Convert Billable Hours to Value Based Pricing

+ Why

Billable hours are the industry standard and frankly they work. Since the billable hour model works, it has managed to maintain its place. Which is why innovation is so slow in the legal industry - the billable hour stands in the way of it.

Think about it, what’s the incentive of running a value stream map if it’s going to potentially eliminate billable hours? Why put effort into decreasing revenue? There are plenty of nuanced arguments that we could make as to why - and I am happy to have them - but at the end of the day billable hours and efficiencies gained through innovation just don’t align.

So how do we fix it? By converting from billable hours to value based pricing. Then once we finish the conversion, using our tool set to improve the processes and gain efficiency. The goal is to make it a win-win for everyone involved.

Now at this point, it may sound like in-house teams don’t need to be involved, but let’s remember that this is part of the integration work in the maturity model. Establishing how to collaborate is going to be dependent on organizational factors, but reviewing the below together will allow you to draw clear lines and formulate how to use this information to move forward.

NOTE: The Find the Value Based Price section of the “How-To” of this workflow is focused on creating a report that your time or billing system may be able to do in a quicker/easier fashion. Read ahead to see if you already have a quicker reporting capability.

Time break down

15 minutes - Setup up spreadsheet for report

30 minutes - Collect and input billable hour entries

NOTE: this will vary based on reporting capabilities and/or organization of entries

15 minutes - Run calculations

NOTE: the improvement section will be dependent on which methods you choose. Each method will have its time to complete in it’s own documentation.

+ How?