Yes, law firms without billable hours are real. But, even in this post-2008 and mid-2020 world, time billing is still pretty much a norm (with a mix of alternative fee arrangements, for good measure). Some law firms boast of having no billable targets nor hourly rates, however...
Real law firms without billable hours don’t use time-based billing. Instead, they set their legal fees based on the clients' perceived value. Likewise, a law firm with no billable hours doesn’t use hours as a base for compensating their lawyers.
Those law firms (some of them listed below) have found a way to make their business model work without billable hours.
(and why wouldn’t they - so many service businesses work on value-based principles)
Then, there are…
According to an archived Reddit thread, there were Biglaw firms without minimum billable requirements as early as 2009. Having no minimum billable target would imply a better work-life balance for associate lawyers in those firms.
However, as many Redditors pointed out, that didn’t mean those law firms abandoned the clock entirely. For starters, they would likely continue to charge clients by the hour, and associates were probably still expected to push long hours. It would seem that billable targets persisted as a sort of a “social norm” in those firms.
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Now, there could be pros and cons of working in a law firm that doesn’t state its annual billable targets explicitly.
Namely, no set targets could mean no clear bonus thresholds, either. If that were the case, it would make bonus awards entirely arbitrary. On the flip side, less pressure on lawyers stimulates creativity and makes the working environment much more enjoyable.
Having no annual billable threshold certainly sounds promising, for associates and the industry as a whole.
However, law firms without billable hours requirements are still run under the Biglaw model. And this could be an issue because...
Typical law firms still operate under the Biglaw model. Most frequently, it is a partnership where a few top (name) partners leverage the structure with the help of lower-ranked staff. Quite often, its compensation model also revolves around billable hours (the so-called “eat what you kill” culture).
Is there anything wrong with that?
For starters, if you base compensation off the hours billed, you would ideally want to charge your clients by the hour. You would, therefore, pass all inefficiencies on to clients.
Secondly, the billable hour compensation model doesn’t quite invite lawyers to collaborate. In its purest form, it incentivizes lawyers to hoard as many billable tasks as possible.
Perhaps most visibly, the billable hour model puts a strain on lawyers. Some of the billable targets that fly around in the legal community are at best exhausting, and often bordering with impossible. As such, they may invoke ethically questionable behavior.
Moreover, the hoarding culture, nurtured by the billable hour, threatens to cannibalize the very model itself.
Namely, partners also tend to keep relationships with clients to themselves. Once they decide to join another law firm, they will bring their “book of business” along. Their former law firm’s revenue would thus take a hit.
There are also other drawbacks to the Billable Hour.
However, let’s see here...
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It all starts with the core. You can’t effectively run a law firm without billables unless you stop using the hourly model at anything you do.
“You have to clear your mind from thinking about time as a unit for revenue. Even internally, it has to go. So, no timesheets, no time increments, no “if I charged this by the hour, it’d be…” when determining the fixed fee…” - Marko Porobija
Hence, law firms that use no billable hours in their business address the following from the get-go:
It goes without saying, but law firms are better-off paying their staff off the basis of the value they bring. There are no fixed rules here, as “value” is subjective, and circumstances in various organizations are different. However, value-based compensation will remove all the problematic incentives and overhead (i.e., inefficiencies, hoarding culture, etc.).
And the value-based model doesn’t mean only a fixed compensation. It can include performance incentives as well, especially in those jurisdictions where lawyers are more flexible in choosing their form of incorporation.
Law firms without billable hours are usually very strategic about their areas of activity. They have studied their niche carefully and selected those where their business model yields the most significant ROI.
Law firms that price their work upfront understand their strengths and where they can bring the most value. Likewise, they have determined their ideal client - i.e., the one that would appreciate their value the most.
Case in point:
“Our strengths lie in giving advice to operators in the commercial, construction, and not-for-profit sectors and in skillfully managing your wealth…” - Moores
“A specialist law firm, focusing on tax, structuring, asset protection, business succession, and estate planning…” - View Legal
“We limit the number and type of matters we undertake. Our system of lock-step compensation promotes a careful selection of matters as well as the flexibility to bring the right expertise…” - Wachtell, Lipton, Rosen, & Katz
Of course, a focused approach generally makes sense in any business enterprise. However, there are still many corporate law firms that pride in their “full-service” approach.
