Applying Lipstick On The Oldlaw Pig

Dear Oldlaw,

You will buy technology and call it innovation.

You will subscribe to retrospective benchmarking and call it your future.

You will imitate your competitors' claims and say you are different.

You will cross sell your services and call it collaboration.

You will do annual performance reviews of your staff and call it motivation.

You will make your "fee earners" account for every 6 minutes of their day and call it inspiration.

You will offer billable hours in drag and call it fixed pricing.

You will buy business and call it lateral hiring.

But you will never, ever change your business model of leveraging people x time x hourly rate because that would be called disruption.

Remaining Oldlaw always.

Transformationally & genuinely yours,

Newlaw

www.chisconsult.comwww.timelesslegalnetwork.comwww.verasage.com

@ChisConsult "Influencing motivated professionals to make a difference"

VeraSage Symposium & Art Of Value Conference

                        Five Days, Two Events, One Unique Opportunity

WARNING: These events are not for the conservative risk averse, the time billers or the timekeepers, nor are they suitable for those professionals* who pine for the status quo or do not want to make their professions' future-and those of their customers-better and brighter.

Ever been to Allen, Texas? No? Neither have I but I will be there with many other professionals from 8-12 November for the premium pricing & consulting events of 2017.

Every 2 years Fellows of VeraSage (the revolutionary think tank for professional knowledge firms which challenge people to break free of practice methods that marginalize their professions, undermine their purposes, and fail their clients) get together to share ideas and learn from one another.

This year we are opening our Symposium up to any like minded professional to join us for 2 days on the weekend of the 11-12 November.

The VeraSage Symposium program (full details which can be found here) includes:

Saturday, November 11

  • 7:00 am – Registration and Breakfast
  • 8:00 am – Welcome Session
  • 8:30 am – State of Value Pricing in the Professions
  • 10:00 am – DETalks by VeraSage Fellows
  • 12:00pm – Lunch
  • 1:00 pm – Q-Force Exercise
  • 2:30 pm – Keynote, Part 1 by Ron Baker
  • 3:30 pm – DETalks by Attendees
  • 6:00 pm – Dinner with VeraSage and TopGolf

Sunday, November 12

  • 8:00 am – Registration and Breakfast
  • 9:00 am – DETalks by VeraSage Fellows
  • 11:00 am – DETalks by Attendees
  • 12:00 pm – Lunch with Greg Kyte
  • 1:00 pm – Keynote, Part 2 by Ron Baker
  • 2:30 pm – Group Conversation
  • 3:30pm – Closing Session

Preceding the VeraSage Symposium on the 8-9 November at the same venue is the Art Of Value Conference. Kirk Bowman, the founder of Art Of Value together with Ed Kless will take participants through 2 amazing days teaching the art of value pricing and effective consulting. Many of the VeraSage Fellows will also be on hand at this event.

The Agenda for the Art Of Value Conference ( full details which can be found here) is:

Wednesday, November 8

  • 7:00 am – Registration and Breakfast
  • 8:00 am – Welcome Session
  • 8:30 am – Keynote by Special Guest
  • 10:00 am – The Art of Questions
  • 11:30am – Lunch
  • 12:30 pm – The Art of Consulting, Part 1
  • 2:00 pm – The Art of Options
  • 3:30 pm – The Art of Consulting, Part 2
  • 5:30 pm – Dinner with Other Attendees

Thursday, November 9

  • 7:00 am – Registration and Breakfast
  • 8:00 am – Welcome Session
  • 8:30 am – The Art of Pricing
  • 10:00 am – The Art of Saying “No”
  • 11:30am – Lunch
  • 12:30 pm – The Art of the Proposal
  • 2:00 pm – The Art of Project Management
  • 3:30 pm – Value Pricing In Your Profession (Accounting, Creative, Legal, Software)
  • 6:00pm – VeraSage Cocktail Reception

Between events on Friday 10 November there is a networking day where participants can, among other things, visit the Dallas Book Depository (from where President John F. Kennedy was shot) or the Fort Worth Stockyards (where the Wild West was created), be part of a live recording of the Soul Of Enterprise radio show hosted by Ron Baker & Ed Kless and then in the evening head off to a tailgate party before watching a Texas institution-High School football.

