Exploring the future of the billable hour

10th Jul 2024

It’s a cornerstone of the legal sector’s corporate business model, but are alternatives to the billable hour viable?

Laptop users

Valued as a tool for managing performance and forecasting revenue, its use has been largely unaltered, with alternative approaches failing to gain traction.

However, as law firms aim to become more inclusive, diverse, and sustainable, the cultural effect of the billable hour model and its impact on lawyers’ wellbeing comes into question.

LawCare, the mental health charity for the legal sector, tackled this topic in a webinar that offered some constructive ideas on how law firms could explore alternative solutions.

The panel, chaired by LawCare champion Lloyd Rees, Senior Lawyer – UK Public Affairs at Freshfields Bruckhaus Deringer, was pragmatic about the ingrained nature of the billable hour in most business models, recognising that it is valued as an – albeit perhaps crude – way of tracking utilisation.

They shared the view that change will not happen overnight. What was clear, however, is that there is optimism about the possibility of alternatives.

Almost half of webinar attendees (46%) felt that the billable hour would not be a core business model in ten years’ time, with only 27% saying it would still be used and the remainder uncertain.

Limitations of the billable hour model

The personal pressure exerted on lawyers who are targeted by billable hours is well-known and can have a significant negative impact on mental wellbeing, cited by many as the reason for leaving the profession.

Mark Blois, partner and founder, education team at Browne Jacobsen LLP, pointed to the lack of inclusivity of the billable hours model and the serious problems created for individuals by “cold objectives and personal accountability that come with it”.

He also questioned whether today’s lawyers are motivated by targets in the same way they might have been in the past, suggesting instead “a move towards something more about coaching and holistic contribution, collaboration and shared effort.”

Polly Sweeney agrees. When co-founding her firm Rook, Irwin, Sweeney LLP, she recognised an opportunity to put lawyer wellbeing at the centre of the firm’s ethos.

She explained: “We had concerns that using billable hours as a performance measure devalues people. Rather, forget whether you charged eight hours or ten hours, and look at what you actually achieved; what have you done for your client or your business?”

Her firm has no specific targets other than achieving the required revenue to keep the business operating sustainably each year.

This approach is founded on trust and teamwork and has generated an extremely high lawyer retention rate.

Libby Clark, COO of Bonacio and past Chair of the Committee on Attorney Wellbeing at the New York State Bar Association, put her concerns about the billable hour model more strongly, describing it as a “non-human measure to value human beings […] in a way you’d monitor something coming off a production line.

“I cannot imagine a worse measure to evaluate a human than by treating them as a machine.”

Libby pointed towards academic research showing that when firms focus on lawyers’ wellbeing, investing in training and support and rejecting blunt performance monitoring instruments, their profitability soars.

She recommends presenting this research in engagements with senior leadership to support the case for performance management changes from a commercial perspective.

A portfolio of measures

If firms are to move away from the billable hour, what should replace or augment it? Mark made the case for a broader portfolio of measures that recognise lawyers’ contributions and individual talents, prioritising team achievements rather than placing all the burden on individuals.

Polly’s firm has adopted this approach, she explained: “We’ve tried to move away from valuing people based on numbers. We’re looking instead at what they have achieved and the results of their output – are clients happy, is work good quality, are cases being progressed, are we seeing good outcomes?”

She continued: “Knowing the number of hours they worked doesn’t tell us any of that. This approach allows you to value your team for their individual qualities and strengths. It is also much more powerful in terms of developing people.”

Lawyers who have spent their careers working in the confines of the billable hour model will need support to move to new ways of working, said Polly.

Her own team struggled to adjust initially: “We had all got used to valuing ourselves based on the number of hours on the clock. It has taken a lot of time to undo that and value ourselves differently – but it’s undoubtedly helpful for our wellbeing.”

How to foster change

Identifying the need for change is important, but finding a route to effect it is also essential.

The traditionally risk-averse legal sector often sees the uncertainty of change as a negative, and the billable hour has been central to daily operations for a long time.

Mark advises: “We need to concentrate on achieving realistic incremental progress, acknowledge how law firm leaders work on financial modelling, and work with them. We need to identify the upsides of bringing in other measures.

“If we can frame it in terms of tangible commercial benefits, outputs, people benefits, and the bottom line, that will give them more courage to explore and innovate.”

Libby concurred, saying: “Firms are more profitable when we focus on wellbeing when we measure things like attrition rates and the number of mental health days taken, for example […] We should be looking for a model that offers a win for the client, a win for the firm, and a win for the working lawyer.”

Achieving these three wins will require firms to look differently at how they measure performance and how they value lawyers on a more holistic level.

While the billable hour will remain with us for the foreseeable future, the appetite for change shown in this webinar means we may soon see it augmented by the introduction of a broader, portfolio approach and a focus on team achievements.