The Greatest American Lawyer

Lawyers as Business Advisors

Lawyers have become so myopic that they often forget how much knowledge, information and expertise they really have. We get to see the inside guts of so many companies. We see were companies succeed and fail. Too often, we focus only on the legal problems without expanding our efforts to understand the business process that allowed those problems to happen. We have been talking a lot recently about value billing. Really, we have been talking a lot about value. The word "billing" gets tagged on in order to describe one aspect of what value-based law firms provide.

Many lawyers are well equipped to add value on the legal and business side of company problems. Those lawyers should remember to sell problem solving on the back-end and front-end as part of their overall solution.

For instance, a client refers to you a number of large receivables on corporate accounts. The receivables are over 180 days past due. Sure, the lawyer can send a threat letter and file litigation in order to collect that debt. A better lawyer would also dig into the process which allowed that debt to exist in the first place.

We offer legal and business solutions to our clients. Because of our technology background, we are able to show clients how to use technology to improve and document their internal process. I can tell you from experience that clients see a lot more value in the preventative services we offer, then the corrective services. Improving a client's /customer’s internal process provides real tangible results in which preclude problems from arising in the first place.

Sure, lawyers are good problem solvers. But a great lawyer will help his/her client from experiencing the problem in the first place.

Is your firm acting as a business advisor to your customers?

Do Hours Equal Profits?

Because counting hours is such an easy exercise for a firm, it is easy to presume that maximizing billable hours will maximize profits. What is lost on many firms is that a business model which is tied to hourly billing actually "caps" the profits that any firm can make.

Think about it. How many cases have you handled at which you provided hundreds of thousands of dollars in value in very little time? In those cases, was it your brilliance, strategic efforts and experience which delivered the results to the client? Do you think that the hours that you put in to delivering those results is an adequate measure of the value you provided?

The goal of a law firm is not to bill the client the minimum amount possible the goal of a law firm is to provide value and be paid for value received. While counting hours is simple, it hardly measures value. If you are a great attorney in a great law firm that focuses on providing value to clients, then the hourly billing system is leaving you short.

Over the next few weeks, we will be talking about the intricacies of value billing, why clients have no problem paying more than your hourly rate if you deliver results and how to incorporate innovative billing models into your law firm business model.

Wake Up! And Add Value

What did we learn from the fall of communism? One lesson that should have been obvious is that capitalism works because it provides the right incentives to workers. Ask yourself, "What are the incentives for the lawyers in my firm?"

With traditional hourly billing model, the incentives are merely to bill your hourly quota each day. The incentive to ensure that you meet your hourly quota permeates your thoughts and dictates your actions.

The value billing approach is different. Because you have defined and documented value to the client, and your singular mission is to obtain that value for the client, you wake up in the morning thinking about adding value. Instead of thinking about hours, your mind focuses on accomplishing the defined goals you have already laid out for your client.

It sounds like a subtle difference but it is not. It is dramatic. I am just winding up a multi-million dollar minority oppression case. Over a year ago, we set out with four major goals. Only one of those goals were financial. The other goals were strategic and provided the leverage we needed in order to obtain the financial goal. The goals were defined and documented from the beginning and monitored throughout the entire project. The discussions with the clients all centered around the four predefined goals. The to-do items in the extranet were all directed at the four goals.

Is it any wonder that we were able to achieve all four major difficult goals on behalf of the client? It shouldn’t be. The entire focus of the entire case was defined, documented, redocumented, discussed, assessed, reassessed, refined...

It is extremely hard to achieve the kind of focus described above in the traditional hourly billing setting. Good lawyers can do it pretty well on some occasions. But at some point, firm culture catches up with you. No one is impervious to the environment in which they live.

How can you create a firm culture which prioritizes providing value to the client from the time your workers wake up in the morning until they go to bed at night.

Blawg Review #106

Catch this week's Blawg Review hosted by Brett Trout at Blawg IT.

Microsoft < Google

As has been posted before, exciting things are happening within the "walls" of Google, but according to Cnetnews.com's Elinor Mills, Google is still surpassing expectations in the outer market. "For the first time, Google has surpassed Microsoft in worldwide visits to its web sites" says Mills, whose information comes from comScore, a company that "provide[s] a continuous, real-time measurement of the myriad ways in which the Internet is used".

Mills' article also cites a 13% increase in unique visitors to Google web sites when compared to a year ago, which is higher than all competitors within the search engine market.

With Google reaching this new height, it is a further reminder of the identity of the "big man on campus" and how Google is the one that high-tech firms like ours have to deal with if they want to successfully reach consumers. While it is a sobering realization of the market power that is in the hands of Google CEO Eric Schmidt, there isn't all bad news.

