The traditional model for law office lawyers has been hourly billing. Pressures are very high for more junior and more senior lawyers to bill, bill, bill. That sometimes can work for Fortune 500 companies with big budgets. But small- to mid-size businesses just don’t have those kinds of deep pockets. But even more than pricing good clients out of the market, this kind of billing model just isn’t good for lawyers either.
The Bathroom Break Dilemma
Any attorney who has billed by the hour knows about the “bathroom break dilemma.” (By billing by the hour, we mean not just billing by the hour but really billing by a small fraction of an hour, usually increments of 6 minutes, which are one-tenth of an hour.) To get this straight, average partner billing rates in the US for law firms mean that every 6 minutes will cost a client about $60 dollars, while every hour billed will cost a client an average of $600 per hour. This amount can vary by legal market (in New York, that’s below average, in say, Indianapolis, it’s slightly above average).
The bathroom break dilemma is as follows: A lawyer is working for a client and has to take a bathroom break. Does the lawyer bill the client for that bathroom break? Attorneys will often say something like, “I was thinking about the client’s matter while I was in the bathroom.” This is hard to measure and relies on self-reporting and self-regulation and a high level of ethics on the part of the lawyer. It can never be disproved either. The bathroom break dilemma includes all kinds of other breaks that have nothing to do with the bathroom: chatting with other lawyers about unrelated matters, surfing the internet, taking a call from a friend or loved one, grabbing a snack, eating a meal, etc., etc. The permutations of the potential bathroom break dilemma scenarios are infinite. In an increasingly distracted society, attorneys are no exception.
A Bad Choice for Lawyers
When an attorney faces this kind of bathroom break dilemma, that lawyer has a bad choice: Either bill the client for time that probably wasn’t actually spent by the lawyer on the client – in a real, concentrated way certainly. Or not bill that time and short-change the law firm for whatever time was indeed spent. So it’s a matter of robbing Peter to pay Paul, or vice-versa. This leaves the lawyer with a nagging feeling of unfairness, while clients ask themselves, “Did my lawyer really spend 1.3 hours on my business?”
Moreover, like being a taxi driver, being connected to a timed money-meter creates a “billable hour” focus, which itself is a distraction from the work for which a business hired the lawyer in the first place, namely, doing the actual legal work, or what lawyers call “lawyering.” This kind of focus is itself a big distraction. It takes the lawyer away from focusing on what the lawyer does best.
Over time, most lawyers statistically don’t remain lawyers, and probably the pressures and stresses and inherent dishonesty of hourly billing are part of what takes its toll. It’s just not fun to do a day’s work that may not be an honest day’s work, because it is composed of questionably 6-minute billing increments.
Instead, it would be preferable to have a lawyer who had a fixed monthly retainer that covered up to X number of hours per month, where every 6-minute increment is not being calculated. This is exactly the model that in-house fractional general counsel services use. By freeing lawyers from the poor traditional billable hour model, the fractional general counsel service allows those lawyers to serve the businesses that hire them without poor incentives and without distractions. To be the resource for companies that as fractional general counsel they truly can be. And lawyering can actually be more fun and more honest too.