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April 2006

Rethinking the Meaning of Quality Representation

It sometimes seems that hourly billing has become the three hundred pound gorilla in the room for lawyers and their clients. With all the focus and drive for billable hours, it is sometimes lost on lawyers that their job is not to meet the 50-hour minimum per week. Clients are looking for outcomes. They have specific goals that they are willing to share with their attorney. They have a given amount of money to spend in order to attain those goals. Sometimes lawyers ignore all of these factors and simply work towards obtaining a retainer agreement and an initial down stroke of cash to bill against.

Lawyers need to become better at identifying client goals, seeing if those goals can be met within the client’s budget expectations and implementing an upfront strategy to attain those goals for the client. That upfront strategy should be shared with the client and the lawyer should be responsible to make sure the implementation occurs. We accomplish the documentation of goals and strategies to our extranet. The benchmarks we have set, and the tasks that we have implemented in order to attain those benchmarks are completely transparent to the client. A client can log on at any moment of any day and see who is doing what and why.

One of the great outcomes from our extranet has been a renewed focus on strategy and documentation of goals. In my old law firm life, I remember trying to think about such things. Sometimes I would create an internal document setting forth key information and benchmarks. However, those items were often lost in the day to day grind of ensuring that hours were being billed, paper was being processed and deadlines were being met. Oftentimes, the legal procedure side of the practice of law becomes dominate. When it does, lawyers are simply going through the motion and filing the paper that a court case expects a lawyer to file.

Our extranet, our paperless environment and our virtual worker program have allowed me to become far more of a quarterback and coach rather than a lineman, a receiver or a special teams player. Instead of trying to be a jack of all trades, I focus my energy on the true value which I can provide to the client. That true value is identifying reasonable goals, identifying budgets and putting a case strategy in place, which has a reasonable opportunity to attain goals.

I have to say that what I do know feels a whole lot different from what I did as a partner or associate at prior firms. Too many days, I felt like I was going through the motions. Too many days it felt like I was on defense. Any good lawyer can be swept up in the process of law if an appropriate business model is not implemented by the firm, which guarantees that a lawyer will have the time and resources to provide real value to the client in terms of strategy and documentation. Having a flexible workforce, in my case virtual workers, allows me to attain a much higher level of time and energy for strategic thinking on behalf of my client without the distractions of procedure or process getting in the way.

Virtual Law Clerks Work Well For Law Students

The virtual law clerk program has worked very well for the students that have participated in it for a variety of reasons. First, they are able to work on flextime. Second, they are able to obtain experience in the niche practice in which they are interested. Third, they are able to make good money to help pay tuition and rent. Fourth, they have the option of working for firms outside the city in which they go to law school. Fifth, they have an opportunity to prove themselves to law firms without having convinced those firms to commit to a law clerk position. Seven, they do not ever have to wear a suit and tie in order to get the task done.

Now that technology makes virtual workers a realistic alternative, all of these advantages can be realized. As you know from my prior posts, there are advantages for the law firm as well as the law clerk. There is little, if any, downside to a virtual worker relationship which is properly implemented and managed. Has your firm considered virtual workers?

Is Your Business Model Hours or Results?

One of the unfortunate consequences of the hourly billing method is that, after decades of use, most law firms work on a business model, which has little depth beyond billing hours. The focus of the firm is making sure that lawyers bill a certain quota of hours per week. Often times, that is as deep as the rabbit hole goes.

A law firm can create a culture which talks about and focuses on delivering results to clients. That is always helpful. Firm culture can have a huge impact on how lawyers go about their day and bill their hours. However, I believe there is a better way to approach the practice of law. Every client is entitled to know not only what hours are being spent on a legal matter but also why those hours are spent and what value those hours are delivering. Every client is entitled to see for themselves what the strategy is and how the firm proposes to accomplish specific goals. How many firms provide that kind of information to their clients?

Law Firm Staffing Decisions Often Shortchange the Client

In many of the firms that I have worked for through the years, the fundamental decision is to whether or not to add a new associate is based on one simple question. The question isn’t whether or not there are tasks being left undone. The decision has nothing to do with the level of service clients receive. The decision is based on whether or not work capacities are pushed to the limit whether every associate’s plate is so full that they can’t possibly deal with their workload.

