Legal Management: The billable hours grip on legal

The 2008 economic downturn accelerated corporations’ decisions to put a cap on legal spending – not only in terms of spending volume but also how many outside counsel they would ultimately engage. This forced general counsel as well as their law firms to take pricing seriously beyond just raising billable hour rates.
Firms began to adopt strategies and processes focused on legal spend management and legal fee pricing. As an additional consequence, legal fee price adjustments led firms to reduce cost of services, which forced the adoption of centralized and standardized project and practice management methods and tools.
In the new normal, rates growth has drastically declined, productivity is down and demand for legal services has flattened. As a result of these trends, the old school billable hour model has once again come under increased scrutiny. Is the billable hour finally dead, as many industry observers have long predicted? How has the hype of alternative fee arrangements (AFAs) measured up to AFA reality? And what is the ideal or hybrid solution?

According to Toby Brown, renowned law firm pricing specialist and Chief Practice Management Officer at Perkins Coie LLP, the better law firms are at pricing, the better it is for the market. Brown has observed client side trends ranging from e-billing, corporate procurement in pricing, to the rise of legal department outsourcing, outside counsel guidelines, and legal spend management.

Click here to read Jobst Elster’s (Head of Content and Legal Market Strategy, InsideLegal) article on the billable hours grip on legal, in the latest issue of Legal Management.