Time is Not Money: Clifford Chance May Scrap Billable Hours
May 23, 2019
2 min read
What's going on here?
Clifford Chance is scrapping billable hours for trainees and associates in its Abu Dhabi and Dubai offices.
What does this mean?
The billable hours system monitors how a lawyer spends their time to calculate how to bill the client. Clifford Chance’s pilot means that staff bonuses will be measured, not based on hours billed, but on activities such as business development, time spent in community programmes and progressing diversity and inclusion. The billable hours metric underplays non-billable work that is still vital to a firm’s strategy. By ditching the traditional metric, the one-year trial will allow for a broader assessment of a lawyer’s performance and contribution. This new approach means that more emphasis is placed on innovation and professional development.
Why should law firms care?
Before, the law firm business model relied on billable hours, with clients being charged accordingly after work is completed. However, clients now demand upfront fixed fees to reduce the risk (and cost) of uncertainty. Therefore, billable hours do not translate directly into a fee. Nevertheless, they will still be used internally to keep track of lawyers’ time. Could it be that this internal measurement eventually changes too?
The old system promotes those who bill the most hours. But these workers are not necessarily the most efficient. Activities which are still needed for a firm to survive (for example, a networking dinner) could wrongly be considered secondary to hours targets. In many firms, bonuses are calculated based on billable hours. So, if a lawyer spends more time focussing on the firm’s professional development, as opposed to clocking in hours, they would be sacrificing their own income. Another criticism of the current system stems from the fact that spending more time on some work does not correspond to increased quality.
The billable hour system has also been one of the main culprits in the excessive levels of stress in lawyers. The pressure to meet billable hour targets puts lawyers’ mental health at risk.
A move away from this system could improve the profitability of the firm, as they have more freedom to focus on innovation and client service. It will also help in retaining talent as lawyers will feel less under stress to maximise their billable hours.
If the trial is successful, we could see this being rolled out in other Clifford Chance offices.
Report written by Elizabeth M
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