So why not join the likes of VeraSage Co-Founders Ron Baker, Dan Morris & Justin Barnett; Visionary of Value Kirk Bowman;Senior Director, Partner & Development at Sage & Soul Of Enterprise co-host Ed Kless; co founder of O'Byrne & Kennedy, the UK's most innovative accounting firm, Paul Kennedy; firm positioning & pricing guru Tim Williams; Thriveal member and writer, disruptive accountant Adrian Simmons; part time CPA and full time comedian Greg Kyte; cloud pricing for accountants expert Mark Wickersham ;Australian thought leader & lawentrepreneur Matthew Burgess; financial services wizz & innovator Catherine Robson; the cost accountants' anti-Christ Dr Reginald Tomas Lee;Virginia's timeless legal counsel Tom Bowden; Co-Founder of USA's most innovative timeless litigation law firm Valorem Law, Pat Lamb; Principals of timeless law firm Andrew Boer & Hugh Watson; legal disruptor & Deloitte Conduit Law partner Canada's Peter Carayiannis; Immersa Law's Marcella Conte; Performance Leader founder Ray d'Cruz; and me plus many more at either or both of these events?

You can attend either or both events and special prices apply as well as early bird pricing up until 15 August. Full details and registration for both events can be found here.

 

*"a professional is someone who is responsible for achieving a result rather than performing a task" Michael Hammer.

Future Firm Forum 2017 Queenstown 20-21 October

Millbrook, Queenstown, New Zealand is again the magical setting for Simon Tupman's Future Firm Forum. Now celebrating its 10th year, Future Firm Forum has established itself as one of the annual marquee events in the Australasian legal calendar.

I am privileged to have been invited to partake this year and to join such fabulous presenters as Kate Billing and Paul Leacock from the boutique leadership practice Blacksmith, Gene Turner from the online legal document generation provider Law Hawk and "the face of New Zealand" the inspirational Ngahihi o te ra Bidois.

I have heard from many previous attendees and presenters that Simon's hospitality (pour me another pinot please) and the social activities (golf anyone?) he organises are legendary and it is difficult to think of a much better environment to be inspired, learn, network, socialise and relax for 2 days than at Millbrook.

Numbers are limited to ensure an intimate and highly interactive program but Simon assures me there are still some spots available so why not join me and others from the Australian and New Zealand legal profession in Queenstown this spring?

Full details of the Forum can be found here together with registration.

 

 

 

 

The Dead Parrot Skit (Legal)

  Who will ever forget Monty Python's Dead Parrot skit?

 

But if you thought that was funny below is a transcript of a conversation between an Oldlaw partner Michael and his client John:

 

"John:Michael how are you? Thanks for eventually getting back to me. I left a few messages for you about that last invoice you sent us. Sorry I have been sitting on it for some time now but I really need to discuss it with you.

Michael: Sure John sorry you know how it is, meant to ring you back but been soooo busy (on other clients work). So what seems to be the problem?

John:You know how we agreed on a fixed fee for that work you were doing for us?

Michael: Yep sure do.

John: Well Michael its just I got your invoice and its not a fixed fee.

Michael. Yes it is.

John.No it isn't Michael. The invoice is higher-substantially higher as a matter of fact- than the fee we agreed.

Michael: Oh yeah sorry about that but well that is because some of work took longer than anticipated and we did some other work that wasn't planned for. But our invoice is still fixed.

Joe: But Barry its fixed at a higher fee arbitrarily set by you. I never agreed to that fee.

Barry: No Joe its not an arbitrary figure, its not as though we just picked that fee in the invoice out of thin air. No way. I have the timesheets to prove it.

John: Michael you may well have some timesheets but they are quite frankly irrelevant to me as we agreed on a fixed fee in advance for this work.I don't care if it took you a longer time or even a shorter time to complete that work than you had anticipated.We had a deal.

Michael: Oh come on John, be fair, I can assure you all the work was necessary to get the deal done, and it has cost my firm more to get you the result you wanted.

John: Michael we had a deal on the fee and with respect its up to you to manage what time and resources you put into getting this work done and it is not my fault if it has taken longer than you anticipated.And anyway just what additional cost is it to the firm because it took longer than you thought?

Michael:well you know John as your lawyers we sell our time to you and if we are giving you time for free its costing us big time.

John: Michael I am not buying you or your law firms time, I am buying your skills, experience and expertise to get me the outcome and results we agreed upon. Again explain to me what additional cost your firm is incurring on this "additional"time? Do you pay your lawyers by time?

Michael: No we agree an annual remuneration with our lawyers, but we charge them out by the hour to our clients as you know.

John: So there is absolutely no additional cost to the firm?

Michael:Oh there is John as the hourly rate each lawyer has is not all profit for the firm. The hourly rate meticulously includes a whole range of actual costs we need to recover before the firm even starts making a profit.

