Billing for value and not for time

The ideal billing system, to me, is a billing system based on certainty and fixed costs.  I believe that clients want certainty above all with value coming on as a close second.  Aside from having to break away from the hourly billing mindset that seems to be so prevalent in South African (and foreign) law firms, a challenge that presents itself is how to fix costs for attendances that are time-based.  This may be a little easier for commercial attorneys whose practice is the drafting and preparation of agreements and similar documents (although one of my commercial colleagues was horrified at the suggestion, pointing out that many agreements become time-based activities). 

I am primarily a litigation attorney, it is what I have done for almost seven years and is an area of practice I know best.  While there are many attendances that can be billed using fixed costs, many of my attendances are time-based.  An example is time spent preparing applications to court and even court appearances themselves.  How do you place a value on an indeterminate attendance?  I could spend an hour in court waiting to be heard or I could wait all day only to have my matter postponed or held over to another day.  In a similar vein, it could take me an hour to draft a substantial application or it could take me a week’s worth of detailed consultations and intricate drafting to prepare an application for counsel to consider.  Obviously the fee must be proportionate to the work done and to the value added to my client’s case.  It must be fair to both my client and to me (after all, like you I have a home to maintain a family to support).

The Greatest American Lawyer has recently posted on this topic.  I agree with his thoughts:

Billing system which puts a value on a lawyers time, irrespective of whether the lawyers used his/her time well or provided any value for that time, puts many of the wrong incentives in play for the lawyer. The lawyer’s incentive is to take more not less time what does the lawyer care. He/She gets paid for every hour irrespective of whether or not he/she is efficient, productive or focused. Since the lawyers business model is built on generating hours irrespective of others factors, the lawyers incentive is to drag a matter out rather than bring it to resolution which cuts off his/her revenue stream.

I don’t know the answer just yet.  I am working on it and you can be sure the more I do the closer I am to that goal of a total value-based billing system.

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