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Death of the Billable Hour Rumors Are Coming True

According to reports, the billable hour may go the way of the dinosaur.

Still adjusting to market downturns and evolving technologies, law firms need to make changes in their practices that also change the way they bill for services. If they don't adapt, reports say, they will not survive.

The 2017 Report on the State of the Legal Market says that the death of the billable hour has been "one of the most potentially significant, though rarely acknowledged, changes of the past decade."

"Although firms still technically bill a majority of their work on a billable hour basis, budget caps imposed by clients mean that as much as 80 percent to 90 percent of law firm work is now done effectively outside of the traditional billable hour model," according to Thomson Reuters, which prepared the report with The Center for the Study of the Legal Profession at the Georgetown University Law Center.

Darwinian Law Firms

The Georgetown report lays out the legal marketplace with a comparison to Darwin's theory of natural selection. It was not really about survival of the fittest.

"In fact, Darwin observed that it was not necessarily the strongest of a species that emerged in the process of 'natural selection' -- nor, for that matter, the largest nor the smartest," the authors say. "Rather, the species with the best chances of survival were those that were the most adaptable to changes in their environments."

For law firms, the report shows changes that have occurred over the past decade say something about their future in 2017. Lawyers notably reported a decrease in billable hours.

Statistically, associate hours have declined about 3 percent over the period, but of counsel and senior staff attorneys have declined about 20 percent. Hours for equity partners and non-equity partners declined 11 percent and 16 percent, respectively, the report says.

Diminishing Species

Lawyers have fewer billable hours because clients have demanded more for their dollars, not necessarily because lawyers are working any less. Due to competition, innovations in technologies, and financial realities, attorneys are navigating new ways for delivering legal services profitably. Clients are setting budgets for legal bills such that the billable hour may become a thing of the past.

"Law firms must find ways to effectively adapt to evolving competitive conditions -- including the effective demise of the billable hour -- or risk further erosion of their market positions," the report says. "At the same time, the changing market dynamics present opportunities for firms that are willing to challenge conventional thinking, take risks and innovate new approaches to the delivery of legal services."

While 2017 offers opportunities in many fields even in a low-growth period, clients will be looking for lawyers who can keep up with the times.

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