pricing

A different take on the end of the Billable Hour

I have read a lot recently about how AI and ChatGPT in particular is going to kill the billable hour. That may well end up happening. What I do suspect though is that it is unlikely to happen soon. And if the billable hour is to be killed off, technology – such as AI and ChatGPT – may well play a part, but it will be the cultural/behavioural change that’s needed that will be the final nail in this coffin.

Don’t believe me?

Here is a quote (of kinds) by Aarash Darroodi, Fender’s General Counsel, at the recent Legal Marketing Association’s annual gathering in Hollywood, Florida:

…the mere fact that he’s being billed by the hour isn’t a problem — but that the billable hour’s implementation can be.

In other words, Darroodi doesn’t mind that his law firm(s) charge him (his company) by the hour, but he does mind if you take him for a fool.

And until this mindset changes, you’re not going to see the death of the billable hour anytime soon.

Darroodi’s comments on the RFP process – should clients do an “open day” before tendering?

While Darroodi’s comments on the billable hour were interesting, his comments on the approach law firms should take to the RFP process were even more insightful. To quote from the article:

[Darroodi] described receiving template-based RFP responses from law firms — an approach he called “fundamentally a mistake.”

Instead, he would like to see a law firm respond to an RFP with an offer to come look at the company’s operations in-depth, gaining a better picture of his organization before a proposal is prepared.

“First of all, it shows initiative on your part. It shows the fact that you care,” he said. “And plus, it shows us that you’re going to submit something that’s directly related to our existing organization.”

Now I’m more than sure that not all GCs will take this approach. And before everyone in Australia says this would likely breach procurement protocols (after the RFP has been issued), I know.

But, wouldn’t it be interesting – and just a little more relevant, if clients did an “open day” before they issued the RFP? Particularly in cases where the tender is by invitation only?

In my view it would certainly make sense and would undoubtably result in more directly relevant and related (and probably eminently more readable) tender responses.

If you want to read anymore on either of the issue above, go read ‘Why Curiosity Is Key For Business Development Observations from the general counsel panel at this year’s LMA meeting‘ by Jeremy Barker on the Above The Law website.

Not only is it highly insightful – so “thanks for posting it Jeremy”, but it contains this nugget – again from Darroodi – on his views about client events (and if you are anEvents Manager in a law firm, stop reading now 🤣):

“I don’t want to spend time with my lawyers,” Darroodi said to laughter, comparing the idea to hanging out with his dentist.

Ouch!

In the meantime, if you need help with your pricing or RFP responses, feel free to reach out to me.

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Is It Fair To Charge Different Clients Different Rates?

Leaving aside the whole issue of whether or nor the billable hour is the best way to charge clients, do you think it is fair to charge different client different rates for the same work?

This article by Jordan Rothman on abovethelaw.com would suggest the answer to that question is – ‘yes’.

And I actually don’t disagree with Jordan’s outcome, but do disagree with his thinking of why.

After all, at least here in Australia, we very rarely have the same panel rate for all legal panels we are appointed to so; despite, or rather, the fact that we will be doing similar work under the various panel appointments.

QED – IMO – it’s fair to charge different clients different rates for the same work we do (and, HINT, it all comes out in the wash when you look at the Average Realised Rate – but I will leave that for another post).

But, and here is the critical difference I have with Jordan’s post, different clients will equate a different value to the work being done by you – and so it is more than fair to charge one client more or less than another client perceived on the value of the service they are getting.

For example, and I accept this is somewhat crude, somebody who has never been divorced before and whom your firm ‘looks after’ in a very emotional period of their life is way more likely to value the service your firm provides than someone going through their fifth divorce – so charge them more!

If you want to have a chat about how you can maximise your value opportunities, feel free to reach out.

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Microsoft: An example of how not to communicate price increases due to ‘changing market conditions’

“As of April 03, 2023, the subscription fee for Microsoft 365 Family will change from AUD 129 to AUD 139 to address changing market conditions.”
Microsoft email notification 19 March 2023

Okay, not a huge increase. But:

absolutely no explanation or detail as to what those “changing market conditions” are.
no explanation about the additional value being provided.
no detail about any additional costs being incurred.
no information provided around whether the scope of services provided will change.