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Traditional law firms obsess over their utilization rate and revenue. Law firms without billable hours, however, keep a close eye on their product-market-fit at all times.
A law firm with no billable hours sees the PMF as a learning method that ensures their offering meets the market demand. If that is not the case, they pivot accordingly.
And here is another reason why is focus important - a clear vision will help you:
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It is a given that, if you have developed a niche service or a product, you know all the ingredients. It feels intuitive, right?
Well, perhaps not to those that still approach legal services as a profession rather than a business. Legal professionals that go after just any legal project that may come around may easily be neglecting essential aspects that could turn around their business.
Law firms that are run like well-organized companies know pretty much all inputs and factors that make up their business model. And this is critical since it helps them determine their bottom line.
(it is their deep niche experience that helps them formulate products and services, and to get to the product-market-fit with extreme precision)
Moreover, law firms that opted out of billable hours have every incentive to innovate their service delivery model. All else being equal, the lower their cost base, the higher the profit margin.
A few years ago, I saw a great analogy about the Biglaw firms, the billable hour, and airline companies. Namely, imagine if Lufthansa, Delta (or any other, for that matter) didn’t sell tickets at a fixed price, and charged you by the mile instead?
Law firms that run without billable hours price their services upfront, based on value.
“You need to have an alternative system to determine the price of a particular project. And there are a lot of methods available - one just needs to examine the best practices of other industries to find a satisfactory solution…” - Marko Porobija
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And it may be tempting to reflect on your costs of legal service production, mark it up, and call it a day. This method is comfortable and familiar.
(some of us would also say intellectually lazy, but shhh!)
However, the problem with that approach is - it marries you to your costs base. Conversely, you should always be looking at how to optimize your service delivery, to stay ahead and competitive.
The billable hour model keeps your focus tightly set to the billable amount, write-offs, and utilization rate. That leaves no room for innovative thinking.
Billing by the hour nowadays feels like riding a bus that runs on fumes. You eventually know gas is going to run out, and throwing the passengers will not help the fact.
Everything that I mentioned above helps law firms with no billable hours to agree on the project outline before they even start.
Their deep niche experience certainly makes them that much confident when setting out the project timeline. However, to get to that experience, lawyers have committed to collecting data and learning from their past projects.
In its purest form, billing by the hour leaves you with the following data points: how much did you work, what portion of those hours made it to the bill, and what part of that bill was paid.
The billable hour has no operational focus at all. If you practice such an approach, it prevents you from learning how you could be running your law firm differently.
Since there are no billable hours to protect them, these law firms must manage their legal service delivery like projects (which, in fact, they are).
Regardless of the method used, law firms make sure that their delivery is within the frames of allocated resources. Otherwise, their reputation, along with the whole business model, would go belly up.
After the project delivery, you can also use the opportunity to learn from the experience, while still fresh. Other professions are known for keeping retrospective meetings, which enable them to spot all the good, the bad, and the ugly of their last gig.
Retrospectives would likely capture any minor improvements in the process. Saving those incremental optimizations, while may seem small, will make a vast improvement over the longer time-span.
And, without any further ado...
This list is by no means finite - I will update it as I learn about new examples. If you run or work in a law firm without billable hours, please drop me a line at editor(at)cloutlegal(dot)com - happy to add your firm to this list.
According to some, this is one of the regularly most profitable law firms globally.
Based in New York, they had started in 1956. They are focused on “the fields of mergers and acquisitions, strategic investments, takeovers and takeover defense, shareholder activism, corporate and securities law, and corporate governance.”
“We have a track record of original and groundbreaking solutions and innovations that have had a dramatic impact on business and law. We are thought leaders.
Our distinctive structure defines our approach. We maintain a ratio of associates to partners significantly below that of other firms (...and) our system of lock-step compensation promotes a careful selection of matters…”
Whoever said litigation couldn’t be priced with alternative fee arrangements has never met Bartlit Beck trial lawyers. This US law firm, started in 1993, frequently makes the headlines for its excellence and innovative approach.
