Episode 208: Legal GenAI Conversations Series – Will GenAI kill the billable hour…ever?
Apr 17, 2025
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In this conversation, Tessa van Duyn, CEO of Moores; Gene Turner, Managing Director of LawHawk; and Melissa Lyon, Executive Director at Hive Legal, tackle the seismic shifts in legal billing due to generative AI. They discuss whether AI will supersede the billable hour model and explore alternatives like value-based pricing. Insights into the challenges and opportunities of integrating new pricing structures are shared, emphasizing a need for law firms to adapt to client demands for efficiency and transparency.
Generative AI is prompting law firms to reconsider the traditional billable hour model and explore innovative pricing arrangements.
Law firms that successfully transition to alternative fee models focus on understanding client needs and delivering value over merely tracking hours.
Cultural transformation within firms is essential for adopting new pricing approaches, fostering collaboration, and improving client relationships in the legal landscape.
Deep dives
The Impact of Generative AI on Legal Pricing Models
Generative AI is fundamentally changing how law firms approach pricing, challenging the traditional billable hour model. As AI automates tasks more efficiently, law firms are recognizing the need to offer alternative pricing arrangements like fixed fees and value-based pricing. This shift is driven by client expectations, particularly from in-house counsel who are advocating for more clarity and cost-effectiveness in legal services. The evolving landscape indicates that firms must rethink their business models to remain competitive and relevant in a rapidly changing legal environment.
Lessons from Early Adopters of Alternative Pricing
Panelists share insights from law firms that have successfully transitioned away from the billable hour. These firms emphasize the importance of understanding client needs and the value generated from legal services rather than simply tracking hours worked. They suggest starting small with pilot projects in specific practice areas to test out alternative pricing models and gather client feedback. Engaging clients in these discussions has yielded encouraging responses, affirming that many are eager for more innovative and transparent billing options.
The Role of Culture in Implementing New Pricing Strategies
Shifting from traditional pricing models to alternative approaches requires a cultural transformation within law firms. Firms must foster an environment where collaboration and creative problem-solving are encouraged, rather than one solely focused on individual billable hours. This cultural shift not only improves employee satisfaction but also enhances client relationships by emphasizing outcomes over hours worked. Success in this space is rooted in aligning team members with the firm's values, ensuring everyone understands their role in delivering client value.
Navigating the Regulatory Landscape for Alternative Fees
As law firms adopt alternative pricing models, they must also navigate existing regulations and guidelines that govern legal billing practices. While some legal systems may be slow to adapt, firms can still explore options for alternative fees by ensuring compliance and advocating for changes where necessary. By actively participating in discussions about billing practices and providing feedback to regulatory bodies, firms can help shape how alternative pricing is viewed and accepted in the legal landscape. Awareness of legal obligations can empower firms to confidently implement innovative pricing strategies.
The Future of Client Relationships in a Fixed Fee World
Adopting fixed fee or value-based pricing models alters the dynamic of client relationships, promoting a shared risk and reward approach. Firms that provide clients with clear pricing structures help build trust and encourage long-term collaborations. This model requires ongoing communication and adjustments based on the project's evolution, making it essential for firms to remain flexible and receptive to change. As law firms embrace these innovative methods, they can position themselves not just as service providers but as strategic partners invested in their clients' success.
There’s little more fundamental to every business than revenue. In law firms, for a while now, that’s been measured by the billable hour.
In most law firms today, we still wrap up hours billed in the same parcel as expertise, performance, and value.
That’s a BIG problem and it’s getting bigger as AI and particularly generative AI is completing tasks faster, better, and cheaper AND starting to advance into complex problem solving too!
So, what does that mean for law firms? Can we/should we all immediately convert to fixed fees, subscriptions and/or value-based pricing or something entirely new? What happens if we do? What happens if we don’t? Where do we go to figure it out?
We chatted about all of that and more on 16 April 2025 in the third podcast in CLI’s Legal GenAI Conversations Series on Will GenAI kill the billable hour…ever? Terri Mottershead, Executive Director of the Centre for Legal Innovation was joined by three amazing guests with a wealth of experience to share from Australia and New Zealand:
Whether generative AI has put pressure on law firms to reconsider the billable hour, or if it is still mostly hype
What are the most viable alternative fee models are and how if generative AI making these more attractive or feasible
The key advantages and disadvantages of moving away from the billable hour toward alternative fee arrangements in a GenAI powered legal landscape
How law firms have managed the impact of alternative models on lawyer and allied legal professional remuneration, bonuses, performance reviews and career progression
The key focus for law firms to have in mind when deciding to move from the billable hour model
You’ll find details about the other topics we’ll be discussing in this series here.
If you would prefer to watch rather than listen to this episode, you’ll find the video in our CLI-Collaborate (CLIC) free Resource Hub here.
Don’t forget to join CLI’s free Legal Generative AI Community here – it’s a lightly curated daily news feed on all things legal GenAI.
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