The results of a survey by Bruce MacEwen at Adam Smith, Esq. leads him to conclude that based on responses by 63% of respondents (there were only 87) “the billable hour will remain intact for all practical purposes.” The responses to the question “Will the billable hour ever lose its dominance?” are:
*Yes, but only for commodity work – 31%
*Yes, pretty much across the board – 29%
*Only for clients who absolutely positively insist – 32%
*Over my dead body – 8%
I have a slightly different slant. For years Bill Cobb of WCCI-Cobb Consulting, a consultant for more than 25 years to law firms on strategic and value-added issues, has used an interesting graph to depict the risk factor and legal expertise need based on the variables of the “volume of legal work available” (X axis) vs. “relative value added” (Y) by lawyers. What is especially interesting about the chart is that (based on ABA figures a few years back), commodity work was 60% of volume of legal work available.
If that is still the case (with technology it is likely a higher percentage today), based on Bruce’s survey results above, it can be argued that 60% of the respondents believe that hourly billing will lose its dominance for the majority of legal work available to lawyers.
Being a believer in, and having commented before (here, here and here) on the advantages of alternative billing, I do not believe hourly billing is here to stay. Having said that, I know that large firm lawyers and large corporations (many of whose in-house lawyers come from large law firms) are more resistant to leaving the world of hourly billing. And I am not saying that hourly billing will go away completely – for example, in the case of bet the company litigation nor major, complex matters. However, they represent a small fraction of the legal matters out there.
For most clients, particularly small to medium size businesses and individuals, who are much closer to the road when it comes to legal costs, alternative fee arrangements will become more the norm. Hourly billing provides less opportunity to know and plan those costs, and that is why I believe there will be less of it. And, again, small law firms can gain an advantage over larger firms by taking the lead in alternative billing.