Jim Hassett, founder of LegalBizDev, and his brother Matt Hassett wrote an excellent article on value-based fees and other alternative fee arrangements. While directed primarily at lawyers (by far the worst abusers of the billable hour lifestyle), this report provides deep insight into a decade of one industry’s look at equitable pricing of professional services.
The report is entitled, Ten years later: A look back and ahead, a decade after the ABA Commission on Billable Hours Report. It was originally published in the Association of Legal Administrators magazine, Legal Management. You can download a PDF of the full article or read the individual posts at LegalBizDev: Part 1, Part 2, Part 3.
In the report, Hassett cites a Wall Street Journal article by University of San Diego professor Frank Partnoy:
In the late 1990s, three researchers—James Evans, Gideon Kunda and Stephen Barley—conducted a 2½-year study of free-agent workers, including contractors, engineers and software developers. They found that, throughout the U.S., one of the most significant differences in how people approach work is whether they are paid by the hour.
For a range of jobs and income levels, people who were paid hourly worked longer and cared less about nonwork activities. They suffered from higher stress during downtime, and they worried more about having enough work. When work was available, they were tempted to work as much as possible. A vacation or a day off meant a loss of money. Other studies found that the problem got worse as people made more money, because they felt that their time was more valuable and therefore more scarce.
Please read the full report at LegalBizDev – whether you are an attorney or not. Not only are value-based fees better for business, they’re better for your health.