John: Michael I don't know where you pulled all that from but I don't believe- and I know you don't really believe- that there are any additional costs whatsoever to the firm so don't try that on me. But even if I was to humour you and agree there were some additional costs I don't care two hoots about your costs Michael just as you shouldn't care about mine. The fact is we had an agreement on our fees and that is that.

Michael: John but what if I can prove to you that the extra time we put in was worth it and necessary will you pay the invoice then?

John: Michael if all this additional work was necessary and unforeseen what didn't you just ring me before you did all this other work and we might-I say we might- have been able to come to some agreement on any change in scope and maybe I might have agreed to a change in the price. But you never rang me Michael.

Michael: John how could I ring you as it was not until the end of the month when I looked at the timesheets of everyone who worked on your matter that I even knew there was additional time and work involved.

John. Michael you are not serious?

Michael:Look John because you are such a good client lets not let this little hiccup come between us, so lets see if we can come to some arrangement on fees.What about if we split the difference.That seems more than fair to me. What say you?

John: (click).

Michael: John? John? You there John? Damn I just wanted to remind him our hourly rates are fixed too."

Click here to watch the full Dead Parrot Skit

 

www.chisconsult.com  www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

The Elephant in Oldlaw

While Ist July marked the start of a new financial year here in Australia, most Law firms had the weekend off so it was Monday 3rd July when it all really began again.

3rd July might have appeared on the surface to be just like any other day but rest assured it was not.

Armed with information and "surveys" from the industry, the legal press, the benchmarkers, HR consultants and the like, and following remuneration and career discussions with staff, 3rd July represented the culmination of months/weeks/days of seemingly endless meetings at executive/management/partner level involving any number of revised spreadsheets and arithmetical exercises, negotiations and compromises.

 

What the new financial year means for Oldlaw* lawyers

So what did most lawyers who work in Oldlaw find when they turned up and turned on their screens Monday morning?

Most found an email from their Managing Partner/CEO/COO congratulating them on last financial year's performance but reminding them today is a "new dawn" and that they can find attached their new hourly rate, expected recorded daily billable hours target and a new (increased) budget for 2017/18.

Most lawyers, simply because another 12 months had passed, received some increase in their hourly rate, while those who were fortunate enough to receive a promotion and a title change (and by the looks of social media last couple of days promotions were rife in most firms), they received a larger increase in their hourly rate and their budgeted fee targets, commensurate with their promotion and new status.

 

What the new financial year means for Oldlaw clients

Many clients might not notice much difference in their dealings with their Oldlaw firms at least in the first week of July, except they may open their (e)mails to read through Tax Invoice narrations that the firms would have been feverishly preparing on 29 and 30 June.

Some clients will be receiving emails or newsletters from their Oldlaw firms informing them of the various promotions made at the firm.

Some clients may also receive an email informing them that due to CPI and other cost increases and/or promotion of lawyers (impliedly indicating that with promotions comes higher salaries), and/or as hourly rates have not increased since ........(fill in time period), the new hourly rates effective 1 July will be as follows........(fill in reverse competition rates).

Some clients may not be informed of any such changes (even if changes were made) and may not notice any rate increases until they receive their first Tax Invoice for any work undertaken from 1 July.

 

So what?

So what's the big deal you may well ask? Oldlaw firms have been doing this for eons (in Australia at least for the last 30 years) and everyone- clients included-understands that hourly rates cannot remain static when costs to run a firm are rising all round. Indeed that is the very basis of the principles of cost plus pricing-price your services or products you sell above the costs to produce them.

The hourly rate, so the Oldlaw mantra goes, is a mix of the cost to keep the doors of the firm open plus something added for profit.No one of course is quite sure what exactly is the cost component and what exactly is the profit component for 2 reasons.

Firstly the hourly rate is not a cost plus exercise for most firms but really an exercise in reverse competition ( what are our competitors rates? what are the market rates? where do we want to sit in the market place? what can we get away with? etc).

Secondly an hourly rate does not equate to any cost of production (even excluding some arbitrary profit component) because in Oldlaw firms, time is not a cost.Period. It is the B.S. of 20th century that this is still peddled and believed by Oldlaw and their consultant/advisers. It is simply untrue, has been proved to be untrue and has no justification whatsoever in economic theory.

Read and listen to this if you do not believe me.

It is another lie Oldlaw tells and one I used to tell myself (to be fair I didn't understand it to be a lie 15 years ago- Oldlaw now know it is a lie but still tell it anyway).

 

So what about value to our clients?

So from the stroke of midnight 1 July each year a miracle occurs. Oldlaw has defied all economic theory and logic, such that magically the value being provided to Oldlaw clients increases proportionately to the increased cost and title being arbitrarily allocated to each lawyer.

