How billable systems harm client trust

After practicing law for over 40 years, I've realized that the billable hour might be the most damaging structure in our profession. It rewards inefficiency, creates conflict, and burns out good lawyers. Here's what 40 years in the trenches taught me about this broken system: The billable hour creates a fundamental conflict between what's good for the client and what's good for the firm. Every other service industry charges for value delivered: - Plumbers charge by the job, not by the hour - Contractors quote a project price - Even doctors bill by procedure, not time spent But in law? We reward the slow. Early in my career, I spent hours researching issues I could have resolved with a quick call to a more experienced attorney. Why? Because I was incentivized to bill more hours, not to find the most efficient solution. This system creates three destructive conflicts: 1. Between lawyer and client - The client wants work done quickly and efficiently. - The firm profits more when work takes longer. 2. Between lawyer and firm - The lawyer's value is measured by billable hours, not by how effectively they solve problems. 3. Between lawyer and their wellbeing - The pressure to bill more hours leads to burnout, stress, and a complete lack of work-life balance. I've seen brilliant lawyers leave the profession because they couldn't reconcile these conflicts. In my own practice, I eventually learned to prioritize efficiency over billable time. Yes, I sometimes made less money in the short term, but I gained something more valuable: loyal clients who trusted me and referred others. The legal profession isn't going to abandon the billable hour overnight. But as individual lawyers, we can choose to focus on delivering value rather than maximizing hours. Your career will be longer, healthier, and ultimately more profitable if you do.

The managing partner defended the billable hour like it was gravity... I was having a friendly debate with the MP of a CPA firm and he went onto say "It's how we measure our people and hold them accountable." I pushed back with a simple example. You're an accountant. On your morning walk, you think through a strategy that saves your client six figures. But you bill in 6 minute increments. So what do you charge? Your fee for a 12 minute walk? Or something that reflects what that idea is actually worth to the client? Here's the trap. By billing in increments, you've trained your client that your time is your value. Not your thinking. Not your judgment. Not the result. Just your time as measured on a clock. And I can hear the accountants now: "but my billable rate is higher" or "we will write up what we actually bill." Will it be high enough to reflect the value you just delivered in 12 minutes and two decades of experience? I'm not the only one making this argument. Ron Baker, who wrote the book on value pricing for professional firms, put it plainly: the billable hour looks inward. It measures effort and activity, when the only thing the client ever cared about was the result. This is the gap so many professional services firms still live with. We measure the hours. We mean the impact. They are not the same thing. Here's where it gets bigger than billing. The same firm that undercharges for that idea will also judge that accountant by their hours and billable revenue. Not the six-figure save. The clock. And that same clock doesn't just set the invoice. It's how the firm decides who's valuable. So your sharpest thinker, the one who solved it on a walk, can look like your weakest performer. I'm curious. If someone on your team delivered that six-figure idea, would your systems even notice, or would they just see a light week? #BeyondTheClock #Leadership #ProfessionalServices #ValueBasedPricing

If the Highway to Hell is billing by the hour... Then, the Spaceship to Hell is selling buckets of hours Do you bill hourly? Do you sell buckets of hours?   IMO, billing by the hour is a broken business model. It’s a trap that punishes efficiency, erodes trust, and signals to your clients that your time, not your expertise, is the product. You’re incentivized to take longer. They’re incentivized to challenge your time. Everyone loses. Worse still? Selling buckets of hours. That’s just billing by the hour in a shiny box. You slap a price tag on 20, 40, or 100 hours and hand the burden of defining success over to your client. You’re no longer a strategic partner, you’re an open tab. You’ve just turned your professional services into an open tab at a bar with no menu and no bartender. Buckets of hours feel safe to you, but they create risk for your client. They don’t know what they’ll get. You don’t know what they’ll ask for. You’re both operating in a fog, and no one’s driving toward outcomes. If you're selling expertise, consulting, advisory, compliance, security, strategy, and transformation, then your business model should reflect that. Not time. Not activity. Results. Align your offers to real business outcomes. Productize your services with clear deliverables. Price for transformation, not transactions. You don’t get to be a trusted advisor while submitting a timesheet. You don’t scale impact by tracking hours.   Kill the clock. Burn the buckets. Build something better. #consulting #advisory #vciso #msp #fciso

