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Legal IT

The Death of the Billable Hour

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In recent weeks, several articles have been published that proclaimed the death of the billable hour. One author declared that he could confidently state that the “traditional” hourly billing is dead. Another even wrote a eulogy. Most of these articles refer to the 2017 Report on the State of the Legal Market, released on 12 January 2017 by Georgetown Law’s Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute.

The publication of the report was accompanied by a press release that stated: “The billable hour model of decades past where law firms experienced little pushback on rates or number of hours spent is effectively dead, and the traditional law firm franchise is increasingly at risk after a decade of stagnant demand for law firm services.”

In a comment on the report, the American Bar Association (ABA) Journal observed that “largely because of budgets and caps imposed by clients, 80 to 90 percent of law firm work is done outside of the traditional billable hour model, according to the 2017 Report on the State of the Legal Market.”

The report itself explicitly says: “One of the most potentially significant, though rarely acknowledged, changes of the past decade has been the effective death of the traditional billable hour pricing model in most law firms, (…) 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 found that the death of the traditional billable hour is due to the rise in so called “Alternative Fee Arrangements” (AFAs). The most common alternative fee arrangement, good for 65-70% of revenue in law firms, are capped fees, which means that cases are allocated a specific budget. Other alternative fee arrangements are being used, too, but amount to only 15-20% of revenues. Combined, this means that the alternative fee arrangements may well account for 80-90% of all revenues.

So, what are the alternative fee arrangements that are being used?

  1. Capped Fees: under a capped fee agreement, the client pays on an hourly basis, but the law firm agrees that the total bill will not exceed the capped amount. A cap is often accompanied by a minimum fee, which together are sometimes referred to as a “collared fee” agreement.
  2. Flat Fees / Fixed Price: the firm agrees to represent the client in exchange for a specified fee, i.e. at a fixed price, regardless of the number of billable hours. Because it can sometimes be hard to predict how a case will go, sometimes variations on the flat fee are used where parties agree, e.g., to a flat fee per stage, etc. Sometimes flat fees are combined with performance bonuses, where the law firm can charge an extra amount if the case is won, e.g.
  3. Contingency / “no cure, no pay”: in a contingency agreement, the law firm only gets paid if it wins the case. (Contingency agreements are illegal in some countries, like, e.g., Belgium).
  4. Holdback: traditionally, a holdback is a sum of money that remains unpaid until certain conditions are met. As an alternative fee arrangement, the law firm and its client agree on percentages of billable hours, where what is actually paid is determined by different criteria the parties set. (E.g., if the case is lost, only 75% of the fees will be paid).
  5. Blended Fees: with blended fees, the client pays the law firm a specified hourly rate, regardless of the individual lawyers’ hourly rates. This incentivizes the firm to appropriately delegate to less expensive attorneys rather than have its more expensive attorneys working at substantially reduced rates.
  6. Cost-plus model: the cost-plus model means that the client reimburses the costs the law firm makes, in addition to a reasonable profit.
  7. Subscription model: in a subscription model, the client pays the law firm a recurring fee to take care of all its legal business.

 

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Legal IT

Starting a blog

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At present, 26 percent of law firms in the US have their own blog, according to the 2016 Legal Technology Survey Report, which was recently published by the American Bar Association’s Legal Technology Resource Center. The larger the firms, the more likely they are to have a blog: among firms of 500 or more attorneys, 60 percent have blogs, while at firms of 100 to 499 attorneys, 52 percent have blogs. In contrast, only 20 percent of firms of 2 to 9 attorneys have blogs, while just 12 percent of attorneys in solo practices have their own blogs.

So, what is a blog, and should you consider starting your own, if you don’t have one? The word blog comes from weblog (web log).  It is often defined as a regularly updated website or web page, typically one run by an individual or small group, that is written in an informal or conversational style. Blog articles are not academic papers. They’re meant to inform the general public.

There are many reasons to start a blog. Some see blogs as a platform for lawyers to offer insight and commentary. As such the articles are a form of free first legal advice, and facilitate access to justice. One lawyer described these blog articles as ‘helping the little guys’. Blogs also helped democratizing publishing and marketing for smaller and solo law firms. And by now, blogs have become an essential marketing tool: the legal market has changed, and the new legal consumers are content consumers. In order to turn website visitors into customers, you must turn them into content consumers first. And that is what you use blogs and social media for!

How and where do you start? You have several options, some which you could even combine. If you have your own site, then it makes perfect sense to use it to publish your blog as well. If you are using existing CMS software, like WordPress, Joomla, or Drupal, for your website, then you already have all you need, as these come with built-in blogging solutions. If you don’t use an existing CMS package, you should be able to stick to the technical solution you already are using, or, alternatively, you could opt to start using blogging software for your blog only.

If you don’t have your own website, and you don’t want to host your own site, you could use one of the platforms that are specifically meant for blogging: WordPress, Blogger, Blogspot typically are most used, but Tumblr, Medium, Squarespace, Ghost, and Wix also offer solutions. The comparison chart at https://startbloggingonline.com/blog-platform-comparison-chart/ offers a good overview of pros and cons of the different solutions that are available. If you are active on social media, you could even use some of those: both Facebook and LinkedIn, e.g., offer the option to publish articles. And finally, your ISP may even offer you a free blog. You don’t even have to limit yourself to one solution. Some people publish their articles on their blogs, as well as on social media.

What should you write about? Many legal blogs offer insight and commentary on developments in the law, business and consumer affairs. Others focus on case law and regulatory developments. Ideally, you should write about something that you are passionate about. Being passionate about a topic makes it easier to be inspired, and will make the writing process more enjoyable. Blogging shouldn’t be a compulsory chore.

After you have written your article, it is good practice to promote it on social media, so you can attract more viewers. (And if you promote you articles on Twitter, use hashtags for the most important keywords. For an article like this one, e.g., you could use #legaltech and #blogging).

The next question is how often you should update your blog with a new article. There is no magical success formula, as it both depends on your target audience, and on the amount of time that you can spend. For larger firms, an update frequency of two to three new articles per week is often seen as ideal. For smaller firms and solo lawyers, one or two new articles per month usually is enough.

Starting a blog might seem a bit intimidating at first. But it is something that grows you on quite easily. Once you have written some articles, you’ll get the hang of it, especially if you write about topics you are passionate about.

 

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