“Efficient Lawyers Starve to Death”
I was recently involved in a Twitter conversation that arose from an article I wrote about corporate clients tracking certain performance metrics for their attorneys. One of the major points of the article is that the day of the bloated bill with redundant time entries and unnecessary expenses is largely a bygone era. Yet some of that culture remains for an older generation of lawyer. And I was gently prodded with the statement, “Efficient lawyers starve to death.” I immediately knew that was going to be a blog post; I just had to ruminate on it for a couple months.
Do Efficient Lawyers Starve to Death?
The Billable Hour
Let’s talk about the billable hour for a minute. It’s an outdated model that creates an uncomfortable tension between clients and their attorneys. In order for the relationship to continue to be functional (and this next part is true of every relationship), there has to be a significant measure of trust. The client should trust that the attorney is only doing work that is reasonable, necessary, and calculated to advance the case. The client should trust that its lawyer is only billing for work that was actually done and in increments of time that reflect the work that was performed. And the lawyer needs to be able to trust that he’s going to get paid for his work. If these levels of trust exist, the billable hour can be a manageable tension.
But here’s where things get wonky. There are lots of corporate clients that arbitrarily cut lawyers’ bills. Maybe something wasn’t worded just right on the invoice. Maybe work was done by an attorney that, in the client’s estimation, could have been handled by a paralegal. Maybe the client just has an unwritten policy of finding any reason for cutting bills by 10%. On the attorney’s side, that’s where things start to break down and a seed of animosity develops.
Alternative Billing Methods
I don’t want to get too far afield from the topic of whether efficient lawyers starve to death, but this needs to be at least minimally addressed. I’ve done a good bit of reading about various value-based billing structures – here’s a good primer from the Association of Corporate Counsel. Alternative fees structures, like flat rates and budgeted fees with collars, certainly have a place in certain types of practices. I’ve seen situations where these structures worked well and others where one side was heavily benefited to the other’s detriment. So here’s my take: value-based billing structures are worth considering, but if you don’t have a good handle on your business, you’re likely to do yourself or your client a disservice with fee proposals.
But Really, Do Efficient Lawyers Starve to Death?
We might have to revisit this in ten years to see if I’m malnourished, but for the time being, I’m going to provide my clients with efficient representation. And before I go into the reasoning, let’s revisit the tension: the more time I spend working on cases a client sends me, the more money I make. Time is money, quite literally.
But here are some other truths. It takes more money to court and bring in new business than it takes to retain existing business. If your practice is a revolving door of clients who leave because their files are being over-billed, then even though you may be making more money on each file in the short term, you are not maximizing your earnings, because you’re having to spend too much time and money putting out the fires of broken relationships and client development.
Not only that but your relationships with individuals who are employed by your clients are going to suffer as well. In the insurance industry, which is where most of my clients reside, there is a lot of movement among personnel, both vertically and horizontally. The adjusters with whom I interact on a daily basis both move up the corporate ladder and move on to other insurance companies. If we have an effective relationship, there’s a greater chance of them taking me with them wherever they go. But if I’m squeezing every last red cent out of a file, they will just as soon find someone else who will do the same work for less. And make no mistake, there’s no shortage of lawyers who are lined up for their business, just waiting for you to give them an opportunity to pounce.
So my answer to the question of whether efficient lawyers starve to death is a resounding, NO! Efficient lawyers may not make as much money on each individual case. But they are maximizing the trust relationship with clients and setting themselves up for a more stable and productive practice for the long-term.
Photo by Hamza Butt.