No need to kill the billable hour

What can an industry that charges in manpower-units learn from one that charges in horsepower units? Law and taxis – both centuries-old businesses, equally resented by consumers for their charge-out rates and an apparent lack of value for money. As the debate around the “billable hour” refuses to abate, even in the post-Legal Services Act age, it is, in my view, no better time to make this comparison.

Let’s take that London-born institution – the Black Cab. A symbol of London that is now a global icon – just like the image of the fully gowned and wigged English barrister that captivates film audiences around the world. The Black Cab is best known for its looks – a purpose built vehicle, 65-years-old this year. You can fit most things in it – a top hat, a 5th person, a wheelchair, a child in a pram and piles of suitcases. It is spacious and comfortable and has its own fast lane. Being a one-size-fits-all service that is available anytime (London’s Black Cab service is built such that you can hail a cab, on the street) is an attractive proposition that has been mirrored in the legal sector primarily in the large, multi-practice area law firms. Just like with Black Cabs, convenience, sleek service and certainty in the quality of outcome generally carry a price premium.

Another shared characteristic of the Black Cab and the traditional law firm is the number “six”. London cabs, as legend has it, turn on a sixpence. This is a number well known to lawyers – they, too, charge in intervals of “six“: “six minute” entries in timesheets.

There are some lesser-known facts about the London cabs. A new cabbie’s first client always rides for free – wherever they want to go. This is the type of client service that most legal businesses also offer to their new clients. Yet, the uplifting mood that is prompted by a cabbie announcing you have just arrived to your destination for free is seldom the reaction of a lawyer’s client when told the first session has not been charged. This is obviously because the client’s first journey in a legal dispute or transaction is only the beginning.

Above all, there’s the “Knowledge of London” – the fully memorised map of London which enables the taxi driver to set off in the right direction more often than not without turning off the engine. “The Knowledge” in fact is the expertise that enables efficiency – a fast turnaround is essential to higher billings as time is of the essence. Does this sound familiar to lawyers? Access to expertise is what they sell as well. This is perhaps the area where Black Cabs – like lawyers – face their biggest challenge through the advent of technology.

Addison Lee, the largest minicab competitor to London cabs, has invested heavily in technology in the last decade but it is struggling to replicate “the Knowledge” to create further efficiencies. It unbundled “the Knowledge” into three technological stages required to catch up with the expertise of the ordinary London cabbie: to gather real-time mapping data, to make a “smart decision” and to automate the data. Investment in technology comes at a price and here is where the Addison Lee and London Cab pricing structures differ and offer an interesting perspective on lawyers’ charges. Addison Lee’s model is built around “fixed price journeys, regardless of route or time taken” whilst Black Cabs give clients a meter reading at the end of the journey, added onto the minimum charge. With Black Cabs, what you see is what you pay. With Addison Lee there is no transparency in how the pricing is set but there is an assumption that it must be cheaper. For Central London, at least, this assumption is not necessarily correct – the minimum charge of any booking I’ve ever made for the shortest distance has never been less than £10. So, why then, are clients happy to commit to a fixed charge that is four times higher than the minimum charge of a Black Cab?

The meter reading model was built on the idea of transparency – the meter ticks in front of you, there is a general understanding of the distance and the price calculation for it. It is real – time pricing that is hard to argue with – although one can argue with the itinerary chosen by the driver. At its origin, a similar transparency ethos lay behind the billable hour – prices were set according to seniority and expertise and were clearly stated at the time of instruction. Technology now enables clients to view their bill in real-time (as long as the timesheets are up-to-date!). The trickiest bit to price is what Addison Lee dubbed the “smart decision”. In law, that includes variables that go beyond the distance between two end points and, more importantly, it can affect the quality of the justice at the destination. Cutting corners to keep to a fixed price can lead to unwanted consequences even for the biggest bargain hunters whereas offering a mixed system – a meter reading at the end, to supplement a minimum charge – can be a fairer pricing structure for all involved.

Surely therefore there is scope for the two pricing structures to co-exist in the interest of transparency? Or, shall I say, affordability by being “reasonable”, to use that most treasured of legal words.