said: “A lawyer’s time and advice are his stock in trade.” Bearing in mind what he said, it is important to note what Lincoln did not say. He did not say: “A lawyer’s time is his stock in trade.”
Time is our stock, that is, it is the cost side of the equation. But it’s not really our trade, in that it’s not what clients want to buy, and it’s certainly not what they want to get.
Clients want results. Normally, results can’t be guaranteed. So client have to settle for less. If clients can’t buy results, they will buy the next best thing: attorney work product.
Advice and advocacy are actually the products clients buy from lawyers. Time is a way that we, the lawyers, apportion the cost of producing our product among our clients. But the truth is that to the client, some tenths of an hour — even from the same lawyer — are valueless and some are intensely valuable. Should the client really pay the same for very different products, even when the increments of time required to produce them are identical?
“Read perfunctory filing letter”
“Value your case.”
The first activity gets the client essentially nothing. The second, if done with excellent judgment, may make all the difference.
If you look through the literature of law office practice management for the last 10 or 20 years, you might think that Lincoln’s comment — and hourly billing itself — have become obsolete. That literature is full of writing about the many alternatives to hourly billing. It’s clear that lawyers and clients would prefer to be done with it.
For good reason. For lawyers, billing by the hour takes discipline. It is a discipline that somehow many otherwise talented lawyers cannot or will not learn. Many a young lawyer with all the intellectual skills, and even, in other respects, the temperament to be a great lawyer in private practice, is defeated by time-keeping. Many try private practice and move quickly to government service or an in-house counsel role in order to avoid it. Many stay in private practice, but have a chronic struggle with keeping good time records.
Clients like it even less. Hiring a lawyer on an hourly basis is like hiring a building contractor on a time and materials basis. The customer has no cost predictability and fears that the contractor has no incentive to be efficient.
At least one commentator, Jay Shepard, predicts that that hourly billing will be dead by 2019! Jay certainly has a point when he says, “stop selling activity and start selling knowledge.”
Thirty-two years into private practice, I appreciate the problems with the hourly billing system. I’ve always hated keeping contemporaneous time records and over the years, I’ve tried any number of different things to avoid doing it or at least to make the job more palatable. It took a long time before I found some practice management software that made it reasonably convenient to actually time my work as I do it, even when I have a day spent constantly skipping from one short task to another.
Part of my practice has always included contingent fee work (an instance where client’s do buy results!), mostly on personal injury cases. Originally, not keeping time records on such cases was something I liked about them. It felt liberating not to worry about writing down every tenth of an hour, attributing it to a client and matter, and creating a written description of the work completed. I also liked the freedom to decide, pretty much on my own, what tasks needed to be done and how much time to put into them, without concern that the client would feel the case was being “over-lawyered,” or simply could not afford to pay the bill.
But one thing I discovered about my own behavior was that, when I did not record my time on contingent fee cases, I was less efficient than in my hourly cases. By comparison, in hourly cases, knowing that I was recording my time and that a client would be reviewing my bill and be asking, implicitly or explicitly, whether the resulting work was worth the fee, I felt pushed to move fast and get the work done quickly.
My construction clients taught me something else: to price work at a profit, you must understand your costs of doing business.
As a result, for many years and on all my legal work, I have kept the most accurate, contemporaneous time records that I possibly could, even on contingent cases (The truth be told, I even keep them on pro bono cases.) As a result, I understand far better than I otherwise would which kinds of cases are profitable, and which are not, and what the cost implications of various substantive decisions about cases are likely to be.
As demand for my time has grown over the years, my own level of confidence in the fairness of the bills I render has grown with that demand. The ethics of charging legal fees requires the exercise of “billing judgment,” that is, adjusting the legal fee that would result from simply multiplying the numbers of hours worked by the hourly rate, to take other factors into account. Normally, one’s fee agreement with the client only leaves the option of reducing the bill on that basis. Early in my practice drawing my bills was a painstaking, conscience-rending process.
I still have to exercise judgment, but it’s much easier now than it was when I was a young lawyer.
Nest time, more on alternative billing systems.