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April 12, 2005

Billing - Honesty is the Key to Delivering Value

First, I would like to express my opinion of fixed fee versus billing by the hour. They are no different. Billing by the hour is the traditional approach. Fixed fee seems to be an insurance policy. The lawyer charges more than the expected hourly fee would total, but if unexpected costs arise, the lawyer assumes the risk. The overall cost to the client is the same either way.

Russ Krajec over at Anything Under the Sun Made By Man added to the recent billable discussion:

Doug is right that in the extreme case, the billable hour encourages the attorney to be lazy and slow. Conversely, the fixed fee can encourage the attorney to cut corners and deliver the minimum acceptable product. How do you find the happy medium?

Unlike Russ, I don't think this occurs only in the extreme case. I think a lawyer will only be lazy and slow if that lawyer is already lazy and slow. I don't believe that a billing scheme will ever change that. Likewise, billing doesn't cause an attorney to cut corners and deliver an inferior product. The lawyer's ethics dictate this behavior.

I don't know if it's because I'm a baby lawyer, or if it's my Pollyanna-esque attitude, but I think that either arrangement can be very fair to the client, as long as the lawyer is honest.

When I was about 7 or 8, my dad told me that he would pay me $1 an hour to clean the garage. I thought this was crazy and asked him what would keep me from spending hours sweeping a small corner. His answer was simple, "because that wouldn't be the right thing to do." I worked hard and cleaned the garage in about 2 hours. I also learned a valuable lesson about work. Honesty may not pay off in the short term, but I can say with certainty that it does pay off in the long run. This explains how both methods of billing can be fair to the client.

I think the ideal situation for the client is to be billed hourly with a fixed cap. To the client, this means that I won't charge more than X, and if I happen to be efficient in my work, you get the benefit. Of course, this means a total assumption of the risk for the attorney. While the attorney is probably in a better position to appreciate the risk than the client, this may be unacceptable, depending on the type of work. Each lawyer and each client is different. Maybe the client should have a voice in deciding whether fixed fee or hourly billing is the best option.

Posted by Melody Wirz at 05:52 PM.
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