Bartlit Beck is careful about selecting their cases, and have no billable hours.
“We do not charge by the hour. Instead, we enter into fee agreements that reward success and efficiency. Our goal in each case is to negotiate a fee structure that will ensure that our interests and the client's are fully aligned.
Depending on the case, this may take the form of a contingent fee, a flat fee, a combination of the two, or some other structure that we and the client devise. Our firm's approach to fees ensures that we remain focused on results.”
Valorem Law Group was among those who started the whole discussion about alternative fee arrangements way before it was cool. Nicole Auerbach and Patrick Lamb, the founders of Valorem, pride themselves as “legal geeks” and “biglaw refugees.”
(the same founders have another entrant on this list)
Likewise, Patrick and Nicole throw the whole “you can’t price litigation with a fixed fee” out of the window, as they literally do just all the time in Valorem.
“We are acknowledged national thought leaders on the use of alternative fees in litigation. In fact, we started the dialogue on AFAs when we started Valorem in 2008. We have handled hundreds of cases since 2008 under the AFA model we designed. For us, a fixed fee is actually fixed – not just a starting point for later increases...”
ElevateNext is a Law Company, rather than a law firm. Started by Nicole and Patrick from the previous entry (after their success with Valorem), it is geared towards in-house legal departments.
In addition to adopting all the core values and best practices of Valorem, ElevateNext goes a step beyond - it tries to solve legal issues by prevention, compliance, and optimization, rather than to react after the damage is done.
“Law departments have issues (...) but addressing them using the same old methods doesn’t tackle the bigger issue — the growing demand for legal services without the commensurate legal budget.
Hiring additional in-house staff is not the solution, nor is farming out more to traditional (ahem, more expensive) law firms. Reducing the legal work, and handling it more efficiently is the only way to get ahead of the curve.
The solution is a combination of enlightened law firm + law company + law department.
The result is substantially reduced legal spend, increased department efficiency, better outcomes, but most importantly – a reduction in the demand for law department services by the business folk. That’s what we call doing more with less or #dolesslaw…”
Conduit Law is certainly not your traditional law firm. Based in Canada, Conduit is a managed legal services provider that helps you fill any staffing or expertise gaps in legal departments and law firms. And they provide such services on an entirely fixed fee basis.
“The next frontier for the most effective and innovative in-house teams is managed legal services. In-house teams are falling under increased time and work pressures, all the while facing greater budget challenges to reduce costs and increase output. Managed legal services is the solution that brings increased performance, reliable metrics, and budgetary certainty with a fixed fee solution…”
Radiant Law is a UK based NewLaw company, started by Alex Hamilton - another biglaw refugee.
(I’ve personally had the honor to meet Alex a few times (usually conferences), and he possesses one of the most profound entrepreneurial minds I’ve seen)
What is unique about Radiant Law is that they combine fixed-fee pricing, legal project management, distributed legal teams, and tech-savviness to solve their clients’ problems. They don’t shy away from building technology either.
“We only charge fixed fees and don't keep timesheets, so our clients always know what they will pay and our interests are aligned.
Radiant Law is tech-savvy - our technology gives our clients the benefits of lawtech through our services, without them having to undertake large IT projects.
We combine the judgment calls of senior lawyers with slick processes and a scalable team in London and Cape Town that can handle the largest of projects…”
Moores is a law firm that takes pride in its proprietary Moores Agreed Pricing (MAP) method. The MAP helps them scope legal projects and agree on the price upfront.
“Where most firms charge by time, our approach is different. With Moores Agreed Pricing (MAP) you’ll know our fee before we begin work. No estimates. No ranges. No hourly rates.
“Before we talk to you about the price, we will listen carefully to you and ask the right questions to understand your needs and how we can meet them. If together, we are satisfied that we can move you to where you want to be, we will scope the work and propose a price.
This may involve giving you some options. In other words, the price will be a function of the scope of the work and the value we anticipate creating; not the time we spend on it…”
View Legal, established by Naomi Arnold and Matthew Burgess, is a firm with an entrepreneurial approach to their clients. I have had a chance to chat with Matthew, who, in addition to being a great legal entrepreneur, also has a fantastic sense of humor.