In 1975, management professor Steven Kerr wrote about "the folly of rewarding A while hoping for B." His central insight was that organisms seek information about what activities are rewarded, then do those things, often to the virtual exclusion of activities not rewarded! Kerr's paper catalogs examples where smart people do seemingly irrational things because that's what the system rewards. Take medicine: A doctor can make two types of errors. He can call a healthy person sick, or call a sick person healthy. Intuitively, both seem equally bad. But look at the incentives. Missing a diagnosis brings guilt, lawsuits, and scandal. Over-diagnosing brings more patients, more income, and gets labeled "sound clinical practice." Result? Kerr cited studies where positive readings outnumbered false negatives by 50 to 1. Doctors were responding rationally to the reward system. Now look at legal services. Everyone knows what good client service looks like. Clients want speed, clarity, efficiency, and practical judgment. So why don't we consistently deliver that? Incentives. A research memo that takes 20 hours generates more revenue than one that takes 8, even when both answer the question equally well. The efficient lawyer just made hitting their 1800 hour target harder. Documenting work carefully takes time. Building templates so others can find information later takes time. None of that is billable. Having every associate re-research the same issue from scratch? Entirely billable. Five email exchanges at 0.2 hours each add up nicely. One phone call that resolves the issue in 15 minutes does not. Training a junior takes longer than doing it yourself at your higher rate. The associate doesn't develop, but your utilization looks better. The effects compound. Technology that automates work reduces billable hours. Candid case assessments might lead to early settlement. Collaboration takes coordination time. Partners do associate-level work because the rate justifies it. None of this is mysterious. Associates see it. Clients feel it. Partners understand it. But the system rewards behavior that runs counter to what everyone agrees constitutes good client service. We keep acting surprised when brilliant people, hired for their intelligence, behave intelligently within the incentive structure we've built. What's the most absurd incentive misalignment you've seen? Where does your firm say it wants one thing but reward another?

I’ve read a few posts this week once again declaring the billable hour dead (in response to the WSJ article below), and my reaction was: not yet — and not in the way people might think. Let’s be real - hourly billing has been intellectually indefensible for a long time. It rewards inefficiency, obscures value, and shifts risk onto clients in ways no modern business would accept if law weren’t so deeply rooted in tradition. Add AI to the mix — research in minutes, drafts in seconds, pattern recognition at scale — and the cracks in the hourly model become harder to ignore. But here we are, in my view because the biggest firms and the biggest clients are the most invested in preserving it. Not because it works particularly well, but because it’s familiar, benchmarkable, and structurally embedded in how prestige and power are measured in the industry. I don’t think we’re headed for a dramatic collapse. I think we are instead entering a long, uneven decade of re-pricing legal work. Contracts, IP portfolios, regulatory monitoring, employment counseling, and large parts of transactional work will move first toward flat fees, subscriptions, and predictable pricing. Clients understandably want fewer surprises and better alignment between cost and outcome. In a few years I think hourly billing will likely survive in narrower spaces — truly unpredictable litigation, bet-the-company moments, ultra-complex deals (though I think even there, budgets and caps will increasingly replace open-ended timekeeping). I am not sure if AI will kill the billable hour, but it definitely does a good job of exposing the core fiction that time spent is a consistently reliable proxy for value delivered to a client. As that fiction becomes harder to sustain, firms will be forced to understand their own processes, economics, and risk in ways many never had to before. https://lnkd.in/dGgeE2pG

The billable hour system is past due for an overhaul, and appellate lawyers can lead the way. I've never met anybody who likes hourly billing. For clients, it means financial uncertainty, long, confusing bills, and an incentive for unscrupulous lawyers to make extra work. For lawyers, it means tediously tracking every six-minute increment of our days. It makes it harder for us to think outside the box, chase down novel ideas, and discuss cases with colleagues -- some of the most satisfying parts of practicing law -- because we have to justify every 0.1 at the end of the month on a bill to a client. Unfortunately, in a lot of practice areas, it's hard to come up with anything better. My main practice -- appeals -- is an exception. While most practitioners still charge by the hour, I think there's a huge, mostly-untapped opportunity for better arrangements at the appellate level. Unlike at the trial level, a good appellate lawyer can usually make a pretty good estimate how much work an appeal will take. And by the time a case is on appeal, you often have a lot more information about what the claims are worth than you do earlier in litigation. That opens the door to well-crafted fixed fee, contingency, hybrid, and other fee structures. I also think there's a large unmet demand for better billing arrangements on appeal. Appellate filings have been declining nationwide for years, and one big reason for that (I believe) is because whole swaths of litigants simply can't afford to appeal bad decisions. If you want to pay by the hour, I'm happy to handle your appeal the old-fashioned way. But for many clients, there's a better way. We're pioneering that better way at Frazier Law, PLLC.

