Yet more on the billable hour

More posts in the world of blawgs, particularly Never mind the billables by  Jordan Furlong in Law 21, following the article Killable hour in the latest Economist. Regular readers of this blog will know that selling time is one of my pet hates.

Furlong puts it very well in his post,

Your client doesn’t care how much profit you make for yourself; the client only cares that you delivered excellent value in a cost-effective (to the client) manner. How you bill your services is between you and your client; how much it costs you to deliver those services has to be your number-one business priority.

Selling time is the antithesis of selling value. Read Stefan Stern’s article Focus on value or pay the price in the FT (now some three months old). I liked his closing paragraph,

But for most businesses protecting margins in the next few months is going to prove extremely difficult. Cynics, Oscar Wilde once said, know “the price of everything but the value of nothing”. You know things are tough when the cynics don’t know the price either.

Delivering value

If Nick Jarrett-Kerr is right that the current downturn in work has removed the last excuse for partners avoiding to engage in valuable non-chargeable work (see his article in Kerma Partners Quarterly 2/08 and my earlier post Spending time wisely), then high on our list of things to look at is how to resolve the problem of a business model based primarily on selling time.

Although his post The new brand landscape for law firms in Law 21 is primarily aimed at law firm rebranding rights and wrongs, and is very well worth reading for that, Jordan Furlong also touches on billing and branding,

Today, brand opportunities are opening up everywhere — not primarily in new industries or practice areas, although there are a few of those, but in how a firm delivers value to its clients. Service delivery, billing parameters, value definition, client communications, risk sharing — these and many other key elements of customer relationships, which have lain dormant and ignored for years, are coming to sudden life.

Take the oldest complaint in the book — the billable hour system — as an example. Clients have moaned for decades about how the billable hour removes the burdens of accountability and risk from the lawyer (though clients share some of the blame for not pushing harder), and conventional wisdom called the billable hour unkillable.

But now there are firms that have successfully staked out this ground and branded themselves as having abandoned the billable hour altogether.

Selling time

Deepak Malhotra’s post From narrative to value in Legal Village early in the month caught my eye. This sums up the dilemma for law firms:

“Law firms sell time and legal skills. From the perspective of in-house counsel, we buy legal outcomes. There is a huge difference between process and end result. Until we start talking the same language, I see that this debate about fees is going to remain and its intensity will only increase. This is where the hourly rate is limited, because the hourly rate is process and it implies that it operates independent of outcome.”

Selling time is not what we should be doing, and things are changing. How quickly is another matter. The problem is that it is considerably easier to sell time than value, and when I have argued the matter with my partners (most of whom are wedded to the chargeable hour), their usual reply is that if it works, why change it. The point they are missing is that either we will have to change, or clients will change us.

The tyranny of time

One of the delights of being away from the office on holiday is the freedom it brings from the tyranny of the chargeable hour. Nonetheless I enjoyed Michael Skapinker’s column The jury is out on family life and the law in the FT on 22 April, in which he looked mainly at what he referred to as the 50:20 ‘scandal’, that 50% of law graduates are women but only about 20% of partners are female, but which began with the fees we lawyers charge, following Mr Justice Floyd’s remarks in the BlackBerry case.

Selling time is not what we should be doing, and things are changing. How quickly is another matter. The problem is that it is considerably easier to sell time than value, and when I have argued the matter with my partners (most of whom are wedded to the chargeable hour), their usual reply is that if it works, why change it. The point they are missing is that either we will have to change, or clients will change us.

But back to 50:20. Skapinker makes good points

In accounting for the failure of women lawyers to advance to partnership, I think we can largely discount sexism as a factor. No doubt there are misogynistic lawyers, and others who secretly doubt whether women can hack it, but for firms to be engaging in widespread rampant, or even subtle, discrimination would make no sense.

First, the level of attrition among women lawyers is ruinously wasteful. The cost of turning graduates into proper lawyers is high, and the 50:20 figure suggests that well over half of the expensively trained female recruits are dropping out along the way. No profit-minded law firm (and, as the BlackBerry case demonstrates, lawyers are intensely profit-minded) would deliberately fritter away investment on this scale.

Second, if some law firms were discriminating against women, others would surely have the nous to snap up these highly capable discards.

Everyone knows what the real problem is: much of law, as practised at the highest level, is incompatible with family life. The pressure to bill for thousands of hours of work, so evident in the BlackBerry case, helps see to that.

But is this all?

Add to this Susan Pinker’s argument, set out in The Sexual Paradox: Men, Women, and the Real Gender Gap, that the workplace gender gap is not the result of discrimination but of differences in brain structure, hormones, motivation, empathy and risk aversion, and choice. It may not play well with the sisters, and the argument is controversial, but the question needs to be asked.