Flat Rate vs. Billable Hours – Lawyers and Public Relations Practitioners

Sacha Pfeiffer of the Boston Globe reported in Beat the clock – that the Boston law firm of the Shepherd Law Group says no to billing by the hour, and its clients say they are pleased.

According to the article, The Shepherd Law Group has abandoned the billable hour all together. Pfeiffer reports that,

Shepherd, a five-lawyer firm that specializes in employment law, charges its
clients a flat annual fee or flat price per task. Clients can call the firm as
often as they want to discuss legal issues, although some services, such as
training and litigation, cost extra. The new approach helps clients determine
legal costs in advance and often prevents legal problems from escalating because
clients are no longer reluctant to seek advice out of fear of incurring a hefty
bill, said Jay Shepherd, the firm's founder.

The abandonment of billable hours has a small following in the U.S. with law firms and public relations agencies alike. It’s a refreshing shift but is it “the answer?”

I don’t believe the answer lies in determining “which form of billing is better” as a standard of practice – rather, “which form of billing is better in the individual situation and which will help deliver the best services to the client.” Clients do need options and as a recovering attorney, I agree with Pfeiffer that most people don’t like the billable hour but the key in that term is “most.” “Most” does not equal “all.”

I do find it both amusing and refreshing that Shepherd’s PR agent is quoted in the article since many firms are making the shift as part of their public relations and marketing strategy.

The bottom line: law firms and public relations agencies should offer options to their clients. When you entertain, it’s customary to offer coffee and tea.

If you bill it . . .

I’ve heard it said that “if you build it, they will come.” In this case, I think they meant, “If you bill it, they will come.” But the question is will they pay? I read Nathan Koppel’s Wall Street Journal article, Lawyers Gear Up Grand New Fees, in which Koppel details the new $1,000 per hour fees being charged by some large law firm litigators. I highly encourage all attorneys and legal marketers to read the article. My favorite analogies to high billing rates of attorneys are to that of the medical practitioner who saves lives and doesn’t make $1,000 per hour and to the baseball pro who makes $15,000 per hour. It’s the strange world of Mr. Mum. They say perception is nine-tenths of the truth, so if payers perceive such services to have a $1,000 per hour value, then they’re truth is that the attorney is worth just that. Let’s hope the counselors billing these rates will hit more home runs than Barry Bonds.