One of the downsides of hourly billing is the disincentive to collaborate. Clients don’t want to see multiple lawyers showing up on their hourly bill. Law firms and lawyers are sensitive to having collaborative work sessions where multiple people might show up on the time sheet.
We are doing a project for a start up company which involved approximately $20,000.00 worth of drafting projects, including license agreements, intellectual property creation and intellectual property protection. Our deliverables included a list of specific documents. The client had hired other firms over the last several years to achieve the deployment of the business model which he was tinkering with. But none of the lawyers were able to capture the business model with any specificity, and he simply threw out the documents paid for on an hourly basis.
On Friday, the three partners of our law firm sat in a conference room together with the client and collaborated over the first draft of our master licensing agreement. We had already had several face-to-face meetings with the client, had visited the client’s initial deployment in order to better understand the software itself and had been working within the extranet to identify key issues. We had developed a master Mind Map document identifying all the different stakeholders, potential licensees and intellectual property hurdles.
It occurred to me during the middle of this brainstorming session designed to spit out a solid first draft of the master licensing agreement that collaborative brainstorming sessions almost never happen in a traditional hourly billing law firm. And yet the value of that meeting and the key issues we identified and resolved can not be understated. On a flat fee basis, the firm has an incentive as a group to perform the promised deliverables in as efficient manner as possible. The hourly billing model treats collaboration as inefficient. The flat fee billing model treats collaboration as a valuable approach to focusing on and deciding key issues.
At the end of the meeting, we asked the client whether or not we were outperforming his prior law firms. He noted that the business model and approach of the firm was delivering exactly as promised. He stated his belief that our business model was in fact the one that would prevail in the market in the end because it is the one that made perfect sense. The client wasn’t blowing smoke. Everyone in the room knew that value had not only been promised but was being delivered.