Lawyers Undervalue Their Services
January 30, 2009 by Mary Adams
The New York Times reports today here that economic hard times are putting pressure on high-priced lawyers. Some ask whether it is time to end the practice of the billable hour. This is a really interesting question.
The “best” lawyers bill hundreds of dollars per hour. In the Times article, one firm is reported to regularly charge $800 per hour for their most senior partners. Even these firms (or especially?) are apparently accepting fixed fee arrangements with some clients.
This trend would actually be a great thing for the legal industry, but maybe not for the reason that you might think. This article and, I imagine, many lawyers see this trend as a good solution to economic hard times–to help keep their practices afloat until the good times return and they are able to return to their old ways.
The reason I think it would be great for the industry is that it would finally force lawyers to leverage their potential as knowledge workers. Under the hourly model, they only get compensated for the hours they put into a client’s work. Yes, partners get excess over junior partners’ salaries but the worth of the most senior lawyer is still judged by their hourly rate and the (usually excessive) number of hours they themselves work.
Lawyers will tell me that they are knowledge workers. I’m not so sure. What makes them better than your average custodian? Their hourly rate. But they work harder than any manual laborer in the country–and maybe not that much smarter?
We are learning in the knowledge economy that the greatest value is created through structural capital–where the genius of employees is captured and packaged for re-use. Once you have a process or work method developed, everyone starts a task smarter and more efficient than before. The value of this kind of knowledge is limited only by the number of people that need it.
I know that lawyers already create structural capital–standard contracts as a starting point, legal research in specific areas–but the hourly model is a disincentive to lawyers thinking about how to create the maximum value for their clients with the minimum amount of work. Yet, I can’t help but think that all those smart people could accomplish great things if they would just free themselves to change their thinking.
Lawyers are ultimately undervaluing their services by seeking compensation for the time they are chained to their desks rather than freeing themselves to think about how to create the greatest value for the largest number of clients in the most efficient way. Now that’s smart.
Hi Mary, this reminds me of a conversation I had with my attorneys this week. These attorneys are from a very large firm and were representing my company in an IP dispute. We are up against a solo practitioner who does not understand the slightest about the subject matter. Yet he has taken a position with zero likelihood of success and through “out of the box” entrepreneurial thinking he has completely taken my counsel by surprise.
What shocks me the most is that my counsel doesn’t even see it because they are slowly plodding along doing exactly what they have always done in every other case, fitting the facts into their litigation process: all at great expense to my company. Whereas, the other side is using whatever they can to paint the best picture for their client….and my gut tells me they will be successful in painting this picture. Hopefully in the end, the law and the “real” facts will prevail.
This may not at first sound responsive to your post, however, I believe that it is. History has shown that different thinking often does replace outdated and outmoded past practices. In fact this country is founded upon that very premise. The Brits in 1770′s thought their well-oiled war machine was going to prevail over the guerilla warfare that the American colonists were prepared to and had to fight in order to succeed.
So I am not sure whether the big law firms will get it, but I am sure that many of us do and that will inevitably lead to the creation of business models that have yet to be fully realized.
Scott B Garrison
http://www.linkedin.com/in/scottbgarrison
Thanks Scott- I hope that the firms do get it. So many smart people that could be providing so much more value than they do but they are stuck in their mental model. -Mary
[...] are a couple of interesting follow ups to my post on legal business [...]