That reported 13% increase in unique visitors is only a representation of the huge numbers of people who are making their first overtures with the internet. With Google finding these new consumers, we can safely assume that a fraction of them are now receptive to your web-marketing campaigns and high-tech message. This growth means the consumer base to which you are constantly trying to coerce, is greatly increasing in number every year - which is good news in my book.

Reputation: Easier to Build Now than in Elementary School

The legal market is one that is highly dependent on many things, but high on that list "reputation" can be found. It is reputation that precedes your face in the mind of the client, can often shape your interactions with opposing counsel, and even affect the way in which you deal with judges. However, the problem is that oftentimes for the single-attorney firms (especially high-tech ones) basic reputations don't exist.

How can a client have any idea of what to expect when the very thing that marks your firm has no precedent in his experience? And when dealing with legal troubles and everything that goes along with that, how ready are they going to be to go for something unprecedented and unique? The answer is not very.

To offset this inherent "uniqueness" that is found in firms like ours, it is extremely important to utilize the tools available to you to create that very reputation that will ease the worry of your clients, set a standard to which their future legal dealings will measured, and even create distinction for yourself in this competitive market.

The importance of creating a reputation cannot be underestimated, and while it seems like a simple concept, the fact of the matter is that a reputation is something "traditional" firms don't necessarily have to worry about. However, a reputation is extremely important for those who don't have it, and too often high-tech firms are the ones lacking.

Luckily, the internet is the great equalizer, and with the high-tech firm's inherent ability to take full advantage of the World Wide Web, creating a powerful reputation is not an impossible task.

When the Billable Hour Backfires

We are all aware of the troubles that plague the attorney-client relationship when it is confined to the billable hour. From the unanticipated bills that tear into the pockets of those we serve, to the sheer confusion of clients as their budgets are eaten by phone calls, meetings and motions - but what about the strain that accrues to the paralegals and assistants who actually work in the office?

Rather than focus solely on their work, paralegals must constantly keep track of their time according to the tasks and cases that they are working on. Further, in order to bill within the amounts acceptable to the client, staffers must cram or shortchange tasks in order to avoid breaching previously set maximums. Than, if you are going to achieve the quality that the client deserves, oftentimes staffers have to put in the extra time - which in turn overloads the client. The reality of the billable hour is that puts the entire law firm at odds with their clients - the same ones they are supposed to be working with.

To achieve real profits, and create a prosperous practice, one must reconcile the firm and client so as to create a unified team that will be much better at accomplishing the unified goals of both. To leave the firm and client at odds is to seriously hamper your practice because of the strain that is placed upon both those who work for you and those you work for - a strain which can be alleviated with a better billing system.

Viringia Tech Massacre - Cho Seung-Hui is Responsible. So Are We.

A lot has come out about Cho Seung Hui, the man police have named as the shooter in the Virginia Tech tragedy. There is little doubt at this point that Cho Seung Hui is responsible for his murderous rampage. 

But as I followed the technorati tags and internet trail of Cho Seung Hui, I came across some great reporting by the blog at Wired Magazine.  A Wired blog post by Kevin Poulsen looked for traces of Cho Seung Hui on the internet with updates about internet clues the killer left behind.  As I clicked a link to a young woman being reported as Cho Seung Hui’s ex-girlfriend and early victim of his gun, I was dumbfounded when I saw the Google MySpace advertisement inviting me to put 50 Cent in the sight of my gun and shoot him dead to win $5,000.  When I clicked on one of the victims MySpace friends, Google ads asked “Do You Want To know The Date of Your Death?”

Here is a windows media file which gets big enough to see the entire screen.

Shocked? Horrified, Amazed?  Yes, all of these emotions struck me. Watch the video and you will wonder, like I did, “who else besides the shooter is responsible for the Virginia Tech Massacre?”

This video and the advertisement shown therein are no coincidence.  Violence is marketed to the 15-25 year olds who dominate MySpace and many other internet sites like candy.  These advertisements broadcast on Cho Seung Hui’s alleged deceased ex-girlfriend myspace page speaks volumes about all of us.

Our responsibility for violence such as occurred at Virginia Tech can be reduced to a Google ad.  We don’t tolerate violence.  We encourage it.  We market it.  We glorify it.

So when you are casting dispersions at Virginia Tech for not evacuating the campus, the gun shop for selling the murderer his gun, the gun laws for allowing firearms, the police for not acting sooner, Congress, Bush, etc, etc, etc, don’t forget to look in the mirror.  And if you need a pick-me-up, line up 50 Cent in your scope and shoot him dead.   You could win $5,000 from bid4prizes.com …

Lessons From Finding Nemo

Here is a clip from our recent vacation in Florida. Notice the rustic and rugged places that we visited on our chartered 34' sailboat.  :-)

Here are some lessons from the Disney movie Finding Nemo which can benefit us all.

