As ranked by UK law departments, strengths of the hourly billing model

A survey this year by Commerce & Industry (C&I) and BDO Stoy Hayward obtained survey results from 171 UK member law departments, 43 percent of which had annual revenues of £1 billion or more. For the entire group, hourly billing accounted for two-thirds of their total annual legal spend on external counsel.

One question asked the respondents to rank six reasons why hourly billing finds such favor. Here are the reasons given, and the percentage of respondents who selected it:

“It is simple.” (56%)
“I can break the bill down.” (55%)
“I can compare the cost of different firms.” (50%)
“It is measurable.” (49%)
“It provides transparency.” (34%)
“It is more practical than the alternatives.” (11%)

One out of ten respondents selected “There are no strengths.”

Reason number one, simplicity, applies to both the negotiation of the billing arrangement – none required – and the shared understanding of the arrangement – no teaching required. I think the second reason, that the bill can be broken down, means that the reviewer can look at hours by individual timekeeper, by level, by day, and even by task. Measurability may include such benefits as calculations of effective billing rates (See my post of June 13, 2006.) and all the reports on leverage and otherwise that can present data from the bill breakdown. Transparency is easy: hours worked times standard rate is all laid out.