| Cost-conscious Big Law clients want more bang for their buck, and who can blame them? Don't we all expect a steep discount on anything we buy these days—houses, TVs, cars—because no one is buying much of anything? Sure we do.
Corporate clients are trying to get creative with their Big Law counsel to save some money. And Big Law is listening. Rumors abound about alternative billing arrangements: “The hourly billing model is dead!” “No more billing in six-minute increments!” Not so fast.
The billing increment is ingrained in everything we do at Big Law. Even if we offer a “flat rate,” we will still track every thought, word or deed in six-minute increments. It is what we do. And you clients know that you like it that way. Even if you paid a flat rate, you would want to know what the work would have cost under the hourly scheme so that you can feel you got a deal.
Clients want the legal fee equivalent of 20 percent more Fritos for free. They want discounted rates, flat fees and proven reductions in inefficiencies. One way they seek to get these cost savings is through a creative little billing system called “Task-Based Billing” or “Task-Code Billing.” Basically, in addition to tracking the work you perform in six-minute increments, you must also break it down by the specific category and task you were performing using codes and scientific formulas that will help the client understand why their bills are so enormous.
I am confident this system saves clients some money because it makes the timekeeper self-conscious about everything they do and every second they spend doing it. It is also so painful to track the detail required that clients probably get some freebies. To explain this system, I must first give you some background on hourly billing—bear with me.
One hour=10 six-minute increments
For those of you unfamiliar with the way Big Law makes money: We charge clients hourly rates and track our work in tiny six-minute increments on detailed bills. That is it. We do not make anything—no widgets here. We just bill for time—all day, every day. Given that there are only so many hours in a day, Big Firms have increased profits over the years by steadily increasing hourly rates and the number of hours attorneys are expected to work.
Everyone who is part of the hourly billing world hates it. Those of us tracking our time often pace the border of insanity as we carefully try to document every waking moment of our working lives so that they sound worthy of the rates clients pay. Partners managing the bills hate having to provide budgets based on the number of hours it will take to handle a matter, hate reviewing bills to make sure they justify the fees requested and hate defending the bills to the client.
Clients receiving bills hate the high rates, hate trying to figure out why the bills are more than they expected, hate wondering about the identity of all these Cogs billing time on their matters, hate wondering if it really should take so long to research a memo and hate deciphering what the time entry actually means.
And if you haven't guessed by now, clients also hate paying those bills.
To give you an idea of the pain generated by creating and paying a typical Big Law bill, here is a sample time entry for one matter on one day as described by a Partner and a Cog:
Tuesday, Oct. 20, 2009:
Partner entry:
MegaCorp./Giant Corp. litigation matter—6.1 hours. Led conference with client and co-counsel regarding evidentiary hearing wherein I demonstrated my superior litigation skills by offering brilliant ideas for said hearing. Conference with Cog regarding research memorandum that Cog needs to draft today on an emergency basis because I was far too busy to request it sooner and he should have read my mind. Draft letter to client regarding expert witness that I carefully selected for the case based on my many years of trial experience. Conference with expert witness during which I demonstrate I know as much as she does about her area of expertise.
Cost = $3,202.50
Cog Entry:
MegaCorp./Giant Corp. litigation matter—12.6 hours. Communicate with partner re: emergency research memo, strategy and plan of action. Research complex legal issues related to expert witness testimony to make sure no new law has been decided since the last time a Cog at this Firm researched the same issue. Draft, revise, review, proofread and nitpick memo. Receive phone call from Partner asking why project is taking so long memo. Reformat memo to comply with Partner's preferred font style and margin size.
Cost = $4,095
See—painful isn't it? No wonder clients want a “better” method to track Big Law work product. Enter the Task-Code Billing System. Simplify. Categorize. Standardize. Drive your Big Law counsel insane.
Task-Code Billing
The same Cog time entry translated into task-code billing =
MegaCorp./Giant Corp. litigation matter—L250/A105-.9 ;L250/A102 4.1; L250/A103 7.7.
Secret codes are cool! To translate this simplified time entry requires a secret decoder ring—known as the
This system classifies all actions under general categories such as “pretrial motions and pleadings” and then breaks down every category into subcategories such as “other written motions and submissions.” Once the proper numeric category and subcategory are listed, this system gives a long list of “action” codes that correspond to such standard activities as “communication within the firm,” “research” or “external communication.”
This system has so many codes and subcodes that we billing attorneys spend hours trying to properly classify our categories and actions. It is insane. But this method must cut costs.
Imagine if you had to task-code track your daily non-work activities in one-sixth of an hour increments:
Category: Grooming—L100. Subcategory: Hair—L103. Action:
What about your leisure activities?
Category: Leisure—L200; Subcategory: guilty pleasures—L205; Action: Watch reality TV A255-1.0; Action: Read Us Weekly A605-.9 ; Action: Manage fantasy football team—A510- 2.3.
Brilliant! By tracking every single thing you do in obnoxious detail, you will realize how much time you “waste” with grooming, bonding with family, reading, eating and sleeping!
In the work context, you'll realize that it's mighty hard to bill for the “thinking” you did about a client matter while on your morning exercise routine. Even though thinking is, ahem, essential to getting your job done.
So, since there's no code for “walking and chewing on a toxic torts problem at the same time,” the client gets a half-hour freebie. By practicing Task-Code Billing, you eventually become a more efficient (and, for clients, somewhat cheaper) billable machine!
And the clients?
Oh, they're happy because all those codes let them track just how many hours all their outside lawyers spend talking to each other—and because those super-detailed codes help them argue that all that talk should be cheaper.
