Overnight Australian time, Patrick Lamb wrote a post (‘The importance of understanding context.‘) in which he makes several comments on a recent post by me.
I will start by saying that I know Mr Lamb, by reputation at least, and I have very high regard for him. I was thinking about it when deciding whether to write this post this morning and I believe I have been a follower of his blog for about 10 years (could be slightly less, maybe longer).
The following are three brief responding comments I would make to Mr. Lamb’s post:
- I strongly believe that any discussion that includes a component that AFAs are cheaper than hourly rates is the wrong discussion. Data-driven or otherwise. Do I want to see data showing me that AFAs are cheaper than hourly rates? Probably not. Why – because it would assume like for like, and the fact is behaviours of lawyers differ under the two structures. And, the only way I can see of getting close to like for like comparables is by asking fee earners under a fixed fee structure to track time – and my own view is even then the statistical data that falls out of that will be tainted and virtually useless for any meaniful discussion. So I’m not really interested as I believe it will lead me – and many others – down a conversation path that I fundamentally believe is the wrong one to be on: which is that AFAs are not a comparable to hourly billing. [as an aside: any conversation I have been involved in which starts with “data suggests AFAs are cheaper than hourly billing” typically ends up being a race to the bottom and rapidly results in a commoditised product.]
- I believe a “value equation” is precisely that: value must be experienced by all parties. If the value discussion results in the client believing they are getting great value but the lawyer feeling they are being cheated, then you are going to have a problem. So my own view is that any “value conversation” is not a one-way street and, as with the case with any pricing discussion, lawyers need to know when to walk away from the discussion.
- My comment on “if you cannot do AFAs, stick to hourly billing” is somewhat tounge-in-cheek, but has a serious undertone. Value pricing/AFAs are not easy. It takes a particular skill. It needs to be learnt. So if you wake-up one morning and decide you want to do value pricing/AFAs, by all means get help. But, whatever you do, don’t set out on that road without some guidance because it will be a road to ruin – stick to hourly billing (if your clients are letting you) until you have learnt how to price otherwise. And it is also my view that too many lawyers in Australia are failing to understand this and are implementing AFAs that are fundamentally “hourly rates in drag” as Mr John Chisholm has been known to say.
I want to finish this post on what I consider a positive. I wholly agree with the following comment by Mr Lamb – and comments like this are largely why I read his blog:
AFAs can provide great value to lawyers, but only if they change the way they do their work. The old way is burdened with fat and excess, and it is why clients grew so frustrated with the billable hour. Second, firms need to decide if customer service is a core value of the firm. If it is, you find out what is of value to your clients and you figure out how to provide it. It is an exceptionally rare matter in which, over the duration of a matter, an AFA cannot be used. The challenge must be to carefully and precisely identify the client’s objectives. Once that is done, a fee to incentivize the accomplishment of those objectives is possible.