I recently posted about the clients of professional firms that play the Billable Hour Scratch and Lose game.
Like most addictions, gambling is hard to beat, and despite clients rarely winning it seems that game is still pretty popular-at least in the legal profession. The timekeeper aficionados’ delight in posting surveys to show that still something like 75% of all law firm fees are based around time. (I personally believe it might be more than 75% as I suspect some portion-maybe most-of the remaining 25% is classified under that meaningless term “Alternative Fee Arrangements” (“AFA’s”) which, dependant upon what survey you read, usually includes capped fees, quotes based on time, blended rates, etc all which still use time to calculate a fee.)
No real surprises there and as I have said many times before, while firms cling to the Oldlaw business model of leveraging people x time x hourly rate it is going to be very difficult, take a very long time or be impossible for many firms to really offer up fee models based on anything other than time estimated in arrears or time estimated in advance.
Funny thing about time though. Theoretically, conceptually and scientifically time is a constant for all of us. My time is no different to your time and last time I looked the world over there were always 60 seconds in 1 minute, 60 minutes in 1 hour, 24 hours in one day, and 7 days in one week (exception might be North Korea as I am unsure what their Supreme Leader might have decreed about time this week).
Time doesn’t “stand still”. I can’t go back in time and I can’t go forward in time (yet). Despite the claims made by practice manager vendor spruikers no one can actually “capture” time. And being human beings we never accurately record our time spent on anything.
But if all time is the same why is it then that we use phrases like “where did the time go?”, “time flies”, “time is dragging”, “I wish I had more time” etc.
Actual time of course doesn’t vary but our experience of time does. Our perception of time is always, always inextricably linked to what we do with our time:
- Is it enjoyable time?
- Is it dangerous time?
- Is it sleep time?
- Is it creative time?
- Is it boring time?
- Is it valueless time?
- Is it meaningless time?
- Is it time that made a difference to someone or something?
- Is it valuable time?
- Is it meaningful time?
If all time is perceived as being different dependant on what we are doing with our time, it must follow that our customers too have different and very individual experiences of the time they spend with us and particularly the time that they pay for.
How then as professional practices do we monetize the experience of time our customers get from us?
For starters it makes no sense at all for professionals to have a single hourly rate to try and monetize our clients experiences of our time. As Matt Homann author of the 10 Rules About Hourly Billing says:
“When you bill by the hour, your once-in-a-lifetime flash of brilliant insight that saves your client millions of dollars has the same contribution to your bottom line as the six minutes you just spent opening the mail.”
“There are 1440 minutes each day. How many did you make matter? How many did you bill for? Were they the same minutes? Didn’t think so.”
One possible way of getting around the “all time is the same” mentality of course is to charge different hourly rates depending on what you are actually doing for your client. For instance for your flash of brilliance in the shower you would charge out a higher rate than when you are correcting your grammar in a letter. Of course this might make your finance manager’s annual budgeting fairytale more of a nightmare and would further add to the administration time of entering different default rates but, hey, as law firms spend something like 10-15% of their gross feeding the time machine at the moment anyway what is a little more effort in an endeavour to more properly monetise the value you are providing to your clients?
It’s not that Oldlaw firms are not used to having all sorts of different hourly rates on their system. Some have default rates dependant upon what particular clients insist on and all have different hourly rates dependant solely on the seniority of the lawyer (in the somewhat time honoured mistaken belief that if I am a senior I am automatically worth more-even for my grammar corrections).
Or you could just drop the time charade completely and do what most of the business world does. Agree your scope of work and your price(s) up front.Make your clients experience focus on the results and outcomes you have helped them achieve-not on your time spent or to be spent.
As human beings we use time to measure many things-especially physical activities.(swimming races, foot races, horse races, public transport timetables, etc).
But there are plenty of things time cannot measure (heat, height, weight, smell, joy, love, for example).
Other things time cannot measure include quality, satisfaction, rapport, likeability, feelings, convenience, success, experience, intellectual capital, and solutions. Strangely enough these are all things your customers measure about about you.
