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The billable hour is a trap into which more and more of us are falling

timharford.com

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Re: The billable hour is a trap into which more and more of us are falling

#71

Post by Ekaros »

cogman10 wrote: post #48
lotsofpulp wrote: post #33

Earlier quoted context omitted.

From the other side of the table, efficiency is encouraged when dollars are on the line too. A buyer is going to prefer a law firm that minimizes expenses. It is not like the law firm has a choice to keep using pen and paper to bill 100x the number of hours as others. They have to compete with other law firms.

It's, frankly, pretty easy for a law firm to pump up their billable hours. "Document review" is something law firms can dump thousands of manhours into with no real appreciable change in outcome. It ends up being more a question of what a company/individual is willing to pay. The reason big lawfirms stay in business isn't because they generally get much better results, but rather it's because they have the time and m…

The finalizing Depp vs. Herd trial is good example what happens when both sides have stupid amounts of money to burn... 6 weeks in court for civil matter, and it probably would have been even longer. With seemingly hours and hours of depositions, stupid numbers of evidence and transcripts...

Re: The billable hour is a trap into which more and more of us are falling

#72

Post by ojbyrne »

I found it interesting that the article started with “It will take about three minutes to read this column” because it seemed a little long for that (I don’t think I’m a slow reader but maybe). Anyway it made grasp the urgency of the six minute interval theme from the rest of the piece in a visceral way.

Re: The billable hour is a trap into which more and more of us are falling

#73

Post by retcon »

cogman10 wrote: post #48
lotsofpulp wrote: post #33

Earlier quoted context omitted.

From the other side of the table, efficiency is encouraged when dollars are on the line too. A buyer is going to prefer a law firm that minimizes expenses. It is not like the law firm has a choice to keep using pen and paper to bill 100x the number of hours as others. They have to compete with other law firms.

It's, frankly, pretty easy for a law firm to pump up their billable hours. "Document review" is something law firms can dump thousands of manhours into with no real appreciable change in outcome. It ends up being more a question of what a company/individual is willing to pay. The reason big lawfirms stay in business isn't because they generally get much better results, but rather it's because they have the time and m…

I have, and many besides, billed every last penny on the basis of "what I may miss I still understand better than anyone else". My 0.01% failures are 100% of my proposition.

Re: The billable hour is a trap into which more and more of us are falling

#74

Post by elevaet »

magicink81 wrote: post #21

Jonathan Stark is a thought leader / coach / writer / blogger etc that has been beating the drum on time-based pricing vs value-based pricing. He helps software engineers and others get off the time-based model and transition to value-based. Here's his website: https://jonathanstark.com/ Here are some interviews where he covers the topic https://www.youtube.com/watch?v=UT32G9wmONg https://www.youtube.com/watch?v=B1b7…

This article hits hard in a lot of ways.

Have any of you who work as a freelance programmer managed to get off the hours-based billing treadmill, and onto a value-based system? How do you determine value? When your clients need constant maintenance or small incremental work, do you end up spending a lot of time with estimates?

I'm really struggling with this in my own work.

Re: The billable hour is a trap into which more and more of us are falling

#75

Post by lotsofpulp »

lazide wrote: post #39
lotsofpulp wrote: post #33

Earlier quoted context omitted.

From the other side of the table, efficiency is encouraged when dollars are on the line too. A buyer is going to prefer a law firm that minimizes expenses. It is not like the law firm has a choice to keep using pen and paper to bill 100x the number of hours as others. They have to compete with other law firms.

That assumes buyers are able to properly price shop, and can discover a law firm that is more efficient. Much rarer than one would assume.

I do not know what “properly” price shop means, but I do not think law firms get blank checks. Buyers themselves are frequently lawyers so they are not completely out of the loop on what is and is not reasonable.

Re: The billable hour is a trap into which more and more of us are falling

#76

Post by gnicholas »

Wowfunhappy wrote: post #37
gnicholas wrote: post #27

Another downside of the billable hour: it encourages perverse incentives. I was recently talking with a potential customer in the legal field, and he was interested in my startup's software, which helps people read on screen more quickly/easily. But at one point he turned to me and said "I know one of the senior lawyers is going to ask me if using your software is going to cause the billable volume to go down for the…

What was your advice on how to answer?

Fortunately I'm a former lawyer, so I anticipated the question. I told him to say that our tools will also help associates work longer hours with less visual fatigue. That means that they'll be able to generate more revenue overall, even if a given task takes less time.

I never heard back after that conversation...lawyers aren't big on efficiency-enhancing technology. That tendency was probably one of the reasons I left biglaw!

Re: The billable hour is a trap into which more and more of us are falling

#77

Post by DANK_YACHT »

rtkwe wrote: post #41
lotsofpulp wrote: post #33

Earlier quoted context omitted.

From the other side of the table, efficiency is encouraged when dollars are on the line too. A buyer is going to prefer a law firm that minimizes expenses. It is not like the law firm has a choice to keep using pen and paper to bill 100x the number of hours as others. They have to compete with other law firms.

It's an opaque field how's a client supposed to know this particular law firm is billing less hours than another would because they're using this software? Can't run the suit twice with two different firms blind to see which bills less hours.

You look at the firms track records, testimonials, results; etc., the same way you evaluate most purchases. If two firms have similar results and one is cheaper, then you choose the cheaper option.

Re: The billable hour is a trap into which more and more of us are falling

#78

Post by gnicholas »

Traubenfuchs wrote: post #38
gnicholas wrote: post #27

Another downside of the billable hour: it encourages perverse incentives. I was recently talking with a potential customer in the legal field, and he was interested in my startup's software, which helps people read on screen more quickly/easily. But at one point he turned to me and said "I know one of the senior lawyers is going to ask me if using your software is going to cause the billable volume to go down for the…

He is clearly not very good with that billable hour craze. By doubling efficiancy you can sell the same hour to two customers. This is normal and encouraged in law and the consulting world.

In my time as a lawyer, I only knew one associate who bragged about overbilling. Not surprisingly, the child of a politician.

Re: The billable hour is a trap into which more and more of us are falling

#79

Post by tomatowurst »

codefreeordie wrote: post #62
tomatowurst wrote: post #13

Does anybody make $1000 USD / hr? What is your day to day like? How many clients do you have and how many hours do you bill per year? Do you actually work 2087 hours per year which would net you $2MM/year? I'm curious how some people are able to bill such high amounts and how they got started. It must also be extra stressful since its not like you are working for a company either so you need to do marketing and find…

That last part is actually the reason why hourly rates tend to be so high. You can't bill all the hours. A common rule of thumb for setting a billable rate is 3x to 4x the hourly-equivalent salary. If you are currently making $200k/yr working a full-time gig with good benefits, then your hourly-equivalent salary is $100, and you should bill hours out at around $300/hr to $400/hr on a billable-hour basis. So, you shou…

thanks yeah this was what I was thinking, 4x of hourly rate of salary

Re: The billable hour is a trap into which more and more of us are falling

#80

Post by tomatowurst »

SkyPuncher wrote: post #69
gamblor956 wrote: post #60

Earlier quoted context omitted.

That is fraud, and if you get caught you would be looking at prison time. And in the case of the legal and accounting professions, doing this will get your license revoked.

It's inconclusive if it's fraud without knowing contract details. If you're being paid simply to travel, then it is not fraudulent to also work on another client. If your being paid to travel _and_ focus on that client, then it would be fraudulent to work on another client.

question: how would they know?
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