1. Life is about risk.  You can stay in your anemone where it is safe, but you will have missed the journey that is life.
2. If great white sharks can learn new ways to live without eating meat, then lawyers can certainly learn to bill without counting hours.
3. Sometimes things get tough.  But successful people just keep swimming swimming swimming.

Duke Lacrosse Players Exonerated

It is being reported by CNN that not only have all charges been dropped in the sexual assault case against the three former Duke University lacrosse players by North Carolina’s Attorney General, but the AG has gone further. Attorney General Roy Cooper states:

"We believe that these cases were the result of a tragic rush to accuse and a failure to verify serious allegations. Based on the significant inconsistencies between the evidence and the various accounts given by the accusing witness, we believe these three individuals are innocent of these charges." [CNN report concerning the three former Duke Lacrosse Players]

It is no wonder that people mistrust the justice system. This is yet more evidence illustrating the imperfections of our justice system. Yes, innocent people go to jail. Yes, innocent people are charged with crimes they don’t commit. Yes, the justice system fails on a regular basis.

We all watched O.J. Simpson walk after a jury returned a verdict of "not innocent" in his favor. We watched the trial judge in the Anna Nicole Smith burial hearing cry from the stand. It was enough to make us all cry, not in empathy with Judge Seidlin, but at the justice system itself which was being once again embarrassed.

Unfortunately, only the most outrageous cases, which depict the justice system in the worse light, get the most press. Even worse, there are thousands of cases of regular individuals who suffer grave injustice at the hands of the legal system whose stories are never told…

Why lawyers love hourly billing

One of the issues, which is repeatedly overlooked in the discussion concerning hourly billing, is the fact that many law firms prefer it. Think about it. Hourly billing is the perfect vehicle to obtain the first retainer check from a client. An average retainer ranges between $2,500 and $7,500. The hourly billing model allows the lawyer to focus on determining whether or not the client can come up with that initial retainer check without discussing:

• What results might be achieved in the matter;
• Whether the client will receive any real value from the legal services;
• Whether the client can afford the next payment of money beyond the retainer;
• What the plan or strategy is concerning the matter;
• What the client’s goals are in the matter.

Hourly billing is the perfect model for avoiding any real substance concerning the client retention conversation. Many lawyers don’t know answers to many or any of the questions implicated above. It’s not that they are not smart enough to think of answers in formulate opinions. But it does take work and effort to define the legal project, set a budget and fully understand and appreciate client goals. The hourly billing method allows lawyers to be lazy. All they need to do is confirm that the client can come up with the initial retainer and sign them up to an hourly billing system based on the single premise that "I’m a lawyer and you’re not."

The best benefit provided by value billing is that it forces lawyers to not only think about the above issues but also define them for the client and obtain agreement and consensus with the client. Value billing shares the risk between client and counsel putting them in a partnership on the specific legal matter at hand.

Can you think of other reasons why lawyers love the hourly billing system?

Blawg Review #103

Check out this week's Blawg Review presented by Jonathan D. Frieden at E-Commerce Law.  Jonathan gives all of us a brief history of baseball in his review which he calls the BaseBlawg Review. 

What is Value Billing?

Value billing is a phrase which is often used in relation to professional services such as law. Value billing means different things to different professionals.

We are at a stage in our firm’s growth where hourly billing is becoming less and less apart of our model. While many of our legal projects are purely flat fee, we continue to do hourly billing on a modified and "value" basis. We always talk about and obtain approval on monthly budgets from our clients even on those matters where we are billing by the hour. On many matters, we agree to a maximum spend by the client or charge the hourly fee, which ever is less. This maximum budget or hourly fee approach ensures that the firm has the proper incentives to get the job done efficiently, but also caps the cost to the client for the services. A key part of this approach is documenting the tasks and deliverables, which are going to be performed by the firm on the front-end. Setting the client’s expectation by documenting those expectations is a key feature of our billing system.

The next step for us is to move more of our work into a pure "value-billing" system. This involves defining the client’s subjective goals, analyzing the value of obtaining those goals from the client’s point of view and putting a correlated value on the legal services driven by client value. Essentially, the client agrees to pay a flat fee over a period of time for a given project irrespective of hours. While this sounds traumatic to many law firms, let me assure you it is both achievable and preferable. It results in benefits for both the firm and the client.

When law firms start talking about hours and start focusing on results, good things happen. Lawyers can document and define legal projects upfront, measure the value to the client for those defined services and charge a defined fee for performing the same.

