The Billable Hour Is Dying. Baker McKenzie Just Proved It.

Last updated: November 2026 · Status: Developing story

One of the world's largest law firms is moving away from the billable hour. Baker McKenzie, No. 8 in the 2026 Am Law 100 by gross revenue, has begun charging clients on a value-based billing model rather than defaulting to hourly rates. The Wall Street Journal reported on November 13, 2026 that the driver is a pivot toward technology and AI. Hourly rates remain available where value-based pricing is unsuitable.

"The hourly rate isn't the right metric," Global Chair Sunny Mann told the paper. "I think it's a trend that you'll see across the legal industry."

In our view, if he is right, this is not only a law firm story. It concerns every firm that sells expertise by the hour: lawyers, accountants, tax advisers, consultants. AI makes much of the work faster, and time has long been the unit these firms sell.

At a glance: Baker McKenzie and the billable hour

Attribute	Detail
Firm	Baker McKenzie, Chicago-based, No. 8 in the 2026 Am Law 100 by gross revenue
What is changing	A shift away from hourly billing as the default, towards value-based billing; hourly rates remain where value pricing does not fit
Reported	Wall Street Journal interview with Global Chair Sunny Mann, November 13, 2026
Stated driver	Solutions aided by technology and the use of AI
Expected effect (per Mann)	Faster work, more deals at the same time, possibly cheaper litigation
Talent change	AI competency now assessed in hiring and performance reviews
Who should watch	Law firms, accounting and tax firms, consultancies, in-house buyers of professional services

What is Baker McKenzie changing?

Baker McKenzie is moving away from hourly billing as its default and towards value-based billing, according to an interview with its global chair reported by the Wall Street Journal. The firm links the change to AI-assisted work that takes less time. It also now evaluates AI skills when it hires and when it reviews staff.

The move did not come out of nowhere. In a July 20, 2026 Bloomberg Law interview, Mann said lawyers, firms and especially clients need to move past the billable hour. He called for the industry to get alternative fee arrangements working properly. The same interview covered the role AI played in the firm's recent layoffs of professional staff.

Why is AI putting pressure on the billable hour?

Hourly billing pays firms for time, so tools that save time can reduce the billable revenue from a given task. AI can save significant time on drafting, review and research. Firms can respond in several ways: taking on more work, expanding capacity, lowering costs or changing how they price. Value-based billing is one way to share in the efficiency gain.

Our view: clients have complained about the hourly model for decades, and it has survived. AI puts a different kind of pressure on it, because it reduces the hours themselves.

Value-based pricing requires a different approach to assessing client value, delivery costs and risk. Building that capability is likely to be the hardest part of the shift.

What could happen to the pyramid model?

Many firms earn much of their revenue from junior hours worked under a smaller number of partners. AI could reduce the junior hours required for some tasks, which would put pressure on that leverage model.

Baker McKenzie's decision to assess AI competency in hiring and reviews is a clear signal for legal education. It tells law schools and graduates that using AI well is becoming part of the job. Other firms are also adjusting talent plans for AI, as EY's $100 million investment in human skills shows.

It also raises a significant training challenge. Juniors have traditionally learned through routine work that AI can now handle. Firms that reduce that work will need other ways to build judgment in their next generation of partners.

Will faster work mean more work?

Baker McKenzie expects AI to increase the speed and volume of legal work. More matters per lawyer could mean elite advice reaches more clients, including pro bono clients. Mann also noted that lower litigation costs could lead to more litigation.

Our view: when a service gets cheaper, demand for it often rises. The firms that benefit may be those that can scale volume, not those that protect hours.

For clients, cheaper disputes could change strategy. A claim that was not worth fighting at hourly rates may be worth fighting at a lower, predictable price.

What might clients and procurement teams demand?

In our analysis, clients are likely to ask for price certainty, clear scope and evidence of value. How risk is shared depends on the contract. Under a fixed fee, the firm usually carries the risk of overruns; other value-based models split it differently.

We expect engagement letters to become more detailed and invoices less so, as procurement teams shift from auditing hours to benchmarking outcomes and comparing prices across firms.

Which professional services firms could be next?

In our view, any firm that bills by the hour for work AI can speed up faces similar pressure. That includes accounting, tax, audit support and consulting, not only law. Mann expects the trend to spread across the legal industry; the same logic may apply to its neighbours.

Firms that compete with law firms for advisory work face a choice. They can move early and help set prices, or wait and respond to prices others set. The overlap is already large: see how PwC's tax and legal services led its global growth in FY2026.

5 steps for firms moving beyond the billable hour

1. Measure cost to serve. Track the real effort and AI cost per matter type, even if you never bill it.
2. Pick the first services to price. Start with repeatable work where scope is clear.
3. Write scope like a product. Define what is included, what is not, and what triggers a change order.
4. Retrain and re-review. Add AI skills to hiring and performance criteria, as Baker McKenzie has.
5. Rethink junior training. Replace the learning that routine work used to provide.

Frequently asked questions

Is Baker McKenzie ending the billable hour?

Baker McKenzie is moving away from hourly billing as its default and towards value-based billing, according to an interview with its global chair reported by the Wall Street Journal on November 13, 2026. Hourly rates remain available where value-based pricing is unsuitable. The firm links the change to AI-assisted work that takes less time.

What is value-based billing?

Value-based billing prices professional work by what it is worth to the client, rather than by the hours spent on it. Common forms include fixed fees, fees per phase, subscriptions and fees linked to outcomes. How the risk of overruns is shared depends on the contract; under a fixed fee, the firm usually bears it.

Why does AI put pressure on the billable hour?

AI can complete drafting, review and research tasks much faster. Under hourly billing, that can reduce the billable revenue from a given task. Firms can respond by taking on more work, cutting costs or changing how they price; value-based billing is one way to share in the efficiency gain.

Will other law firms follow Baker McKenzie?

Baker McKenzie's global chair, Sunny Mann, expects it to become a trend across the legal industry. Many firms already offer alternative fee arrangements for some matters. Moving away from hourly billing as the default is a bigger step.

Does this affect accounting and tax firms?

In our view, any firm that bills by the hour for work AI can speed up may face similar pressure. Accounting, tax advisory and consulting firms sell time in much the same way as law firms. Clients may start asking them for fixed and value-based prices too.

How could value-based billing change junior roles?

AI could reduce the junior hours required for some routine tasks and increase demand for AI skills. Baker McKenzie now assesses AI competency in hiring and performance reviews. Firms may also need new ways to train juniors who learn less through routine work.

Conclusion

In our view, the billable hour has survived decades of client complaints, but AI is a different kind of pressure. When one of the largest law firms in the world says the hour is the wrong metric, every professional services firm that sells time should take note. Firms that learn to price value early are likely to have more say in how the market sets prices.

Sources: Wall Street Journal – Baker McKenzie Looks to Abandon the Billable Hour as Default · Bloomberg Law – Baker McKenzie Head: Law Firm Billing Should Be Ready to Move On · The American Lawyer – Am Law 100

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