While this approach certainly makes sense from an hourly billing perspective, it is fundamentally anti-client. Sure, law firms don’t want to add an associate if workload fluctuations will mean that those associates will be looking for hours to bill 3 months down the line. At a given moment, the associate workload may be way beyond the ability of the associate workforce to get all the tasks done that really need to be done in order to accomplish client goals. The law firms are concerned that that workload might fluctuate downward and that they will have over hired. Law firms deal with the "over hire" situation by creating make-work for their associates. You know this type of work. It’s the work that associates do which really doesn’t add any value to the case strategy or the client goals. Nevertheless, it appears legitimate on the billing record.

Another tremendous advantage of the virtual worker program is that it is scalable. Law firms do not have to worry about overhead, finding more office space, adding a secretary to support the associate or law clerk, being stuck with an associate who is doing make-work as opposed to strategic work. Our virtual employees are added as needed with no overhead to the law firm. If the workload fluctuates downward, the law firm has not made an investment, which they cannot undo. Each virtual law clerk/associate operates as a profit center for the firm. Where is the downside?

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? 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.

Telling a Staff Person or Associate to "Handle This" Is Asking For Trouble.

For those of you who've been reading this blog for a long time, you know I am a big fan of law firm extranets.  Not only do extranets make the law firm transparent to the client and encourage accountability, they also force lawyers to define tasks narrowly.  In our virtual law clerk and paralegal programs, we have to provide enough information to the workers so that they can return the task well done.  The upper level lawyer's job is to not only define the specific task given to the law clerk or paralegal but all of the tasks in chronological order in order to achieve a client goal or benchmark.  When any worker can see the progression of tasks leading to the deliverables, it's pretty easy for that worker to figure out where their piece of the puzzle fits in.

David Maister and his new blog has a great post about providing task information to workers called "what do you want from me?"  David notes that most of the work that is being assigned is assigned "badly."  He offers this tidbit of advice:

When someone gives you a task to do, say something like ‘I really want to do a great job for you, so can I clarify a few things?’ Most people will say ‘Yes.’ You can then be sure you understand the following details about your assignment –

1) The context of the assignment – ‘Please could you tell me what you are going to do with this when I get it done, tell me who is it for, and where does it fit with other things going on?’

2) Deadline – When would you like it, and when is it really due?

3) Scope – Would you like me to do the thorough job and take a little longer, or the quick and dirty version?

4) Format – How would you like to see the output of my work presented? What would make your life easier?

5) Time budget – Roughly how long would you expect this to take (so I can tell whether I’m on track or not?)

6) Relative priority – What’s the importance of this task relative to the other things you have asked me to do?

7) Available resources – Is there anything available to help me get the job done? For example, have we done one of these before?

8) Success criteria – How will the work be judged? Is it more important to be fast, cheap or perfect?

9) Monitoring and scheduled check points – Can we, please, schedule now a meeting, say, halfway through so I can show you what I’ve got and ensure that I’m on track for your needs?

10) Understanding – can I just read back to you what you’ve asked me to do, to confirm that I got it down right?

11) Concerns – before I get started can I just share with you any concerns about getting this done (e.g., other demands on my time) so that I don’t surprise you later?

Yes, your client or boss should be good at delegating or assigning work and giving you this information anyway. But the truth is that many people would not have thought through what they really want from you until you guide them through their ‘either-or’ choices.

The foundation of my new model for legal practice is built on the very principles which David refers to above.  Because lawyers are so frazzled and consumed with billing hours and making sure everyone around them is billing hours, they forget why they went to law school.  They forget why they toiled in the trenches for years to gain experience.  A lawyer's brain can be a viciously awesome instrument.  Unfortunately, many lawyer brains are wasted and fried by law firm business models that do not provide appropriate incentives.  Lawyers must remember that their value is to understand the client's goals and define and document a strategic path which will achieve those goals.  That path should be documented and available to everyone on the team, most especially the client. 

Our virtual worker model allows top level lawyers to do what they do best and make sure that every task is pushed down to the lowest billing level.  By having workers available on flex schedules; a lawyer can post tasks to an important issue and receive the response by the next morning.  If a big project comes in requiring answers to eight key questions, the underpinning of those questions can be assigned to law clerks for quick turn around.  The lawyer assimilates the information and incorporates it into a strategy which will deliver results and spends his or her time managing the project toward completion.