Add to this that clients do not care one iota about your costs (they have their own costs to worry about) and that the amount of time a lawyer spends on anything for a client bears no resemblance to the value provided to the client, and you can see what a bind Oldlaw has got itself into.

As my friend Matthew Burgess co founder of Viewlegal so eloquently put in in this post  "Tyre pumping, timesheets & The Force"  when commenting upon the hourly rate increases in Oldlaw firms:

"Best wishes for the new financial year ahead, particularly if you have suddenly been asked to be somewhere between 5% and 23.6% (depending on your firms definition of current CPI rates**) more valuable to your customers …"

 

So who should care?

Thank goodness in Australia we work in a (largely) democratic society and legal environment where many choices are open to law firms and their clients as to how they both sell and purchase legal services. No longer it is a case "you can have any colour you like so long as it is black" (i.e. pay my hourly rates or else) which predominated for so long.

So these days, in response to market forces and to be perceived to be innovative like their competitors ( i.e the same as their competitors), most Oldlaw firms offer all sorts of billing options to clients-hourly rates, capped rates, blended rates, fixed fees, and some even offering value based fees.

Sounds great in theory for Oldlaw to be offering all these options but there is just one (big) problem Oldlaw has. Whatever Oldlaw may say about being innovative, overwhelming they would still prefer to bill- not price- their services ( billing occurs after the work is done whereas pricing occurs before the work is done).When they do (reluctantly) offer a price, for so long as they continue to measure and reward time, Oldlaw will always relate what they do back to time and their pricing will inevitably reflect little more than "billable hours in drag".

You only have to have to read those Monday morning emails to know what I write is true.

Timesheets remain the elephant in the firm for Oldlaw.

 

* I define Oldlaw as any firm that leverages people x time x hourly rate

Related:

https://www.thesoulofenterprise.com/tsoe/timesheets

http://www.chisconsult.com/firms-get-over-it-the-pricing-debate-has-moved-on/

http://www.chisconsult.com/hourly-billing-is-accurate-transparent-ethical/

 

http://www.chisconsult.com/10-rules-about-hourly-billing/

www.verasage.com/blog/timesheets-are-terrible-cost-accountants

http://www.chisconsult.com/burn-baby-burn/

www.chisconsult.com  www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult 

Influencing motivated professionals to make a difference.

"Hourly billing is accurate, transparent & ethical"

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Recently an Oldlaw partner told me that while a small minority of lawyers may have abused time based billing, overall hourly billing is "good" because it is "...accurate, transparent and ethical".

This of course is not the first time I have heard (and read) similar comments as further justification for maintaining the billable hour model and indeed when I was still a practising lawyer I used similar terms myself.

While there are several purported justifications for the existence of the billable hour, including:

  • it is easy to implement and understand,
  • it records effort,
  • professionals sell time,
  • it is the norm as most of our competitors charge by time too,
  • it is acceptable to most clients & some demand it,
  • our practice management system is built around time,
  • our firms measurement and rewards structure is built around time,
  • it transfers all risk to our client.

I, like many, challenge the notions that the charging by time is "accurate, transparent and ethical".

"The billable hour is accurate"

Accurate=to be correct, exact, without any mistakes.

Of course to charge by time you must keep a record of your time correct? And if your contractual engagement with your client is to charge by the hour or part thereof ( broken down into 6, 10 or 15 minute units or whatever other iteration the management consultants, most of whom do not charge by time themselves, dream up) it follows that your time recording must be, at the very least, reasonably accurate.

Ever since the introduction of time based billing, Oldlaw firms of all shapes and sizes have been drilling into their "fee earners"( an awful expression, only exceeded by the derogatory term "non fee earners") the importance of accurately recording all billable time because that is what is primarily measured and rewarded.

Manual recording by time of course has moved to automated recording of time with a plethora of practice management vendors out there extolling the virtues of their systems which "capture time".Alas! Even with all the help from technology we still cannot seem to get time recording accurate.

Why? Simply because time recording requires human input to either manually record time or to push a button to start/stop automated recording time.It is physically and psychologically impossible for human beings, no matter how good their intentions, their intelligence or their "time capture" software to accurately record time spent on anything. Law is not practiced in some kind of vacuum. Like most of us, lawyers are continually interrupted on whatever they are working on by emails, by colleagues (including those "non-fee earners"), by phone calls, etc-so unavoidably accurate time recording gets "overlooked" .

At best, professionals record the time we think we spent on something or what we think we should have spent on something.

At worst, we forget completely the time we spent on something maybe for always and sometimes for days or even weeks (often until the managing partner sends an all firm email on the second last day of the month reminding all that "chargeables are down and all fee earners must lodge their timesheets"),then we "guesstimate" or we simply make it up.

