1/26/09

How to - Step One

Having been taken to task on my How To Alternative Bill post by Ron Baker, I have been making some progress on this effort so it's time for an update. Ron presses the Just Do It approach. When we just do it, we need to be able to do two things up front. First - we need to build budgets in one sense or another to value bill. This is the case whether it's a flat-fee or pretty much any other type of value billing since we need to know our costs on some level. I've heard numerous partners tell me they know "in their gut" how much a matter or case will cost in fees. This is one approach. But it makes sense to have some benchmarks for how much a type of matter will cost. Of course, all matters are different, but some are actually quite a bit alike. Following Ron's lead of just picking a client and getting started, you should consider picking a type of matter you know well to handle for this client. Then you can construct a budget without a lot of effort. You can also check the fees from a few similar matters as a reality check on your estimate. So without too much over-analysis, you can have a good, reasonably informed budget to use. The risk factor is low, likely low enough to match the average risk a firm takes on a new matter. So our risk issue is well addressed. Second - we need to monitor our performance over the life of the matter to see how we perform against the budget. Even if you choose not to share this effort with the client, you will be learning how to manage against the budget. This will tell you how honest your budget was and it will tell you when you need to make adjustments in how you manage the matter. If you plan to continue to value bill in to the future, this information feedback will be critical to your success. It will help you focus your efforts on higher value tasks and to manage your business with profitability in mind. Both of these efforts can be kept relatively simple. Lawyers do have a tendency to over analyze and cripple their efforts by seeking perfection. Ron's advice makes sense in that context. And in my recent diggings, I have found that firms can perform both of these tasks. At first they may be very manually intensive, but over time necessity will drive development of automation. And this automation will be laser-focused. Too often large firms serve up great technology that never gets used. In this situation - technology will be highly focused on meeting pressing needs. Thus I see it getting used and being quite valuable. The Bottom Line! Firms already have tools to handle value billing. These are likely not the best tools, but they can get the job done. And once you start value billing, you will be motivated to implement better tools and will know exactly what you want them to do.

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2 comments:

Jackie Hutter, Intellectual Property and Patent Business Strategist and "Recovering Patent Lawyer" said...

Great post, Toby. I would add that lawyers should not "reinvent the wheel." Many legal specialites, such as patent, trademark, real estate etc have operated for many years with flat or fixed fees. These lawyers already know how to estimate total time, gauge efficiency and assess ROI of fixed fee work. Those newly moving into this uncharted territory would be well-served by learning from those who ventured into(and hopefully succeeded in) the "strange new world" of alternative billing. As someone who has played in the fixed fee space both as a law firm shareholder and as a senior corporate lawyer, alternative billing is only scary if you think it must be.

Jason Mark Anderman said...

Toby is right on the mark here. I also think few people are better prepared at law firms to lead the way to alternative fee arrangements than knowledge management experts. A deep, searching analysis of the work and the interplay between the firm and the client, with a supply chain management focus, will make these arrangements possible, and KM experts think about these issues all the time, especially if they have a process improvement background.

 

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