FEATURE
IT’S ABOUT TIME: RE-THINKING THE TRADIONAL TIME-BILLING MODEL OF FIRMS SARAH BEHENNA
T
ime capturing: A mystical and ancient art adopted by lawyers worldwide to identify and record six-minute intervals of their working day, for eventual attribution on a client’s bill. Generally speaking, it is a displeasing process for all involved. And one which provides absolutely no indication of value. Lawyers are essentially service providers who are in the business of selling time. This creates a continued and repetitive conflict between the desire for a practitioner to work quickly, to display their efficiency, but to work slowly because they charge by the hour. Time-based billing has dominated Australian legal practice since the 1970s, often to the ire of time-recorders themselves and, of course, clients. But a growing number of sophisticated clients, and younger generations, no longer wish to subscribe to the out-dated time-costing method of recording and billing. Everyone involved in the charade knows all too well that billing by time is structured for lawyers to charge clients, with absolutely no incentive for being productive. So why exactly is it that we persist with this model? Innovative law firms across Australia are making the revolutionary shift towards non-time-based pricing. The momentum generated has the potential to be hugely beneficial to the industry, and to clients. David Wells is one such innovator. Wells, 60, was managing principal of Melbourne legal practice Moores from 2007 until 2020. Moores differentiates itself in an overcrowded market of legal service providers by utilising agreed pricing. This pricing mechanism allows clients to know exactly what they are
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getting and exactly what it will cost. There are no estimates. No ranges. No hourly rates. No time recording. Before they talk to clients about price, Moores takes the time to understand their clients’ needs. Once they understand their clients’ situation, they prepare a proposal and provide a fixed-fee cost, often with a variety of three options for scope and price to choose from. Clients are afforded price certainty, with no billing surprises. This is essentially in line with most other services we receive in the course of our day-to-day lives: building and construction, health, telecommunications, beauty, education, the list goes on. Wells was at the helm when Moores transitioned to agreed pricing in 2013. He believes that time-based costing hinders practitioners from understanding the value they create and what they are actually worth. “It inhibits creativity, innovation, finding out what clients really want and the capacity to delight clients.” Wells explains that time-costing inhibits sustainable relationships. “Irrespective of the outcome, clients are always surprised by the bill based on time. They may have agreed the rate, but a rate is not a price. They quibble or complain about the time or about who or how many did the work or the necessity for the item. It breeds dissatisfaction and undermines trust and sustainability.” Wells is also one of the Directors of Innovim Group, a company established in 2017 with a shared view of wanting to move professions away from billing by time to pricing up front. Innovim understands that clients care about outcomes, not inputs. “They don’t care about how long the professional took
or how much the professional was sweating the small stuff, unless the client is paying by the hour, in which case, the client hates it.” Wells explains that solutions which deliver client objectives can often be achieved expeditiously, without wasting the time of clients and team members and consuming resources. “Those sorts of outcomes enable clients to sleep at night. This builds trust. If the client is the right fit, it leads to repeat work, referrals and long-term relationships,” he says. When asked whether certain practice areas of law lend themselves more easily to value-based pricing, without skipping a beat Wells replies: “No. Show me your expertise and how it is relevant to a customer and I will show you how to price for value.” This begs the question: why aren’t there more law firms adopting these alternative pricing models? One possible reason law firms have been resistant to change is because lawyers are conservative by nature. “There are risks with any significant change exercise, and introducing or changing a pricing model is such an exercise. Conservative people will be deterred by the prospect of something that involves risk,” Wells explains. There is also a sense of fear within some practices where the key decision makers have a vested interest in retaining the status quo until they retire. Additionally, some owners of professional practices think that if they don’t record time, they won’t know what their costs are. “The proposition that time is a cost is one of the most ignorant statements I have ever encountered,” muses Wells. “Professionals who cling to that notion