So what does your firm measure? Thought so.
When are the professions going to stop measuring & selling something our customers do not measure and buy? While Karl Marx might be resting soundly the late Peter Drucker would be turning in his grave wondering why Knowledge Workers measure themselves, and the value they provide, by time.
For the time being unfortunately for Oldlaw and many other professional firms, “it’s just time”-and therein lies the problem.
*since starting this post I have become aware of a book by Alan Burdick titled “Why Time Flies” which examines the concept and perceptions of time-which I have not had time to read yet!
@ChisConsult Influencing motivated professionals to make a difference.
Senior Associate/Future Leaders Program: Melbourne 12 May 2017.
Join Andrew Barnes, Kate Chisholm, Andrew Clarke and me for this very popular high level, practical workshop that provides valuable insight into the essential qualities needed to enable lawyers to progress further in their firm. Designed specifically for lawyers at or near Senior Associate level, this program will outline the practical skills and knowledge necessary to deliver the outcomes that many firms expect now or will expect in the future.
Being a technically good lawyer is only the first step to success. The key is knowing what it takes to make it as a leader in a law firm. Gain inside knowledge and give yourself a competitive edge by attending this Workshop.
Topics covered include:
• Common attributes of the more successful law firms: why some firms succeed and others do not
• Trends, challenges and opportunities facing the legal profession
• How to build and maintain a sustainable client base, differentiate yourself from the competition & stand out from the crowd
• Why understanding and being able to utilise technology is essential to your tool kit
• Firm profit drivers and what financial reports tell us and don’t tell us
• Billing and Pricing options for progressive lawyers
• What law firms look for in their leaders
• Motivating and inspiring your team
• The future of the profession – how it will affect you and how you can help shape it
My guest presenters:
Previously Financial Controller, Andrew Barnes is the recently appointed Chief Executive Officer of The Lantern Legal Group Pty Ltd, which incorporates the legal practices of Harwood Andrews and Sladen Legal. Andrew is also the National President of Australasian Legal Practice Management Association (ALPMA), having previously served as Treasurer.
Patrick has almost 20 years’ experience within professional services, primarily 15 years as IT Director at national law firm Maddocks where he was key to how the Firm conducted its business, risk profile and operational relationships with clients. He has also consulted to manufacturers, educational institutions, retailers, property developers and tech firms and has been a guest speaker on legal tech on many occasions.
Previously People & Culture Advisor at Maddocks, Kate has been with international law firm Pinsent Masons since mid 2015 shortly after they opened in Australia. Reporting directly to Head of Australia, Kate is responsible for all Pinsent Masons Australian HR needs including recruitment, career advancement, ongoing training and education.
Andrew has been working with law firms for more than two decades with firms such as (current names only) Ashurst, K+L Gates and Aitken Partners. His work has been multi-dimensional, including areas of strategy such as branding to basic media profiling, as well as the basics of task such as door signage. At Aitken Partners, where he currently works, he looks after the management of client events, web and social media, tenders and media relations, as well as brand and business strategy.
Total CPD Units: 6.0
Practice Management & Business Skills: 3.0
Professional Skills: 3.0
Click here for registration
A couple of weeks ago I attended a technology conference ( I can hear Ron Friedmann laughing all the way from Arlington VA) hosted by InPlace Solutions of which my friend and colleague Patrick Ng is Principal Consultant.
I employed Patrick over 20 years ago as our first IT Manager at Maddocks when I knew even less about IT than I do now. Patrick long ago gave up trying to teach me anything serious about technology (after all isn’t that why law firms have IT Directors & HelpDesks for people like me?), but given nearly every law firm on the planet now boasts “innovation in technology” (if not always innovation in their business & pricing models!) and I have been an Apple convert for nearly 10 years now (my wife Karen tells me she thinks I love my Apple family more than my own at times), I figured I ought to see what some of the fuss is about.