And he doesn’t shy away from showing it either...
Biglaw jokes aside, here is what View Legal commits to provide to its clients:
“Customers provided upfront ‘SPS Guarantee’ – that is service and price satisfaction is Guaranteed with all work undertaken following upfront fixed pricing.
No timesheets. Sophisticated project management tools used to help ensure customer expectations are exceeded.
Quality is defined by the customer (not a law firm).
All service designed to be fit-for-purpose, aligning with collaboratively agreed customer objectives…”
Hive Legal is a law firm that leverages collaboration with outside service professionals on a per-needed basis. Likewise, they did away with hourly billing.
“Hive Legal embraces the opportunity to value our work based on the outcomes we achieve for our clients and has a strong preference for value pricing. We offer alternative fee arrangements that provide certainty, reward efficiency, are not tied to time recording. And do not rely on leveraging into a large fixed cost base…”
Aptum Legal is a legal service provider that puts a strong emphasis on strict legal project control, data visualization, and sharing risks with clients. They use a range of tools to make sure their legal service delivery process goes smoothly.
“Aptum applies technology from outside of the law to improve the experience for clients. Tools include the Jira project management platform, Power BI to help clients visualise critical data, and technology to enable collaboration with clients and broader professional teams.
Our philosophy is to ensure we are always aligned with our client’s best interests by sharing the risks associated with the litigation process. Options range from value-based fixed pricing through to appropriate risk-sharing aligned to agreed outcomes…”
It starts to get clear that the only way forward is entrepreneurial thinking. Law firms that go beyond general marketing jargon, and really think about what clients need, will have a shot at thriving in the future society.
“People tend to think of our profession as “indestructible.” However, that is very far from the truth.
Now, more than ever, the legal services industry needs new leaders, new pathways through which it will be able to transition to the post-COVID era…” - Marko Porobija
It will be interesting to follow how the legal industry proceeds from here. One thing is for sure, times prior to 2008 aren’t likely to come back, and biglaw will have to learn new tricks.
(did I miss an innovative law that should be on this list? Please drop me a line at editor(at)cloutlegal(dot)com - happy to update it)
Photo by Justin Veenema on Unsplash
What are law firms without billable hours?
Real law firms without billable hours don’t use time-based billing. Instead, they set legal fees based on the clients' perceived value. Mainly, such law firms use fixed fees and contingency fees.
What are law firms with no billable hour minimum requirements?
Some Biglaw firms have seemingly dropped minimum billable requirements, implying a better work-life balance. However, they keep billing for time, and lawyers may still be expected to put long hours.
How do law firms calculate billable hours?
Biglaw lawyers record time they spend servicing clients in a timesheet. At the end of a billing period, law firms multiply billable time by their hourly rates to determine amounts for invoicing.
What drives the business of law nowadays?
Legal excellence is no longer enough. Nowadays, law firms need deep niche expertise, focus on their ideal target client, and an empathetic approach, to get to a product-market-fit and thrive.
Ivan Rasic holds the Transnational Trade Law and Finance LLM, a program by Universidad de Deusto (Bilbao, ES), Universiteit van Tilburg (Tilburg, NL), and Goethe Universität (Frankfurt, DE). After his work in law firms and inhouse, he started a legal tech company.
Nowadays, Ivan leads STP Informationstechnologie GmbH's Sofia RnD center with project/development management, culture, strategy, and special project initiatives.
Ivan is an Ambassador at European Legal Tech Association (ELTA). He closely follows and writes on future of law, legal tech, ALSPs, and new ways of delivering legal services.
Ivan Rasic holds the Transnational Trade Law and Finance LLM, a program by Universidad de Deusto (Bilbao, ES), Universiteit van Tilburg (Tilburg, NL), and Goethe Universität (Frankfurt, DE). After his work in law firms and inhouse, he started a legal tech company.
Nowadays, Ivan leads STP Informationstechnologie GmbH's Sofia RnD center with project/development management, culture, strategy, and special project initiatives.
Ivan is an Ambassador at European Legal Tech Association (ELTA). He closely follows and writes on future of law, legal tech, ALSPs, and new ways of delivering legal services.
