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By Murray Gottheil | June 29, 2023
The other day I heard a story about a furniture store in Toronto known to cater to the wealthy. The owner purchased an unusual item in Vietnam for twenty dollars. He brought it back to his store and promoted it as a one-of-a-kind item from an exotic destination. He sold it to someone with more money than brains for $10,000. The person who told me the story swears that she has fifth-hand knowledge of the incident and that it is absolutely true. Having shopped in that store once, I do not doubt it.
Welcome to the concept of value billing. Things are worth what people are willing to pay for them.
If you want to sit in the reception area of a law firm on the 60th floor of an office building in downtown Toronto, look at Lake Ontario through a giant picture window, be ushered into a beautiful meeting room with expensive art on the wall and be served freshly baked cookies while you discuss applying for a trademark, it is going to cost you more than having it done by a smaller firm. If you believe that the larger firm has better lawyers, or just enjoy the surroundings, you may perceive value in having your work done there.
We are told that value billing is the way of the future and that charging by the hour is evil and should be relegated to the dustbin of history. We have all laughed about the lawyer who complained to Saint Peter that he should not have been taken to the great beyond at such a tender age, only to have Saint Peter respond that according to his dockets he was two hundred years old.
You will not be hearing that from me. I like the billable hour. Sure, it is open to abuse by people who are greedy. I will not trouble you with cataloguing all of the ways that you can be ripped off by those charging by the hour, because others have written extensively about that. Those who do so appear to believe that all will be fine in the legal world when we are finally rid of the billable hour. I respect those people. Their heart and business ethics are in the right place. But I do not agree with them.
You see, I do not think that the billable hour is actually the problem or that ditching it will have the effect that some think. I, and many of my colleagues, used the billable hour as a tool to measure the amount of effort that we put into a matter, and then looked long and hard at whether the result reflected value to the client. We provided reliable estimates, communicated effectively with clients about changes in scope, and wrote down the bill wherever it was necessary to ensure that the client obtained good value. And yes, I had other colleagues that did not do that. What was the difference? Some of us are ethically challenged. Some of us are greedy.
Instead of focusing on ridding the legal world of the billable hour, I suggest that we work on our ethical standards and our desire to earn more and more money. I don’t think that fixed fees are going to fix that.
Murray is a happily retired lawyer who lives in the country, drives a pick-up truck, writes, teaches and mentors. You can reach him at [email protected] or see what he is up to at lawanddisorderinc.com.