 

"The billable hour is transparent"

Transparent=easy to perceive or detect, open to public scrutiny

I confess to never being sure why this statement has any ring of truth to it. It just seems to be one of those sayings that rolls easily off the tongue and if you say it often enough people will believe it.

I suspect the "transparency" part stems more so from some notion that "you only pay for the time spent" rather than any real "openness" context. Of course there are times when a client knows or observes when their lawyer is physically doing something (such as attending the same meeting, speaking to them on the phone, etc much like watching your lawn mower man mow or your window cleaner clean).Theoretically it is even possible for someone-including a client-to personally watch their lawyer (or watch through technology) performing a task like drafting a document or dictating/typing an email etc.

However as we know (and as many lawyers are only too quick to tell me) the real value of a good lawyer is not so much in their physical competencies but more by their intellectual and social competencies (often called "thinking"). Until technology invents a chip that is inserted in our brain that is somehow linked to a client matter number to track when you are actually thinking about a client's matter, genuine transparency has a long, long way to go.

 

"The billable hour is ethical"

ethical=morally good or correct, in accordance with the rules or standards for right conduct or practice.

Now here is where it gets really interesting. The ethical justification for the billable hour seems to be intrinsically tied to the rules or standards in the legal profession (originally set by the profession itself).It has been an accepted practice for so long to retrospectively bill for their services either by use of an agreed hourly rate or some sort of scale of fees that the legal profession has convinced itself at least that this billing model must be ethical.

Of course both these retrospective billing practices meant that, essentially, clients and their lawyer had no way of knowing what the fees were in advance because the task, activity or time has not yet been undertaken.

Regrettably, as is the case in any industry or profession, there are a minority of providers of legal services who chose to take advantage of these accepted retrospective billing practices.Even though an argument could be mounted that retrospective billing is pretty much the perfect crime, the profession (and in many jurisdictions, the appropriate regulators where the profession failed to or was slow to respond) introduced codes of conduct /rules/regulations to try to ensure clients were protected as best they could be whereby anyone aggrieved by the fees charged by their lawyer could purportedly have those fees assessed, determined or "taxed" (another quaint legal term) to see that they were in essence "fair and reasonable".

One of the inherent problems with even an independent third party assessing a lawyers fee as "fair and reasonable" is that it too is an after the event determination and often is of little comfort to a client if the client was not expecting the quantum of such fees in the first place No Suprises

                                                                                Bill Shock

For so long as the legal profession enjoyed a monopoly on the provision of legal services and for so long as clients were prepared to accept these billing models such practices were deemed "ethical"(note however that neither of these are pricing models they are merely billing models as billing takes place after the work is done whereas pricing takes place before the work is done).

As we know perceptions and acceptance of what constitutes ethical and unethical conduct of course change in accordance with the times particularly as our knowledge increases and community and business norms evolve. The medical profession is a prime example where doctors who once undertook and prescribed cures and remedies in the past based on accepted medical and scientific knowledge at the time, would be judged professionally incompetent and negligent if they applied such remedies today.

And guess what, even in the legal profession the world changed. For starters lawyers no longer had a monopoly on the provision of many of their traditional legal services (our "Grand Bargain" as coined by Richard and Daniel Susskind in The Future of the Professions-How Technology Will Transform the Work of Human Experts was coming to an end), the profession became more deregulated and more and more clients wanted and insisted upon greater certainty and predictability in legal fees.

For many years there have been any number of articles, posts, surveys, and research undertaken by many commentators, observers and participants in the legal profession, including members of the judiciary, bringing into question the ethics of the billable hour and what perverse behaviours it encourages and entrenches into firm cultures.

A recent article in the ABA Journal titled "Not competent in basic tech? You could be overbilling your clients—and be on shaky ethical ground":

"there are no business, practical, or ethical excuses to avoid learning about, understanding, and adopting technology. Yet, at the same time, we must recognize that there are perverse incentives that encourage lawyers to refuse to learn technology—the main one is the billable hour. Increased financial rewards for increased hours encourage lawyers to bill as much as possible for every matter. It’s an incentive structure where lawyers are working in opposition to their clients’ interests.

The seemingly-innocuous decision to skip technology training can lead to overbilling. And if you are deliberately avoiding technology because it means that you can bill more, then you are definitely overbilling. Do not confuse this with a clever billing scheme. This is not “just business”—this behavior is an ethical breach."

