In the course of the 1990s, corporate law departments pressured outside counsel to move away from “block billing” to “task-based billing.”
The negative effects of time-based billing have been exposed for quite some time yet it still underlies the bulk of law firms’ billings to corporate clients. How can outside counsel move away from time-based invoices?
Task-based billing offers several advantages over traditional law firm billing methodologies. Ultimately, it can serve as a means to improve client/counsel relationships as it provides greater visibility into the work performed by law firms for their clients.
Task-based billing can serve as the basis for improved billing arrangements. It also supports greater application of project management to legal service.
Alternative fee arrangements must be specific to the particular assignment for counsel in order to work as hoped. Properly designed, though, they can allow for fee arrangements that are more value-focused and that serve the client’s business goals more directly.
Time-based billing bears no direct relationship to the client’s goals for the assignment or its view of how the legal service adds value to its business operations.
Time-based billing results in a number of negative impacts on clients and law firms. Its persistence seems a result of inertia more than it does any other pressure.
To maximize the benefits of moving away from time-based billing, corporate clients must put effort into constructing teams that work more efficiently. This, in turn, requires more deliberate selection of team members.
Because clients recognize the value of legal service differently (one client might even see the same legal service as worth more or less depending on the matter in question or due to other factors), firms and clients to take that variability into account when discussing and designing fee arrangements.