Is it Possible For Lawyers to Embrace New Business Models?

I received a thank you and an interesting comment from David Maister at the David Maister Blog. David states his position well noting that," I agree that the exclusive and overwhelming dominant use of billable hours as a performance metric is dysfunctional.  Most partners and managing partners would agree."

A couple of points here. The thought that the hourly billing system is inherently evil is, of course, an overstatement.  We use billable hours in our practice. We just don’t do it like most other law firms. We budget on a monthly basis with our client’s participation in litigation matters. On drafting and other matters we offer an alternative billing structure that requires the client to pay the maximum agreed fee or the hourly rate, whichever is less.

As I have noted previously and which David points out in his comment, it is really the current incarnation of the billable hour that is so troubling to so many attorneys. The simplicity of the business model, which merely involves tracking time and passing the value of that time on to a client by way of a monthly bill, has gotten out of control.  Law firms have, in many instances, simply become blind to anything beyond driving hours, capturing every moment and passing every minute of time on to a client.  In many instances, double billing is rampant.  In most large firms, whipping associates to some unattainable hourly goal for the year is commonplace. Concepts of value and deliverables have become almost irrelevant.

David appropriately asks, "So why do law firms not address it and solve it?...is the lack of change explained by the ability of lawyer to brilliantly shoot down any new idea, so that carrying on with the current model is the only viable one? Or is there a better explanation?"

David has touched on something I have believed for a long time. Lawyers are so use to arguing with everyone about everything, that they have no vision.  The implication of David’s comment is that lawyers are so good at shooting every idea down, that the concept of change or innovation is analogous to blasphemy. Lawyers are such a sarcastic lot, that they lack the creativity to embrace new ideas.

I think that David has hit upon something that is important.  Lawyers can be incredibly smart.  Moreover, there are even lawyers who are good businesspersons.  So why don’t they make the change?  Why is innovation in the practice of law so rare in a time in our history where virtually every other business model is evolving, changing and morphing into something the world has never seen?

Lawyers, by their nature, are opposed to…well they are simply opposed to many things.  Their job is to oppose people, ideas and concepts.  Because the law is such a mystery to so many clients, it is hard to imagine change being demanded from the client side.  Of course, giant corporations do sometimes require innovations and change from the mega law firms that they deal with day to day. However, in a medium sized town like I live in, there are no mega corporations.  The concept of a business model different from the traditional hourly billing one is blasphemy.

So is change even possible?  Yes, I believe that change is possible. The Internet and the Blogosphere for the first time bind innovative, creative attorney minds together. It is not hard to go online and find great ideas about new business models. This information exchange quite simply did not exist pre-internet.

Further, the world is changing at an increasingly fast rate of speed. It will be impossible for law firms to remain entrenched in their old billing ways when the rest of the world is racing forward with new business models and efficiencies all bent on delivering more value for less money.

For those of us who are already embracing new business models, there is little or no competition in the market. My business has grown so quickly because of the fact that I do things different from other attorneys. Few, if any, clients really like their lawyers.  Being different and standing out from the crowd is not only easy, but has a direct result in generating revenue.  My clients tell their friends.  Their friends choose my firm for their legal work.

I would encourage and applaud any lawyers who embrace innovative and alternative thinking business models for their practice.  You will be rewarded.  You will stand out.  You will be different.  Clients will soon find you, embrace you and refer you to others in your community.

Comments

[Christopher McKinney]

Perhaps you could do one or more articles sharing your process that you go through in determining a fixed price for various legal services. I think many attorneys are afraid to set a fixed price for an item b/c they fear taking a bath when they take on a project that turns out to be much more involved than origianally contemplated.

[Paul]

That is actually a really good idea Christopher. GAL, what do you think? The only thing holding me back from implementing fixed fees or even working off a max budget basis is the fear that I will sink myself by setting prices that are either far too high or far too low.

[Greatest American Lawyer]

will do. I'll get something in play by next week... :-)