 

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Also well worth listening to is Jonathan Stark the founder of the Ditching Hourly podcast and my friend and colleague Ron Baker founder of the VeraSage Institute having a great discussion on the ethics of time based billing.

Here is a link to the podcast.

 

The late Dr Michael Hammer once said:

"a professional is someone who is responsible for achieving a result rather than performing a task"

The Oldlaw business model reduces everything any lawyer does to a series of tasks and I ask how much longer can Oldlaw get away with claiming it is ethical to ask clients to pay for an activity or a task when clients do not even know what the task will be? After all every law firm-I repeat every law firm-could agree its price(s) upfront-they simply choose not to.

If none of the above convinces you about the ethical challenges of the billable hour perhaps have a go at applying The Golden Rule:

If hourly billing were so ethical, would we want it to be universal?

 

Summary

I have never hidden my distaste, my biases and my prejudices of the the billable hour and the "we sell time" culture that has permeated most professional firms, but especially law firms, over the last few decades and the deleterious effects this has had, and continues to have, on the reputation and values of the legal profession, those that work within it and with it. It is truly hard to believe that there are some out there still claiming its virtues but they have their own vested interests in ensuring this model survives long after its "use by" date.

The tide has turned I am pleased to say but there is still a long way to go before we eradicate the billable hour and its partner in crime the timesheet, together with any form of retrospective billing, from the legal profession. We may never and I accept that buggy whip manufacturers will still exist. While an ever increasing number are experiencing a better way of practicing their craft for the benefit of not just themselves but for their clients, the majority of lawyers, instead of being proactive and changing their business and pricing model for the better, will wait until market forces imposes change upon them.

In the meantime Oldlaw however you care to justify the continuance of time based billing if you use terms like "accuracy", "transparency" and "ethical" you must accept that increasingly your customers, and indeed your "fee earners", see these justifications as self serving rhetoric.And a rhetoric that simply does not stand up to any objective and reasonable examination.

We were taught (by our parents) at an early age that ignorance of the law is no excuse. Feigning ignorance of better business and pricing models is no longer an excuse for Oldlaw either.Sherlock Holmes in the search for alternatives to billable hours                                    Oldlaw in search of alternatives to the billable hour

 

Related:

10 rules about hourly billing

ethical issues posed by time based billing in law firms

its only time

the deleterious effects of time based billing

ready reckoner table of advocates for the retention of timesheets

firms get over it the pricing debate has moved on

burn baby burn

 

 

 

 

www.chisconsult.com  www.timelesslegalnetwork.com  www.verasage.com

                            @ChisConsult Influencing motivated professionals to make a difference.

Where are all the Holly Ransoms' in your firm?

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  A few weeks ago I was privileged to speak at leading solvency & forensic accounting experts Worrells 2017 VIC State Conference.(great event Worrells put on by the way)

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If being given the graveyard shift (immediately after lunch) and also being last presenter for the day (standing between professionals and the bar/18 holes of golf) was not bad enough but a baby boomer like me was also following the amazing millennial that is Holly Ransom.

imgres-6Now I don't know how many of you know of Holly-I had certainly heard of her ( hard not to notice a 20 something with a CV that includes the youngest person to be named Australia's 100 Most Influential Women, Chair of the 2014 G20 Youth Summit and the world's youngest-ever Rotary President) but had never met her nor heard her present.

Wow! Holly's keynote about our changing world and in particular the role millennials now, and increasingly in the future will, play was at the same time inspirational, exciting, challenging and scary. As Holly pointed out and challenged the audience in her keynote:

"50% of the world’s population is under 30, and within the next decade this millennial cohort will grow to comprise 75% of our workforce. Mix in that 42% of jobs are due to be automated within the decade and suffice to say that the nature of work and leadership is changing on us- will you be leading or bleeding?" 

Looking around the room full of mainly middle aged, predominantly male accountants and lawyers, as expert and skilled in their crafts as they are, I couldn't help but sense that many were feeling decidedly uneasy or unsure about whether they will in fact be leading or bleeding in the not too distant future.

At least, as they say, forewarned is forearmed and Holly made sure the audience understood the future is going to look very different from the present and bear no resemblance whatsoever to the past.

I was fortunate enough to speak with Holly briefly before her keynote and was surprised to find out she actually studied law-but not surprised to discover she never actually practiced.As she was speaking I kept wondering to myself what if Holly Ransom had have joined a law firm-would she have enjoyed her experience? Would she have been satisfied to be part of the Oldlaw business model (which leverages people x time x hourly rate)? Would she have been able to change some of the things she might not have liked about practising law? Would she have been content? Would she have been able to make an impact anywhere like she has done with her own business?

