"Beat the clock": The Boston Globe on hourly billing

Busy, busy, busy. I know. I hate it when bloggers make excuses about why they haven't posted in a while. But we've been very busy at my firm lately. (So busy that I missed noting Gruntled Employee's first anniversary, September 28.) Why so busy?

Because we abandoned hourly billing.

In fact, during 2007, Shepherd Law Group has billed exactly 0.0 hours. And in doing so, we've more than doubled our revenue compared to last year. Clients don't really want to hear about our revenue, but if they think we're doing something to make less money, they immediately get suspicious. (Fear not, good clients. We're still capitalists.)

Our revenue growth comes from two sources: new clients fed up with the value-insensitive system of hourly billing, and increased efficiency driven by our flat-fee system. Our up-front pricing places our interests squarely aligned with our clients' interests, which makes them happy and forces us to be more efficient.

But don't take my word about it — I've already written many posts on the subject of hourly billing.

Instead, check out this article from today's Boston Globe. Sacha Pfeiffer, the Globe's world-class legal-business reporter, profiled our firm and its campaign to kill the billable hour. Whatever I could tell you, she says it better. And the article has kicked off a huge discussion. As of day's end, the story had been emailed via the Globe's site, Boston.com, 674 times (surprisingly, only once by me). That was more than four times more than the story of the Red Sox sweeping the Angels in the ALDS, and third-most for the past week.

In the blogosphere, people are discussing the article and the model. Here's a sample:

• Ron Baker's Verasage Institute, "Another Trailblazer: Shepherd Law Group"
• Susan Cartier Liebel's Build a Solo Practice, LLC, "The Billable Hour "Cockroach" is Being Snuffed Out....One Law Firm At a Time"
• Law School Dilettante, "I really shouldn't be thinking about jobs yet"
• Andrew Perlman, Legal Ethics Forum, "Billable Hours — A story and a question"
• Marie S. Newman, Out of the Jungle, "A trend in billing?"
• and, more acridly, Drew Curtis's news aggregator Fark.com with 122 comments and 10,135 clicks as of midnight.

Comments

[Susan Cartier Liebel]

Jay, I'm glad I just discovered your blog through your brilliant move to no billable hours. It will be a shining example in my class and for my clients. How does it feel to be one of the first land on the moon? The view is spectacular, isn't it?

[Frank Roche]

Jay, first, congratulations.

It's so funny, I have a story in the hopper about why hourly billing should end in HR consulting. Then I saw your story pop up today. Wow.

When we started our 13-person firm 4 years ago, we abandoned hourly billing and only work by the project. I sometimes say internally that we aren't plumbers or prostitutes. (I know that's no nice language, but it makes a fast point.) We've found that our clients like project billing and that, like you said, they can call us anytime. It works. And I'm pleased to hear that it works in the law, too.

That's really forward thinking. And your lessons (and ours here at iFractal) show that revenue follows. I really like that.

I'm smiling about your success and leadership on a very important issue. Fun stuff...and continued success!

[Allison Shields]

Jay:

Congratulations to you and your firm, and thanks for sharing your story, not only with the papers, but with the blogosphere and other lawyers. Like you, I've been writing and talking about the move away from hourly billing, and hope that your story inspires other lawyers to consider making the switch.

[John M. Riccione]

I am a partner in a 115-year old firm in Chicago, which about six years ago, launched an alternative billing program offering flat fees and flat fee, plus success bonuses. One client loved it. However, when we offered it to the masses of in-house counsel at many corporations, they seemed too puzzled and scared by it. We have continued to try to sell the program to those in-house counsel who have been vocal about their hatred of the billable hour and even they are reluctant to try something new.
Our success and the clients' success when operating under these alternative methods of billing are unmatched by anything we have done within the billable hour framework. Why companies are not jumping at the chance to try it is really perplexing to us and we continue to grapple with finding solutions.

[Ben Stevens]

I agree with your assertion that the hourly billing model is outdated and generally not in the client's best interest. I switched to a fixed fee billing model in my family law practice about two years ago, and I have written on my blog and spoken at CLE seminars about the many benefits of handling cases on a fixed fee basis. It's good to know that there are so many others out there in so many varied practices that share this view. Best regards and keep up the good work.

[Michael Sherman]

Jay-

Congrats all around - for abandoning the billable hour, for increasing your profit, and for the positive press you've gotten from the move - a nice trifecta.

I've been heavily influenced by Ron Bakers' work myself and long abandoned the billable hour in my own family law practice. Good to see another fellow lawyer make the switch from the dark side!

[Joan Woodbrey]

I really enjoyed this post. What a concept! I hadn't even thought of it. I especially like the idea of more efficient and productive project management. Get 'er done, as they say. Thanks for sharing.

[Scott McArthur]

Jay - I like this and it sits quite well with one of the key elements I use to describe the role of the trusted advisor - clients are more interested in value than cost.