For those interested in taking a look at our firm's current "value-billing" statement, it is set forth below:

Value-Based Billing Policy

Some of Traverse Legal's customers prefer to be billed on a time-based system, where hours are tracked and billed to the client at a specific hourly rate.  Some cases are best suited for time-based billing.  Unlike most other firms, Traverse Legal does not bill for every activity and task associated with the handling of a matter for a client. 

The following is a list of items that we do not charge to clients:

·       Transmittal letters which do not contain significant legal analysis or recommendations.

·       Short phone calls that do not lead to immediate legal work.

·       Update or general information calls to or from client.

·       Any activity that does not add value to client’s immediate matter.

·       Any activity which deals with general information about the client.

·       Any activity which does not work towards resolution of the client’s problem.

Things that we do bill for:

·       Any activity which provides specific value to a specific client problem.

I would be interested in comments concerning this billing statement from the audience, please.  Does this statement comport with the billing model of your firm? 

Talking Value with Clients

One of the many evils and pitfalls of hourly billing is our tendency to talk to clients about hours. Clients don’t care about hours. Clients don’t care about hourly bills. Clients will never understand and appreciate the hourly billing system. The uncertainty of the hourly billing method is a big part of this perception. When a client doesn’t know what the bill is going to be until it arrives, the client is almost always left with sticker shock and the anxiety which comes from the unknown.

We project monthly budgets for our clients and get their approval ahead of time. This removes the sticker shock factor. It also means that the client has already bought into a monthly spend before the month begins. Many projects in which we handle are purely on a flat fee. Thus, there is no sticker shock because the price was set up-front.

With any billing model, we as lawyers need to learn to talk value rather than budgets and time. Subjectively analyzing the value of your legal services for any particular client is critical. This process involves understanding the monetary and non-monetary benefits that would come as a result of your involvement in the client’s problem. While we often dabble in such discussions, lawyers need to learn to prioritize these issues in virtually every conversation with the client.

By talking "value" with the client at every opportunity, you not only create a set of expectations but reaffirm the value of the services that you are providing. The moment this conversation becomes difficult, is the moment you should realize that you may not be providing the value which makes sense from the client point of view. This is the same moment you should revisit the project with the client and discuss whether or not your involvement continues to make sense.

One of the real detriments of the hourly billing system is that it drives the focus and terminology of law firms. The entire culture of the firm becomes "hourly billing." This makes it extremely difficult to instill a culture which focuses on the value proposition to each and every client of the specific services which are being provided by your firm.

Vacation Elation

Vacation Elation

I am back from my 11-day vacation in Florida with the family. My firm has been growing and expanding so much these last six months that several changes have occurred. As you know from previous posts, my brother Mark has joined the firm. He is now starting his second month. This has been a huge relief. I needed another "me" in the office in order to handle demand.

But for five months, I was being pushed beyond maximum capacity. This vacation was long overdue.

You never realize how bad you needed a vacation until you come back from one. My calmness and focus are at a completely different level than pre-vacation. It makes me realize how important it is to get away from the office, not only from a personal sanity point of view, but from a client service point of view.

How can we expect to service our clients if we are overworked? The pressures of being a worker at any level eventually build up. From our staff on up, vacations should be a key component of any firm’s client service model. Managers should be responsible for ensuring that their workers get the appropriate time away from the office in order to stay balanced, refreshed and motivated. In order to get 110% out of your team, you must ensure that everyone gets away on a regular basis.

Al, that means you buddy. We need to get you scheduled for a week vacation sometime soon.

This Week's Blawg Review

Check out Blawg Review #102 hosted by Delcarations and Exclusions Blog which can be found here. The official 102^nd Edition of Blawg Review; the traveling "blog carnival for everyone interested in law."This Edition follows hard on the heels of this year's April Fool's Blawg Review Prequel, which appeared yesterday at my more whimsical personal and cultural weblog, a fool in the forest.

Michigan Threshold of Death

One of the fascinating things about having a website that has high traffic is seeing the search terms that find their way to your site.  For instance, I noticed the other day that the Traverselegal.com website logged number two on Google with this search query: "Michigan threshold of death." 

I don’t know whether to be shocked, amazed or proud.  Regardless, these types of oddball search results remind us that (1) content diversity is important on our web sites and (2) the power of Google is truly staggering. 

We should never underestimate that many people find our websites as a result of putting in non-obvious and even strange search terms.  We should never forget that content is key.  We should never forget that the diversity of search words is as important as the density of obvious key words.  You aren’t blogging if you aren’t generating lots and lots of vertical content. Get blogging!  Ignore my message at your peril; I am the Michigan threshold of death!

What are your strange keyword results?