It also got me thinking as to where are all the Holly Ransoms' in the professions? Why can't we attract them and then the few we do attract, why is it we can't we retain them? Why predominantly in the professions, instead of breeding our own innovators, change agents and disruptors do we buy in or rent the Holly Ransoms' of the world externally?

imgres-7Why can't, as Steven Johnson so persuasively points out in his masterful book "Where Good Ideas Come From?" and expertly summarised in this video clip, the professions breed a culture of innovation from within instead of going external.

As Steven Johnson says "chance favours the collective mind" and after all professional firms are built around smart, intelligent, social people working together many hours per day, so surely they can all get together and maximise the sum of their individual parts to come up with some amazing innovative thoughts and ideas?

But we know that is not how it works in most professional firms don't we? As I (and many others) have written about before the structure, the measurements and the rewards in most professional firms do not engender a culture of collaboration, trust and connectivity necessary for innovation to even get a foothold-let alone survive & thrive.

But back to Worrells 2017 VIC State Conference. I challenged the audience and asked them

"where are the Holly Ransoms' in your firms?And if not, why not?

If you are in a professional firm I ask you the same questions.

Handy Hint: If you don’t have any Holly Ransoms’ in your firm do the next best thing-get her in to speak to your people-she may actually help you uncover your hidden Hollys’.

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www.chisconsult.com www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

Luncheon initiative for Sydney lawyers

https-cdn.evbuc.comimages286715602033324934201original I was fortunate to be invited to a lunch a couple of  Wednesdays ago in Sydney at The Swinging Cat (so good you could have sworn you were in a Melbourne speakeasy!).

While the only problem for me was I had to sing for my lunch (well thank goodness for everyone there not literally sing but speak), it was great to mingle with many professionals from the Sydney legal scene. I was so impressed by what a great initiative this is for lawyers (and anyone in any way connected with the legal profession) who wish to socialise, share war stories, network, and learn about business, management & leadership over some good food and wine in a very informal atmosphere.

Lawyers Lunch is the brainchild of My-Linh Dang Managing Director of boutique M&A,Privacy & Business Contracts law firm Metis Law. My-Linh and her team put on a great show.

I am not sure how regular they hold these luncheons but if you are in the legal profession in Sydney you could do a lot worse than subscribe to Lawyers Lunch and head off to their next lunch. You won't be disappointed.

Melbourne Lawyers Lunch next please?

www.chisconsult.com www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

Its Only Time*

bttf I recently posted about the clients of professional firms that play the Billable Hour Scratch and Lose game.

Like most addictions, gambling is hard to beat, and despite clients rarely winning it seems that game is still pretty popular-at least in the legal profession. The timekeeper aficionados' delight in posting surveys to show that still something like 75% of all law firm fees are based around time. (I personally believe it might be more than 75% as I suspect some portion-maybe most-of the remaining 25% is classified under that meaningless term "Alternative Fee Arrangements" ("AFA's") which, dependant upon what survey you read, usually includes capped fees, quotes based on time, blended rates, etc all which still use time to calculate a fee.)

No real surprises there and as I have said many times before, while firms cling to the Oldlaw business model of leveraging people x time x hourly rate it is going to be very difficult, take a very long time or be impossible for many firms to really offer up fee models based on anything other than time calculated in arrears or estimated in advance.

Funny thing about time though. Theoretically, conceptually and scientifically time is a constant for all of us. My time is no different to your time and last time I looked the world over there were always 60 seconds in 1 minute, 60 minutes in 1 hour, 24 hours in one day, and 7 days in one week (exception might be North Korea as I am unsure what their Supreme Leader might have decreed about time this week).

Time doesn't "stand still". I can't go back in time and I can't go forward in time (yet). Despite the claims made by practice manager vendor spruikers no one can actually "capture" time. And being human beings we never accurately record our time spent on anything.

But if all time is the same why is it then that we use phrases like "where did the time go?", "time flies", "time is dragging", "I wish I had more time" etc.

Actual time of course doesn't vary but our experience of time does. Our perception of time is always, always inextricably linked to what we do with our time:

  • Is it enjoyable time?
  • Is it dangerous time?
  • Is it sleep time?
  • Is it creative time?
  • Is it boring time?
  • Is it valueless time?
  • Is it meaningless time?
  • Is it time that made a difference to someone or something?
  • Is it valuable time?
  • Is it meaningful time?

If all time is perceived as being different dependant on what we are doing with our time, it must follow that our customers too have very different and very individual experiences of the time they spend with us- particularly the time that they pay for.

