3/12/13

Bad is Bad?

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A good friend recently switch from BigLaw to in-house, not as a lawyer but on the business side. He shared a story about working with some consultants on a project. The story caught my attention not for the subject matter, but instead for the billing practices of the consultants.

The company is revising its records management practices. Although simple sounding, these efforts involve all kinds of issues both legal and business related. Companies have so much data and so many compliance rules to follow and they need to minimize risk at the same time, So these efforts are not for sissies.

The story involves some consultants from an unnamed provider; not a law firm. At a recent meeting ten Subject Matter Expert (SME) consultants attended. They covered compliance, technology, economics, etc. Some were even PhDs ... which I read as “expensive.” And these consultants fly in for regular meetings from around the country. I didn’t ask, but would venture they bill for travel time.

Is anyone at the company screaming about this service approach? No.

If this was a law firm instead of a consulting company, you know there would be screaming.

Where am I going with this? It’s not to defend law firms, but instead to gain perspective.

Why aren’t people screaming? Because they expect consultants to behave that way. They used to expect lawyers to do the same, but something changed and they no longer abide such behavior. What changed was Trust. In the market it appears that clients are treating their lawyers as opposing parties instead of trusted advisors. They feel lawyers are there to just bill as many hours as they can and get rich at the client's expense.

With consultants, I figure clients trust that they will bill as many hours as they can. Either that, or the client is focused on an end-goal (in this case a new records management practice) and are less concerned about how that goal is achieved. So the clients have some level of trust or understanding about the service model of the consultants. This makes it clear what law firms need to do: address the trust issue.  Yes - firms still need to “reinvent” and join the future, but more importantly, they need to re-establish a trusted advisor role with their clients. Without that reaffirmed trust, all of the efforts on efficiency and cost savings may well fall short of meeting clients’ expectations.

And, oh yeah … the service being provided by the consulting company could easily be part of a law firm’s offerings. I’m just sayin ...

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5 comments:

Anonymous said...

You assume way too much. As a matter of fact, consultants today face many of the same billing issues as lawyers. I'm a former consultant and now executive management in IT for a BigLaw firm who hires consultants... And I can't recall the last time I was paid for or paid for travel time. Plane tickets and hotel, yes, and a per diem for food. Billed by the hour? Not generally. Fixed bid contracts are by far the most common.


Toby Brown said...

Anonymous - My point was not that consultants have no pricing pressures. The point is that the nature of pricing pressure on lawyers includes a significant broken trust component. So even if lawyers implement efficiency tactics, clients will still be unhappy with them. Until they address the trust issue, everything else will be window-dressing.

The fact that "fixed bid contracts are by far the most common" demonstrates a reasonable level of trust. Clients too often don't trust fixed fees from lawyers and label them as "hourly billing in disguise." A manifestation of the distrust.

Bruce MacEwen said...

As a former lawyer who's now a consultant, I side with Toby on this one: It all comes down to Trust. The few times in days gone by when a partner on a matter I was working on would send a flat bill out "for professional services rendered" were based on a bedrock assumption of mutual trust: Trust by the client that the firm's work was worth the flat amount posted, and trust by the firm that the client would recognize it as fair and pay in full and at once.

But I say in days gone by advisedly. Today such flat fee billing from a firm is an invitation to the client (often now the CFO, not the GC) to second-guess 'til the cows come home. "What would it be on the hourly clock? (I assume you keep track of hours all the time anyway, right?) Because if that would be less, that's what I want."

In several years as a consultant we've hourly-billed on a grand total of three projects--where the client requested it and it in fact made sense. Everything else? Flat fee agreed up front, usually in a conversation lasting < one minute.

(And no, I wouldn't dream of billing for travel time; yikes.)

Susan Hackett said...

I'm with Bruce and Toby on this - there is a trust issue, for sure, in part because trust was a one-way street for so long in so many firm client relationships. As Bruce noted about his practice, the vast majority of my retentions are also project based/flat fees, carefully scoped, and usually offering tiers of service and pricing choices, but always creating predictable pricing options that the client chooses and can evaluate the value of prior to the retention commencing.

The trust issue is thus a value issue - I see it as a centerpiece of my relationships and retention agreements with clients in two distinct ways: first, through transparency - I always take the initiative to explain my fees and carefully scope and describe what my work will include (and not include) for the flat project fees I charge so that clients can judge for themselves without having to ask why my fee is what it is; and second, through my service guarantee - there's no better way to engender trust than to write into your contract that if the client is not completely satisfied that I met or exceeded expectations, they are welcome to adjust my fee to the level they think is appropriate. Hat tip to Pat Lamb/Valorem for this practice. This shifts the risk entirely to me to perform to the client's satisfaction ... where it belongs. I've earned my clients' trust by producing great results for many years, and am happy to continue to invest in the furtherance of that trust with new clients. Trust extended usually works in my world, and it always earns rewards.

I've never had anyone ask me for a fee adjustment or their money back [please say I didn't just jinx myself, Toby!]; indeed, my clients return and refer me to others precisely because I trusted them to be great clients before I required them to trust me as a service provider. Trust is a two-way street.

Anonymous said...

DLA Responds to Charge That Emails Prove Firm Overbilled http://www.newyorklawjournal.com/PubArticleNY.jsp?id=1202593689941&thepage=1

 

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