Hourly billing is the currency by which law firms have operated for a long time and talk of the death of the hourly rate goes back many years. However, much of the recent debate misses the basic point. Whatever the pricing model used, it is important that the fees accurately reflect the value delivered. When these are not appropriately aligned, issues can arise with the client. This is not unique to law firms; it is true for many professional services including tax and financial advisers and accountants.
Many do not realise that alternative billing is not a new phenomenon. Before hourly billing emerged in the US in the 1960s, fixed fees were the most common form of pricing, either for a set period or for a given task. As legal practices grew, hourly billing became more dominant until, eventually, it became an accepted norm. However, the sustainability of a model built solely on the cost of labour inputted by hours spent was always likely to be questioned when the economic environment grew tougher and consumers of these services became more experienced and demanding in their own business environment.
