Fred H. Bartlit, Jr. and Catherine McPherson

December 11, 2024

It has long been known that the hourly rate motivates law firm inefficiency and results in higher costs for clients.

• This is because law firms make more profits by increasing total hours spent on clients’ projects and make less profits when they become more efficient and reduce total hours.

It works this way:

Conduct motivated by hourly billing

• The culture’s incentives are all tied to hours, hours, hours.
• Attorney compensation and bonuses based on meeting or exceeding billable hour budgets.
• Teams are big, generating more hours.

Conduct discouraged by hourly billing:

• Efficiency.
• Innovation.
• Smaller teams of experienced lawyers.

31 years ago Bartlit Beck abandoned the hourly model.

                   Fred: I left a top law firm where I had worked for 30 years and started from scratch with 24 lawyers in Chicago and Denver.

Why?

• My wife Jana said, “I do not want you to die without knowing if your ideas were right.”
• “We don’t want to make money on our hours. We want to make money on our results and efficiency… capitalizing on computer technology and partner experience will help make the firm profitable.” (Vanguard of a Fee Revolt, Randall Samborn, National Law Journal, April 4, 1994)
• This was an opportunity to try a new way to do business that benefits both the firm and its clients.

Pillars of the non hourly fee deal

• Due diligence is key.  You can’t write a fee deal without knowing what the case might involve.
• Tailor the deal to each client for each case.
• Negotiate with the client the value of each phase of the case.
• Establish success bonuses – both parties then have skin in the game.

What have we learned in 31 years of non hourly billing?

• Common sense was dead bang right. You get what you pay for: if you pay for hours, you will get a lot of hours.
• Clients love it. They are paying for wins and quality. They have predictability of fees and costs: “As a client, I felt that we would get higher quality service with fixed fees, says Mr. Martin, and have an opportunity to design billing procedures that fit our needs more than the hourly system does. And the arrangement benefits NL’s inhouse lawyers, who know they can seek advice without running up a big bill, he says, adding that it also fosters a much greater sense of openness and dealing with problems at an early stage.” (J. Landis Martin, as quoted in Vanguard of a Fee Revolt, Randall Samborn, National Law Journal, April 4, 1994.  J. Landis Martin, also known as Lanny Martin, was an American lawyer, businessman, and philanthropist. He was the chief executive officer of NL Industries from 1987 to 2003. He was the founder and managing director of Platte River Ventures, a private equity firm.)
• Under the hourly model, the client has no predictability of the true cost of litigation until they receive a bill. Shockingly, the hourly rates are skyrocketing, reporting between 6% and 9% increases in 2024 alone. (Top Big Law Partners Are Earning More Than $2,400 Per Hour, As Rates Continue to Climb, Dan Roe, American Lawyer, January 10, 2024; Mother of All Rate Increases Still Couldn’t Keep Up with Big Law, Roy Strom, Bloomberg Law, June 13, 2024; Rates will Go Up (Again), But Here’s Why Profitability Might Not Be Maximized, Andrew Maloney, American Lawyer, October 18, 2024)
• We can succeed with small teams and by leveraging the best technology. We can attract the best talent. You can have a work-life balance.
• This model incentivizes not just lawyers but all support teams to participate in the success.
• This model cures the defects in the hourly rate.

Why hasn’t the non hourly model been adopted by others?

A simple Google search of literature about the “death of the billable hour” will turn up dozens and dozens of hits.  Yet, few if any have adopted the non hourly case specific model.

Why? In short, the science of paradigm shifts.  The ones who do the best under the old model are resistant to change. Investing in new technologies and efficiencies are disincentivized under the hourly model, because hours equal profits.

AI and Technology Fits the Non Hourly Model

The non hourly model relies on efficiency and quality, which technology supports.  Today’s AI tools offer exciting advancements that deserve attention and curated adoption.

Technology does not replace humans: it enhances the deliverable. There are myriad software databases that truly change the practice of law and are crucial to the non hourly billable model of efficiencies.  There are many tools that aggregate the key evidence, provide smart query functions secure within the platform, and enhance the attorney role in providing quality and accuracy to the client.  There are troves of operational tools that streamline the business of a law firm, releasing attorneys to do the work they are hired to do: counsel and litigate.

The time is right for change

While it is unlikely the hourly billable will ever truly go away, firms need to explore alternative fee arrangements because clients are demanding it, technology advancements support it, and today’s culture of work-life balance is here to stay.

Firms that embrace non hourly billing and exploit the technologies of today to be more efficient and accurate and produce quality services will thrive.

We have proven that this works.   

Fred H. Bartlit is a founding partner of Bartlit Beck LLP.  He has tried over 70 major cases. Named one of America’s “Lions of the Trial Bar,” ABA Journal. Trial techniques described in recent books on the leading trial lawyers in the United States. (“The Trial Lawyers,” St. Martin’s Press, NY; “America’s Top Trial Lawyers—Who They Are & Why They Win,” Prentice Hall, NJ.) Described by The National Law Journal as “… personally one of the most successful corporate defense litigators ever, with a long history of big wins.” “The 100 Most Influential Lawyers,” The National Law Journal.

United States Military Academy, West Point, N.Y., B.S., Engineering

University of Illinois College of Law, J.D., Top academic record in history of College of Law

Catherine McPherson spent nearly 30 years at Bartlit Beck LLP as a paralegal, consultant, and legal technology strategist.  She supported many dozens of trials and arbitrations both in the U.S. and internationally, managing discovery and trial evidence using a wide range of technologies. She has collaborated with many legal technology vendors to improve essential tools used in the legal process.

Catherine is now the founder and consultant at This Might Help Consulting, LLC., helping legal technology providers develop best in class solutions, helping litigation support teams excel by maximizing technology solutions coupled with improved workflow, and helping professionals achieve success by honing skills, rethinking their trajectory, and finding their niche. www.thismighthelp.ai

Vanguard of a Fee Revolt, Randall Samborn, National Law Journal, April 4, 1994

Diamonds Are This Firm’s Best Friend, Nicholas Varchaver, American Lawyer, December, 1995

Competitive Strategies for Mid-Sized Law Firms, edited by Alex Davies, ARK Group 2019

Top Big Law Partners Are Earning More Than $2,400 Per Hour, As Rates Continue to Climb, Dan Roe, American Lawyer, January 10, 2024

The fate of billable hours is in the hands of artificial intelligence, Danielle Braff, ABA Journal, March 12, 2024

Mother of All Rate Increases Still Couldn’t Keep Up with Big Law, Roy Strom, BloombergLaw, June 13, 2024

Rates will Go Up (Again), But Here’s Why Profitability Might Not Be Maximized, Andrew Maloney, American Lawyer, October 18, 2024

The Billable Hour Is Not Dead, Just Misunderstood, Feargus MacDaeid, Law Technology Today, October 23, 2024

Steptoe Offers Associates New Flexible Billable Hour Tracks in Revamped Comp System, Abigail Adcox, The American Lawyer, December 9, 2024