Thanks to a reader, I was alerted to an article entitled “Taming the Billable Beast” by David Gialanella in the February issue of the ABA Journal. The article discusses how three firms are doing just that. How? you many ask:
- Harrison & Ford out of Atlanta has eliminated the billable hour requirements for first year associates, AND doesn’t charge clients for their time on a matter. (If you want to read more about this, take a look at my post entitled “Is the Billable Hour Now Dead?” of last August);
- Shepherd Law Group in Boston has done away with the billable hour completely “in favor of flat fees and fixed prices;” and
- Strasburger & Price in Dallas has reduced the billable hour requirement for first-years by 320 hours, and increased hours for on the job training.
It’s reported, and I would wholeheartedly believe, that clients and first-years love it, and it certainly should help with the perennial associate retention problem.
One troubling point mentioned in the article relating to the Shepherd firm. And that is the statement involving CEO Jay Shepherd that “he denies secretly keeping track of hours spent on each case.” If the firm doesn’t do so, IMHO, it is being foolhardy based on the following simple reasoning:
- You can’t make a profit on fixed fees unless you know what your costs are;
- You can’t know what your costs are unless you know how much time (and other dollars) are consumed by the matter; and
- There is no way to know how much time is being spent on matters if you don’t keep track of hours!
So, either they are guessing which means they don’t have a clue what their profit margin is either, or the firm has some other means of determining costs that I am unaware of.
In any event, I commend the firms for addressing the billable hour problem. I have long advocated dropping the billable hour (that doesn’t mean you don’t track working hours internally) for fixed fees as a legal marketing strategy. Moreover, it seems that reducing the billable requirements for new associates has benefits as well – in terms of training, associate and client retention, and business development. That’s a win-win-win all firms should consider.