CFO Slice

The traditional billable-hour model, widespread across law, consulting and accounting firms, is under pressure as artificial intelligence makes time-based pricing increasingly obsolete, argues Rita Gunther McGrath, academic director at Columbia Business School. Originally adopted in the mid-20th century for transparency and efficiency, the model now clashes with artificial intelligence-driven productivity, where tasks like contract review and strategic analysis can be completed in seconds. This creates a paradox: firms using AI to deliver faster, better outcomes risk losing revenue under hourly billing structures. As clients demand value over time spent - especially objecting to paying for junior staff training - the industry is being forced to explore alternatives. These include value-based pricing tied to outcomes, subscription or retainer models, and more flexible firm structures with leaner teams of senior experts. The shift will prioritise human judgement, creativity and relationships - qualities not captured by hours worked.