Rolf Dobelli in his book, The Art of Thinking Clearly, writes in Chapter 18 about the concept of incentive super-response tendency.  More simply, people respond to incentives by doing what is in their best interests. Coming to law from the business world, I’ve always been baffled by the billable hour model in law.

If lawyers are paid by the hour, where is the urgency to getting the deal done fast?  Why rush anything when taking longer is not only more comfortable, but also more profitable?  Why bother being more creative and efficient, when mindlessly slogging it out by using the tried-and-true method brings more money in the bank?  I think the answer is clear.  It makes no sense.  This structure incentivizes working longer instead of working smarter. And for this reason, the billable hour model can’t possibly survive.

But it doesn’t have to mean less profits. To the contrary, it means greater profits for the best lawyers at the very best firms. In tomorrow’s legal reality of value-based pricing, a lawyer could theoretically charge a thousand dollars for a minute of work. Customers are paying for a solution. Does it matter whether it takes 5 minutes or whether it takes 5 months to solve the same problem?