Are Medium and Large Law Firms in a Better Position to Take on New Clients?

Independent practitioners (solo practitioners) are at a disadvantage when it comes to demand for services. A busy independent practitioner is in a difficult position when a new client comes through the door, especially if that client brings a matter, which will be work intensive. Multi-member law firms have an easier time juggling staff and attorney resources to handle a significant influx in workflow. Of course, if a ten person law firm is "choking on the fire hose"; they will be in a similar position having to juggle their current client needs with the needs of a new large project in the door.

After having used a virtual worker program successfully for the last year, I have to say that one of the greatest advantages is the flexibility to add staffing on the fly. For independent practitioners, this can be the difference between signing up a new client or sending the client on their way. It could also be the difference between being in a position to provide great client service to all your clients, or having to slight some In order to service others.

I would recommend a virtual worker program to any independent practitioner who struggles with obtaining the appropriate staffing levels. I would also recommend the program to any medium or large law firm that sees the advantages of a flexible workforce in order to deal with the inevitable fluctuating workload.

Welcome to the Blogosphere Mr. Maister

One of the great things of blogosphere is that we are constantly welcoming new authoritative bloggers.  David Maister is one such professional who is respected by many.  He recently launched a new Blog and has an interesting new post.  David comments on the Adam Smith, Blog about rising salaries for young lawyers.  The concept of paying people richly and then working them like dogs is a pretty good description of our current law firm management model.  Here is the money quote:

The real question that tests a management approach is not whether it rewards good performance and punishes underperformance, but whether it creates performance.

My complaint about law firm management systems built on the hourly billing model is that the hourly billing model has taken control of law firm management.  Everything about the management system for most law firms is focused on driving more hours, billing more time and exacting more blood from the lawyers and staff in order to accomplish greater revenue aspirations.  What is lost in this model is any notion of customer service, innovation or any metric which gauges value to the client. 

Welcome to the Blogosphere Mr. Maister.  I’m adding you to my Blog Roll.  I would recommend for anyone else to do the same. 

What If We Put A Value On Tasks, Not Time?

Billing system which puts a value on a lawyers time, irrespective of whether the lawyers used his/her time well or provided any value for that time, puts many of the wrong incentives in play for the lawyer. The lawyer’s incentive is to take more not less time what does the lawyer care. He/She gets paid for every hour irrespective of whether or not he/she is efficient, productive or focused. Since the lawyers business model is built on generating hours irrespective of others factors, the lawyers incentive is to drag a matter out rather than bring it to resolution which cuts off his/her revenue stream.

A great feature of our virtual worker program is that we have workers available at most every billing level. Because we work on a max budget, the incentive is to push tasks down to the lowest competent billing level in order to get more done for the client in less time. The virtual worker makes the budgeting process easier. The fact that workers are available at lower billing rates, has the potential to bring the overall budget down for the client.

In a way, we also put a value on tasks, as opposed to people. More complicated tasks like determining what strategy will achieve the client’s goals are accomplished at higher billing levels. Basic research, document summaries and the like are accomplished at the lowest billing level. Drafting and other tasks involving the execution of strategy are accomplished at a billing level somewhere in the middle.

But today I am wondering about further refining the system. Should there not only be an incentive to value tasks and assign them, but an intrinsic value to the task itself. Lets face it, I sometimes doing tasks that are relatively easy and require less thought. Shouldn’t those tasks be valued less than my more critical tasks? In a way, I account for this with my zero billing rate method. Main tasks that I do in the day are really administrative. I bill those out at a zero rate meaning it costs the client nothing. When I travel for a client, I have a travel rate which is approximately ¼ my normal billing rate. While I’m traveling, I try to do other things for other clients, again at low billing rates because I’m not sitting at my desk where I can truly provide value in order to make up the difference. Again, I’ve provided myself an incentive to do more than accumulate hours.

As I move forward in my law firm, I am more and more focused on letting tasks become the true focus of billing. While a task-centric system is more complicated then simply logging raw hours, it provides more of the right incentives for the lawyer and drives value for the client.