Other than to say: “if you don’t like this increase, here is a link to unsubscribe”, absolutely nothing.

My take:

a really badly drafted email to loyal subscribers (I think my family have subscribed to Microsoft 365 Family for around 10 years).
a missed opportunity to set out all the great features that Microsoft 365 Family provides – and there really are a lot -and why paying AUD 10 per year more will be worth it at the end of the day (after all, this is less than AUD 1 per month).

TIP

If, like me, you got this email can I suggest you file this away as an example of how NOT to communicate a price increase to your clients/customers.

And if you need help talking through how you might be able to do a much better job than Microsoft have in communicating price increases to your loyal clients, feel free to reach out:

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Photo credit: Ross Findon on Unsplash

Peak loading – Hourly billing with a twist

Not exactly sure where I came across this pricing menu by a translation service provider in Malaysia – Lexup – so apologies if I am not giving you the credit you deserve because this really grabbed my attention.

A translation service focussed on the legal profession that not only charges by the minute (let alone 6 minute units), but whose rates vary depending on how urgent your need is.

Alternatively, if you’re not happy with the hourly billing model, then let’s go old school (Charles Dickens era) and pay by the word. Again though, the quicker you want your work back, the more it will cost you!

Peak-load pricing. I have no idea why law firms have not adopted this years ago!

As usual comments are my own – but I’m sure there is someone out there who can tell me the optimum price to time!

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Report: The top 5 measures of ‘Value’ – in your client’s eyes

If you missed it, the recently published ‘The Legal Spend Landscape for 2022‘ by Apperio sets out the ‘Top 5 Measures Of Value‘ in the eyes of the survey respondents – aka, your clients!

In order, these included:

Outcome of legal matters – 66%
Hourly cost per lawyer – 60%
Spend forecast vs Actual spend – 46%
Risk exposure – 43%
Overall spend by law firm, matter type or business unit – 40%

Interestingly, in the same Report, the Top 3 answers to what the ‘Most Effective Techniques For Controlling Legal Costs‘ were:

Structuring more legal work under AFAs – 74%
Utilising specialist software for monitoring and maintaining cost – 63%
Centralising all legal spend through the legal department – 49%

And I very much suspect that the last of these – “Centralising all legal spend through the legal department” – is going to be a post in the near future, either here or on my other blog.

As usual, comments are my own and I welcome feedback.

Have a great week all.

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From 996 to 1075 and a cap on billable hours – what’s going on?

If you missed it, last week TikTok owner Byte-dance announced that it was moving its employees away from their 996 work week to a new 1075 work week.

For the uninformed, which included me until last week, 9-9-6 required Byte-dance employees to work from 9am to 9pm 6 days a week. A time schedule that would make most lawyers blush. Fortunately for Byte-dance employees, their new – light-on – work schedule is 10-7-5, or from 10am to 7pm 5 days a week.

Clearly a step in the right direction when it comes to employee well-being and mental health.

Anyhow, I comment on this for three reasons:

First, Legal Cheek recently published a post that revealed the average working hours of junior lawyers in the UK. Of the 2,500 junior lawyers surveyed, junior lawyers at Kirkland & Ellis racked up the longest average working day, clocking on at a tardy 9:14am and off at 11:28pm. The survey is silent on whether this is a 5, 6 or 7 day week. I recommend you take a look at the full list, makes for rather sad reading (if junior lawyer mental health really is an issue of concern for the industry)
Second, last week the New York State Bar Association Task Force on Attorney Well-being suggested that there be a cap on billable hours at 1,800 hours per year.

The announcement had no less than Roy Strom comment on Bloomberg Law that:

Firms are too scared to impose a cap because it would be hard to hire the number of additional lawyers the cap would require. It would also put a huge dent in profits.

And

The billable hour serves as something of a measuring cup ambitious people pour themselves into. The unfortunate truth about Big Law is that it doesn’t have many alternative definitions of success.

If Roy’s comment is right, and it is an unfortunate truth that Big law has little alternative but to measure success by the amount of hours billed then, in my view, that is a really sad reflection of our industry. Because surely other metrics, such as the quality of the work provided and client satisfaction should have equal weighting. Not to mention churn and retention rates.

