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The professional-services firms providing support to many companies and their CFOs are grappling with a key question: Is the billable hour about to become a thing of the past?
It seems inevitable, at least for lawyers and other professional-services firms, because as artificial-intelligence capabilities accelerate, the fundamental logic of charging for time spent rather than value delivered is becoming increasingly untenable, Rita Gunther McGrath, an academic director in executive education at Columbia Business School, writes for The Wall Street Journal.
The billable hour as the fundamental unit of business for professional services is so widespread that it’s difficult to remember that it is a fairly recent innovation, becoming prevalent in the 1960s and 1970s. Before that, many lawyers and other professionals billed for outcomes achieved or services rendered, not for time.
When was the first billable hour recorded?: Many say the seed for the billable hour was planted in the early 1900s by a young lawyer named Reginald Heber Smith, who implemented a time-tracking system for lawyers during his tenure as counsel to the Boston Legal Aid Society, which provided legal services to the poor. He wanted lawyers to track how they were spending their time, not for billing purposes but to find ways to improve the efficiency of the team, which had a limited budget.
What could change?: When an AI system can review thousands of contracts in minutes rather than weeks, draft complex documents in seconds rather than hours or generate strategic analyses near-instantaneously, the time component becomes almost meaningless. More fundamentally, as AI handles routine cognitive work, the remaining human contribution shifts toward judgment, creativity and relationship management—the value of which bears little relationship to time expended.
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