The sway of the billable hour is not only systemic and cultural, but also physiological. Dr. Jeffrey Schwartz and I are writing an article on the neuroscience of the billable hour and self-induced workaholism. We will describe in the next edition of The Complete Lawyer how lawyers' brains become accustomed to habits and paces and may not welcome change, regardless if for worse or better.
The billable hour is addressed in an article on Slate.com titled "The Scourge of the Billable Hour." The author Lisa Lerer writes that several large corporations
have begun to force their law firms into alternative billing arrangements. The companies push flat fees and volume-based discounts, and ban young associates from working on their business, hoping to avoid paying through the nose for work that could be done more cheaply by paralegals or temp lawyers. They say that by eradicating or at least limiting hourly rates, they avoid cost creep, cut their bills, and better predict their expenses.
Law firms, notoriously risk-averse, are reluctant to go along. Only about a quarter of companies used alternative billing last year, according to a 2006 study commissioned by the Association of Corporate Counsel, an industry group of in-house lawyers.
Lerer predicts where alternative billing will become most common.
If this is the future of the legal world, then the business will eventually spilt into three fairly autonomous markets. The top end of the spectrum will remain largely unchanged. Companies will still pay hourly rates to hire white-shoe law firms for specialized, bet-your-company kinds of work. On the opposite end, however, clients will stop taking their rote legal work to law firms altogether. Companies already outsource relatively simple matters like document review to consulting services. And as technology improves, more programs will let companies handle their own contracts online.
In the murky middle between one-of-a-kind advice and dime-a-dozen contracts, the push for alternative arrangements will prevail. Cisco, for example, already pays a fixed fee to law firms for filing patents at the Patent and Trademark Office. The firm's total charge must decrease by at least 5 percent each year, as a firm becomes more efficient; if not, it is replaced with a smaller one willing to take the work.
As you will see when you read Jeff Schwartz's and my article, this shift may require some deliberate and forceful brain changing. Attending to the brain's role will make the change easier; ignoring its role may create a surprisingly strong desire to tenaciously embrace the billable hour as time marches on.