Rethinking the billable hour: how generative AI is reshaping law firm economics and client service

Why the billable hour is under pressure

The billable hour ties revenue to time. Generative AI compresses many of the tasks that fill junior hours—legal research, initial drafting, document review, intake and routine due diligence. When the same legal output requires fewer hours, traditional billing creates a structural problem: increased productivity can reduce revenue unless firms change how they capture value.

This is not theoretical. Companies across the legal sector are seeing 2024–25 as an inflection point where efficiency gains force business-model choices. The question for partners and executives is no longer whether to use generative AI, but how to translate faster, cheaper delivery into sustainable revenue and client value.

How generative AI changes client expectations

Clients react in two predictable ways:

• They expect better economics—lower fees or more scope for the same spend.
• They demand more predictive, proactive and outcome-oriented services that reduce their risk and cost.

Generative AI also makes previously uneconomic services viable: continuous contract monitoring, automated compliance alerts, personalized legal playbooks and outcome forecasts. These offerings strengthen client relationships but don’t map neatly to hours.

Three pragmatic pricing strategies to adopt

You don’t need a wholesale conversion overnight. Most resilient firms develop a portfolio of models.

1. Hybrid hourly with efficiency credits: Keep hourly rates for high-value advisory and courtroom work. For repeatable tasks accelerated by AI, apply “efficiency credits” that reduce billed hours but are offset by a small fixed fee or platform surcharge. Clients see the savings; the firm protects margin.

2. Value-based and outcome-aligned fees: Price against measurable outcomes: time-to-close, percentage risk reduction, or cost-avoidance. Establish baselines, KPIs and tiers. Start with small pilots to prove the link between the fee and the outcome before scaling.

3. Subscription and managed services: Convert routine, predictable work into subscriptions—ongoing contract maintenance, compliance monitoring, or legal operations-as-a-service. Subscriptions stabilize revenue, build stickiness and make room for productized, AI-augmented offerings.

Mix these approaches. Use pilot programs to test elasticity, then expand the models that deliver predictable margin and client satisfaction.

Operational changes that make new pricing work

Pricing is only credible when operations follow. Practical changes include:

• Reallocate work: shift routine drafting and review to AI-augmented teams; preserve senior time for problem definition, strategy and client relationships.
• Measure the right things: margin per matter, time-to-value, realization by fee type and NPS—don’t fixate on hours alone.
• Cost‑in: account for AI platform fees, model training, validation and oversight in your pricing models.
• Create “offer packs”: bundled services with clear deliverables and KPIs that clients can buy, understand and renew.

Run small, measurable pilots. Iterate rapidly. Data from pilots will build partner confidence and client buy-in.

Governance, ethics, and client transparency

Trust is a law firm’s most valuable asset. To protect it:

• disclose material use of generative AI where it affects outcomes or confidentiality,
• enforce human-in-the-loop rules for judgment and signing off on legal advice,
• implement model validation, audit trails and data governance around client data.

These steps reduce malpractice risk and preserve client trust—critical when shifting away from time-based billing.

Talent and change management

AI changes who adds value. Junior lawyers will draft less but can add more value through playbook design, supervision of AI outputs, and client-facing product roles. Actions for leaders:

• invest in reskilling: prompt design, AI oversight, product and service design skills,
• redesign career paths to reward client outcomes, product thinking and supervisory excellence,
• appoint internal champions to run pricing pilots and operational redesigns.

Be explicit about new performance metrics and make transitions visible and fair.

How Futurice helps

We help firms turn strategy into results: rapid pilots that pair generative AI tools with redesigned matter workflows; pricing experiments tied to measurable KPIs; client-ready subscription and outcome offers; and governance frameworks that secure data and trust. We combine service design, business-model innovation and engineering to make new pricing practical, measurable and defensible.

Next steps for leaders

Start small, aim for measurable outcomes, and align incentives. For example, run three parallel tracks:

1. a lean pilot on a single service area (e.g., contracts or compliance),
2. a pricing experiment (hybrid or subscription) with two client partners,
3. a governance checklist and training program for affected teams.

If pilots show improved margin or client satisfaction, scale—and keep measuring. The firms that act fast will convert productivity gains into stronger client relationships and more predictable revenue.

If you'd like to know more, or discuss the topic further, please contact the author.