My third and last reason for commenting on all this is a personal one. I have long said that asking lawyers to work 2,000+ billable hours a year wasn’t a good thing – and there must be a reason why that is my most read post, so there is some comfort in seeing such an esteemed group as the New York Bar Association finally agree with me.

Have a great week all.

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Photo credit to Nathan Dumlao on Unsplash

10 takeouts from BigHand’s Legal Pricing & Budgeting Report

I’m a cynic, so usually read industry reports published by industry providers with a huge pinch of salt, but every now and then you get an exception to the rule. So is the case with BigHand’s recently published ‘The Legal Pricing & Budgeting Report’, which is full of really insightful information (so read it!).

Here are my 10 take-outs (NA = North America and UK = UK):-

From

The damning:

To the surprising:

To some obvious:

And some knowns:

With a few, “What the?” (as in, only…)

With a great conclusion:

10.

As I said, as a rule I don’t recommended reading these types of reports as they typically are a waste of time; but this is one I have no problem saying “go read it!” – and if you have any thoughts/comments, post them in the comments section below!

Have a great week all.

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Charging like a wounded bull: 10 things to consider

I came across the phrase “The Marquis de Sade approach to billing clients: ‘Bill them till they scream’” in Ori Wiener’s ‘High Impact Fee Negotiation and Management for Professionals: How to Get, Set, and Keep the Fees You’re Worth’ (a book a highly recommend). It made me laugh, and got me to thinking:

‘What would be some of the things I would want to be looking out for in a law firm’s invoice?

So here’s a quick list of my 10 things, but feel free to add your own 🤪 :-

Being charged [for]:

Expenses/disbursement – especially if they are unaccounted for (and particularly on fixed fee matters)
Travel time – especially if your lawyer is in the same town/city as you
‘Reading in’ time – especially when a new lawyer joins the team because one of the original team members has resigned or left the team
Team meetings to discuss your case/matter
Multiple lawyers attending the same meeting – especially if they have different time eateries
‘Out of scope’ work without a corresponding change order
Block billing of numerous tasks without explanation
Promotions – charge-out rates being increased for lawyers on your case because they have gain an additional year of post-qualified experience without adding any additional value
‘Bill padding’/‘Rounding up’ – when your lawyer rounds their time up to the next billable unit
‘Stickiness’ – where senior lawyers are doing work on your file that could be easily have been done by more junior lawyers, but they do it because they need to meet their internal billable targets.have different time.

As I say, feel free to add some of your own in the comments.

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Do you know the 5 Cs of Value?

My friend John Chisholm hit the big time last week, he made the front-cover of Issue No.5 2021 of Legal Business World. All joking aside, John’s article ‘Who subscribes to your law firm?‘ (starts on page 8) is a really good read.

One of the gems I took away from John’s article is what he calls: ‘The 5Cs of Value’, which are (in his words):

Comprehend value to clients.
Create value for clients.
Communicate the value you create.
Convince clients they must pay for value.
Capture value with strategic pricing based on value, not costs and effort.

These are really good cornerstones to have, even if you don’t subscribe to John’s views of value-based pricing (did you see what an did there 🤪).

In any event, if you are new to the concepts of subscription and value based pricing, read the article because you’ll get a lot out of it.

And if you want to know more about the important topic of value based pricing in law firms, call him – but make sure to extract as much value as you can from him!

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A lesson law firms can learn from Apple’s approach to discounting

What’s your law firm’s approach to discounting?

As far as I’m aware, Apple has never allowed retailers to discount (or have any other say in) its products pricing.

Ever.

As far as I have understood it, Apple’s rational for this because it has always insisted that it – and it alone – has complete control over its pricing.

Why is this important?

In short, because while you will see retailers heavily discounting every other computer software and hardware manufacturers’ products during this year’s EOFY (lockdown) sales, no such offer is made on Apple products.

You don’t see red ink on Apple product price tags.

Ever.

So what can law firms learn from this approach?

Always understand the value you provide to your clients
Never underestimate your worth
Always retain control over your pricing

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Photo credit to Tamanna Rumee on Unsplash