Why the billable hour is not the issue: How law firms can become their clients business allies, not their adversaries

Many in the legal profession and the business community will be aware of a widely reported dispute between law firm DLA Piper and a former client.  The suit claims the firms lawyers overbilled the client on work totalling $675,000 US Dollars.

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CFO Magazine cited a March 29 ABA Journal report about the dispute:  “An email exchange among Piper lawyers surfaced in which a lawyer (who is no longer with the firm) stated to his colleagues, “Churn that bill, baby! That bill shall know no limits.” Another was said to have noted, “we are already 200k over our estimate – that’s Team DLA Piper!” DLA has said the emails were an “inexcusable effort at humor, but in no way reflect actual excessive billing.”

The attitudes expressed by those lawyers are at the heart of a problem which can be solved.  The problem, however, is not the billable hour.  The problem is how law firms view and work with clients.  And as the title of this article suggests – law firms need to approach clients – and work with them – as business allies – not adversaries.

How to become your clients business ally

Stephen Dunn, a litigation attorney in Michigan, wrote in the same CFO article I just cited that:  “In this business climate, at the beginning of the engagement the client and the outside lawyers should have a frank and open conversation like mature businesspeople. They should arrive at a mutually advantageous plan that gives the client some reasonable assurances against potential gouging, and gives the law firm some downside protection against being under-compensated given the resources it will be expending.”

Take it further

Law firms need to end the internal culture of seeing clients as purely a source of revenue, and instead (as I have written about extensively before) align their services to advance the commercial objectives of clients – one of which is to reduce their clients legal fees.

Most managing partners and rainmakers in law firms already understand what I am espousing.  They understand it – because it’s what’s necessary for firms to attract and secure new business – and maintain and expand existing relationships with clients.

Change firm culture, not the billable hour

The billable hour can be a part of a mutually beneficial commercial relationship between law firms and their clients.  So can alternative fee structures.  This can be worked out between a client and the firm before and during an engagement.  It’s the culture of law firms that needs to change in order to achieve this balance.  And in order for it to change – firms should train all members and staff – in how to see and work toward identifying and helping achieve clients and potential clients commercial objectives as their primary goal.

Approach client retention and new business development by helping clients achieve commercial goals – and your firm will lay a solid foundation for future mutually beneficial relations with clients and more effective new business generation among prospective new clients.

John Grimley helps law firms, law firm practice groups, individual lawyers, financial services and governmental relations professionals develop and implement custom business development initiatives. To enquire about his services, contact him at +1.213.814.2855 or at jg@jgrimley.com.

2 thoughts on “Why the billable hour is not the issue: How law firms can become their clients business allies, not their adversaries

  1. I completly disagree with your analysis. The billable hour IS a problem. No matter how wonderful and ethical an attorney is, and no matter how much he or she wants to work with their “business allies”, the cold hard truth is that the billable hour structure often puts the law firm’s financial interest at odds with the client’s interests. Not to mention the insane pressure placed on associates (by way of the minimum billable hour requirement) to overbill clients.

    Remember, the owner of the company being sued by DLA Piper initially valued his relationship with the firm. As partners left and the firm grew, he became just another cow to be milked. This isn’t unique to DLA Piper….its just what can eventually happen even to “business allies”.

    • I agree the billable hour can be an impediment to a more productive relationship between client and law firm – however if properly utilized – it can be a tool which permits lawyers and clients to arrive at a fair measure of services and payment for those services.  Of course alternative methods of remuneration – in particular monthly retainers – which cap fees – are often a better means by which to reach that productive relationship.

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