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.

Although Toby is the master of this discussion, I thought I’d chime in with some open-ended questions of my own.  There has been a lot of talk about attorneys moving away from the billable hour method and look toward either flat rate or some type of maximum billable rate in order to coax more clients (or more of a specific client’s work) to themselves and the firm they represent.  But, my issue is this:  What Does That Mean for Me (the non-billable guy)???
Here are some (very simplistic points) of the benefits that attorneys and clients get from a flat-rate, or similar alternative billing method.
Attorneys:

• Motivated to get client’s case completed 
• Potential ability to take on additional cases
• Profits are not determined upon the number of attorneys on the roster
• Ability to manage the client’s matters rather than looking at the time spent
• Leverage different billing approaches to attract business that may have gone to competitors

Clients:

• Ability to determine exact costs of legal representation
• Simplify the billing process (less time reviewing those billing invoices)
• Use leverage of different billing approaches to determine what works better for their issues

So, if we look past all of the complexities and paradigm shifts that will need to take place in order to get to alternative billing, what does it mean for the support staff of a law firm?
Right now, the way a firm makes money is by charging more hours to a client.  The more “billable” people you have on the matter — the more hours you bill — the longer you take to finish the matter — the more you make. Since raising rates this year seems to be off limits, the only way to increase the bottom line would be to hire more billers.  And, we seem to see that that isn’t an option either.
There is one word that gets tossed around a lot when you talk about alternative billing — Efficiency.  We all seem to agree that the billable hour promotes inefficiency because the attorney will actually lose money by finishing up a matter too quickly.  If alternative billing requires that matters be handled more efficiently, then that should push for tasks to be pushed down to the level that can handle them in the most time and cost efficient manner.  It should also push for automated tasks when possible and the ability to find the most experienced people to manage the tasks.  
Tasks that do not require a licensed attorney to do, should not be taking up an attorney’s time.  Why pay someone the equivalent of $80 an hour to do the task that someone paid $35 and hour can do?  Tasks will be pushed down to the level that creates the highest rate of return.  If that means a paralegal does the work instead of an associate, then the paralegal should do it.
Tasks that can be automated should be.  This is something that the folks in Knowledge Management have been touting for years, but have not had total success in implementing due to the fact that if a task is automated rather than handled by a biller, then the firm cannot make money off that task.  In an alternative billing world, there would be a push to automate these tasks, and train the attorneys and other staff on how to use the automation efficiently.
The end game of alternative billing is to enable the firm to handle more of the client’s work in a shorter amount of time, and charging a rate that allows the firm to make as much or more than they were with the billable hour rate.  The client wants the firm to handle more of the work in a shorter amount of time, and to have a standard rate charged on each matter that will allow the client to predict the money spent for legal work.  
If the firm plans to take on more work, it absolutely has to make the handling of the work as efficient as it can.  Finally creating efficient methods, standard procedures, and automating tasks when possible.  This should encourage firms to finally implement some of the projects that KM has been discussing for the past few years.  It is also a golden moment for well knowledgeable staff to step up and take on take on those tasks that they are qualified to do.