The title of the conference was Taking IT to the Cloud 2017.I more than vaguely knew about the Cloud. In addition to Patrick himself there was a pretty impressive array of speakers, some of whom I know and admire greatly ( e.g. Jodie Baker founder of Hive Legal now running Xakia and Andrew Price from Inspire Management) and others I wanted to listen to (e.g.Gary Adler CIO of Minters and Berys Amor CIO Corrs) to hear first hand what some of the bigger law firms were doing in the Cloud tech space.
I didn’t get to hear Andrew Price in Melbourne unfortunately but I have heard him speak before on the need for a systematic approach to continually developing, managing and ingraining change and improvements in law firms generally. From all reports those who heard Andrew present on change techniques for implementing technology in their firms were blown away.
As an admirer of Jodie and the Hive Legal model from way back, while I had read about Xakia it was great to hear and see how the cost effective & scaleable cloud based Xakia platform can, and is, making the life of GC’s more palatable.Terrific to also hear Simone Zerial senior lawyer/legal manager at Toyota talk about how Xakia Matters has been used by Toyota now for over 12 months for more effective measurement and legal reporting.
Berys spoke about Corrs journey to the Cloud generally and their digital offerings to clients, especially CorrsEdge another innovative package for entrepreneurs and start ups in Australasia.
Gary Adler also talked about Minters investment in the Cloud, some of the challenges along the way (security, convincing partners, etc) and the benefits the Cloud now provides to Minters and their clients.
Many of InPlace Solutions Cloud partners, including reps from Hotdocs automated document assembly,NetDocuments, Introhive’s CRM platform, Nikec, ESP Solutions Group, Ethan Group and TeleApps, also spoke and showcased their impressive array of cloud based solutions for the legal profession.
Unsurprisingly the results reveal an increasing preference toward Cloud based solutions with law firms naming increasing productivity, online client collaboration platforms and more mobile working environments as their top IT priorities for 2017. Patrick expands more about the Cloud survey and cloud computing generally in the legal profession in a very informative and entertaining podcast available here.
As a recovering lawyer with a passion for value based pricing, I am of course very interested in how many of the law firms that are investing in technology that is designed to make them more effective in their services offerings and to speed up the delivery of their services, are going to price for this? Investing heavily in such technology yet continuing to bill by time makes no business sense at all as it must follow under the billable hour model the quicker they turn around delivery the less the firms will be paid!?
An example of yet another pressure point being exerted on the Oldlaw business model which leverages people x time x hourly rate.
How much more evidence does the profession really need before the penny finally drops that time based billing is as redundant as the 19th & 20th century “buggy whip” technology 21st century Cloud solutions are now replacing?
@ChisConsult Influencing motivated professionals to make a difference.
Earlier this week I wrote a post titled Death Of The Billable Hour and I am encouraged by the support the article has received from many quarters (if not from Oldlaw partners, from several Oldlaw employed lawyers).
In that post I mentioned that serious calls for the death of the billable hour have been occurring regularly over the last decade.As evidence of this I came across an old ABA Journal dated August 2007.Here is the front cover.
It contains a 6 page article by Scott Turow calling for the billable hours’ death. It is well worth reading the article in full.
The article describes the billable hour as:
- rewarding inefficiency
- making clients suspicious, and
- it maybe unethical
It it however the author’s final paragraph that is well worth reprinting in full and reading aloud.
“If I had only one wish for our profession from the proverbial genie, I would want us to move toward something better than dollars times hours.We have created a zero-sum game in which we are selling our lives, not just our time.We are fostering an environment that doesn’t provide the right incentives for young lawyers to live out the ideals of the profession.And we are feeding misperceptions of our intentions as lawyers that disrupt our relationships with our clients.Somehow, people as smart and dedicated as we are can do better.”
Here, here. Mr Turow.We can and we MUST do better.
I do not know Mr Turow (except via the books he has written) and now as a partner at Dentons I do not know whether he still shares the same views as he did in 2007. I hope so.
10 years on and still the calls are being made for the billable hours demise and while there has been some progress away from time based billing since 2007 it is incredibly slow and very painful to watch.
Oldlaw still maintains the billable hour via the timesheet life support.
Shameful Oldlaw shameful.