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Billable units make lawyers the punch line

Billable units make lawyers the punch line

The legal profession does not have a PR problem, according to Jay Shepherd, but rather gets a bad rap internationally due to the way it goes about the business of law - particularly by still…

The legal profession does not have a PR problem, according to Jay Shepherd, but rather gets a bad rap internationally due to the way it goes about the business of law - particularly by still charging by the hour. He speaks to Angela Priestley

Type "lawyer joke" into Google and the search engine responds with almost 300,000 results.

Lawyers have long been at the centre of many a joke and a quick scan over Google reveals that lawyers are commonly believed to be humorous due to a number of stereotypes: they're greedy, charge excessively, pad timesheets and operate unethically.

But as Boston lawyer and legal commentator Jay Shepherd points out, it's not just that the legal profession faces a significant PR problem, but rather a reflection on the way legal businesses are commonly run. "There aren't a lot of plumber jokes going round and I think there is a good reason for that," he says.

Shepherd started practicing law 16 years ago. After undergoing a four-year stint with a small law firm - finding a specialty in employment law "by accident" he says - and learning about the legal profession, Shepherd was determined that there had to be a better way of running a legal business compared to what he had seen and experienced.

In 1998, he set out to prove such beliefs and formed Shepherd Law Group. On 31 December 2006, the firm vowed never to use timesheets again.

"It took me eight years to figure out how to get rid of timesheets and billable hours," he concedes. "It didn't seem right, but I first needed to find out why we do it that way."

What he found was that, like much of the legal profession, billable hours come down to precedent and tradition - and off the back of a model that can be traced to 1919.

"I'm stubborn and I figured that can't be the way to do it and that there has to be a better way," he says. "It's arrogant for us lawyers to think we somehow get to operate outside the regular marketplace."

Today, Shepherd lives by the mantra of "making work less work" and publishes a blog, The Client Revolution, to voice his views. He is also determined to shake-up the status quo of how many legal businesses operate and is taking such determination to much of the world. In Australia later this year, Shepherd will deliver the message directly to local law firms by presenting at the Australian Legal Practice Management Association's national conference.

He also lives by his word - so much so that he will turn clients away should they insist the firm charge by the hour. "If General Motors or IBM calls us up and says 'we want you to do all our employment law next year, but only if you bill us hourly', we're going to be prepared to say 'no'," he says. "It has to be all or nothing or it wont change. Otherwise, the systems are kept in place."

Shepherd believes that all areas of law can function without timesheets - even litigation, which he says takes up 75 per cent of his work - and he's adamant that if a firm moves to fixed-price billing it must also remove timesheets to ensure the removal of the billable hour is truly engrained, even if such a firm only uses timesheets for internal purposes.

"Many firms say, 'we'll try fixed prices, but we're going to keep timesheets'. That's a cop out, they are missing the point there," says Shepherd.

That point is that lawyers operate differently when not tied to billable hours. Shepherd believes that by removing timesheets, lawyers can truly concentrate on delivering the best outcome for clients and that in his firm, the moves has contributed to a direct increase in revenue.

"I really don't want my lawyers to be thinking about time," he says. "It's not just an invoicing method, it's a way of thinking about the work that we do. You don't practice the same way when you're not worried about hours. You do things differently, you make different choices."

In the legal industry, despite success stories regarding firms that have completely disposed of timesheets, Shepherd believes many law firms are not willing to make the switch and will even attempt to hinder progress.

"The large law firms, for the most part, are doing everything they can to confuse the issue," he says. "Clients will say they're interested in alternative billing and the big law firm says 'we have all these things, we have capped fees, hybrid rates, risk collars, reverse contingency and this and that' ... At the end, the client throws up their hands and says 'look, can you just give me a discount and bill me hourly?'"

And while the global financial crisis may have encouraged many law firms to sit up and offer new forms of billing for the benefit of their clients - at least in the United States - according to Shepherd, there are too few solutions being delivered to really make a difference across the industry.

"The law firms, for the most part, have paid a lot of lip service to this, but they haven't provided the real solutions - with very few exceptions. You'll see law firms bragging about their alternative fees, but then they still keep track of time."

Meanwhile, a strong upturn in the global economy may simply send any progress made towards fixed-pricing in the legal industry into oblivion. "The expectation of many firms is that once the economy turns around, they're going to go right back to what they were already doing."

As for the continued barrage of lawyer jokes, just like the billable hour, there may be little hope of an end in sight anytime soon.

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Billable units make lawyers the punch line
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