I used to co-counsel with larger firms. I rarely do anymore - and billing transparency is a big reason why, among many others. When you're sitting across from a shared client who just got blind-sided by a big law law firm invoice at the closing table, that reflects on everyone in the room. Including you. It's embarrassing - and most importantly, it's not fair to the client. At our firm, we do things very differently. We communicate constantly - off the clock. We do regular pulse checks with the client - off the clock. We talk through cost-benefit analysis at every step, and when we believe pursuing or defending a matter no longer makes sense for the client, we say so. If something falls outside the scope of our engagement, we tell the client before we begin the work - not after. We get their approval to begin the work, amend the scope, and make sure they fully understand what they're agreeing to. The client rarely knows where the lines regarding scope are. That's our job to explain to them. No surprises. No springing invoices. Just honest, ongoing conversation. Legal work is already stressful. The billing should never add to it. Client trust isn't earned in the courtroom or boardroom. It's earned in the small moments - and we take those moments seriously. Our clients come to us because they trust us. We work hard to earn that trust, and we work equally hard to keep it. #BusinessLaw #ClientFirst #LegalIndustry #Transparency #LawFirm

In the legal profession, time has been used as the currency of value. Through six-minute increments, the “billable hour” model is how law firms measure productivity and how they invoice. However, we lawyers secretly hate that [so much that we often burn out or quit]. The billable hour is Proof-of-Work — the legal sector’s analogue to [Bitcoin] mining, effort as evidence of legitimacy because we couldn't think of a better design. It rewards busy-ness over impact, and is burning enormous human energy in the process, leading to depression and a system that strangles the brightest minds. In addition to the human cost of this, let's talk about systemic effects - when you’re paid for time, you optimize for time — not necessarily for clarity, creativity, or impact. Associates learn to fill their days rather than to design better systems, a model which is now showing its cracks because of the emerging technologies such as #AI, dismantling the correlation between time spent and output. When drafting and research only take seconds, billing for hours becomes absurd. However, the ability to create trust-worthy output instead of sloppy things, ahh, that's rare. Let's pause there for emphasis and think about it - what is now valuable for lawyers is the ability to create trust-worthy output by wisely using #AI, delivering precision, insight and accuracy, without doing artisanal work [ever got tired of seeing v13 on a draft and knowing it's costing you $$$?]. Now imagine a different ledger of value, where legal work isn’t validated by the time spent, but by the outcomes generated, the risks mitigated, and the systems improved. In this paradigm, a lawyer’s contribution could be captured through measuring preventive insight — how early a problem was detected or defused, systemic contribution — how a contract, structure, or governance layer improved resilience, or relational trust — how well clients understood and used the advice. That’s Proof-of-Value, the model I am advocating for and building, a shift from measuring hours to measuring impact. Three forces are converging to make #PoV not just desirable, but necessary. First, #technology. Second, clients ask for alignment = transparent, outcome-based models and what “value delivered” is. Third, in #Web3, proof is now verifiable. Every profession needs new standards of evidence for contribution and impact, and law is not exempt from this. Moving from billable hours to #PoV doesn’t mean abandoning rigor but upgrading it. Lawyers will be acting more and more as stewards of trust in complex systems, because what law really secures isn’t time, it’s trust. I’m exploring this further in upcoming research on Proof-of-Value. If this resonates, follow Ixian and share below how you see value evolving in your own field. #LegalInnovation

The billable hour is the black mold of the legal industry. No matter how hard you scrub, you still get law firm narratives in 6-minute increments. But I really think this may be the Cillit Bang moment. Companies like Meta and ZScaler are refusing to pay for AI generated output from law firms. They just won't pay. Why? Because the system is built on billing for time spent on work output, not value delivered. Thanks to AI, the heavy lifting is much easier than it was. Due diligence is 10x faster, drafting is 10x faster, discovery is 10x faster. Work output is lower. If law firms billed for value - for judgement, problem-solving and insight - I don't think anyone would care how they got the work done. In fact, I think clients may even pay more for that than is being billed today for the time it took to deliver it. But in a system designed to bill for work output, this all starts collapsing. What the solution is, I'm not exactly sure. But I do know from our community of 2k GCs that clients are just not having it anymore.