The Billable Hour Is Dead

The vast majority of law firm work is done outside the traditional billable hour model, because of budgetary limits imposed by clients, according to a new report released by Georgetown Law’s Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute. “Plainly, the imposition of budget discipline on law firm matters forces firms to a very different pricing model than the traditional approach of simply recording time and passing the associated ‘costs’ through to the client on a billable-hour basis,” the report states. Capped billing is just one of many changes facing law firms since the recession. Stagnation in demand growth for law firm services, a decline in productivity for most categories of lawyers, growing pressure on rates, and declining profit margins are a few of the other issues. Meanwhile, clients are demanding greater efficiency, reducing the use of newer associates, and outsourcing work to legal service providers.