How then as professional practices do we monetize the experience of time our customers get from us?

imagesFor starters it makes no sense at all for professionals to have a single hourly rate to try and monetize our clients experiences of our time. As Matt Homann author of the 10 Rules About Hourly Billing says:

"When you bill by the hour, your once-in-a-lifetime flash of brilliant insight that saves your client millions of dollars has the same contribution to your bottom line as the six minutes you just spent opening the mail."

"There are 1440 minutes each day. How many did you make matter? How many did you bill for? Were they the same minutes? Didn’t think so.”

One possible way of getting around the "all time is the same" mentality of course is to charge different hourly rates depending on what you are actually doing for your client. For instance for your flash of brilliance in the shower you would charge out a higher rate than when you are correcting your grammar in a letter. Of course this might make your finance manager's annual budgeting fairytale more of a nightmare and would further add to the administration time of entering different default rates but, hey, as law firms spend something like 10-15% of their gross feeding their time machine at the moment anyway what is a little more effort in an endeavour to more properly monetise the value you are providing to your clients?

It's not that Oldlaw firms are not used to having all sorts of different hourly rates on their system. Some have default rates dependant upon what particular clients insist on and all have different hourly rates dependant solely on the seniority of the lawyer (in the somewhat time honoured mistaken belief that if I am a senior I am automatically worth more-even for my grammar corrections).

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Alternatively you could just drop the time charade completely and do what most of the business world does. Agree your scope of work and your price(s) up front.Make your clients experience focus on the results and outcomes you have helped them achieve-not on your time spent or to be spent.

As human beings we use time to measure many things-especially physical activities.(swimming races, foot races, horse races, public transport timetables, etc).

But there are plenty of things time cannot measure (heat, height, weight, smell, joy, love, for example).

Other things time cannot measure include quality, satisfaction, rapport, likeability, feelings, convenience, success, experience, intellectual capital, and solutions. Strangely enough these are all things your customers measure about about you.

So what does your firm measure? Thought so.

When are the professions going to stop measuring & selling something our customers do not measure and buy? While Karl Marx might be resting soundly, the late Peter Drucker would be turning in his grave wondering why Knowledge Workers measure themselves, and the value they provide, by time.

For the time being unfortunately for Oldlaw and many other professional firms, "it's just time"-and therein lies the problem.

 

 

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*since starting this post I have become aware of a book by Alan Burdick titled "Why Time Flies" which examines the concept and perceptions of time-which I have not had time to read yet!

www.chisconsult.com www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

Everything you want to know about moving up the ranks but are too afraid to ask...

 Senior Associate/Future Leaders Program: Melbourne 12 May 2017.

Leo Cussen Centre for Law, 360 Little Bourke St, Melbourne

 

Join Andrew Barnes, Kate Chisholm, Andrew Clarke and me for this very popular high level, practical workshop that provides valuable insight into the essential qualities needed to enable lawyers to progress further in their firm. Designed specifically for lawyers at or near Senior Associate level, this program will outline the practical skills and knowledge necessary to deliver the outcomes that many firms expect now or will expect in the future. Being a technically good lawyer is only the first step to success. The key is knowing what it takes to make it as a leader in a law firm. Gain inside knowledge and give yourself a competitive edge by attending this Workshop. Topics covered include: •    Common attributes of the more successful law firms: why some firms succeed and others do not •    Trends, challenges and opportunities facing the legal profession •    How to build and maintain a sustainable client base, differentiate yourself from the      competition & stand out from the crowd •    Why understanding and being able to utilise technology is essential to your tool kit •    Firm profit drivers and what financial reports tell us and don’t tell us •    Billing and Pricing options for progressive lawyers •    What law firms look for in their leaders •    Motivating and inspiring your team •    The future of the profession - how it will affect you and how you can help shape it

My guest presenters:

AndrewBarnesAndrew Barnes, CEO, The Lantern Legal Group Pty Ltd

Previously Financial Controller, Andrew Barnes is the recently appointed Chief Executive Officer of The Lantern Legal Group Pty Ltd, which incorporates the legal practices of Harwood Andrews and Sladen Legal. Andrew is also the National President of Australasian Legal Practice Management Association (ALPMA), having previously served as Treasurer.

imgresPatrick Ng, Principal Consultant, Inplace Solutions

Patrick has almost 20 years’ experience within professional services, primarily 15 years as IT Director at national law firm Maddocks where he was key to how the Firm conducted its business, risk profile and operational relationships with clients. He has also consulted to manufacturers, educational institutions, retailers, property developers and tech firms and has been a guest speaker on legal tech on many occasions.

imagesKate Chisholm, HR Consultant, Pinsent Masons

Previously People & Culture Advisor at Maddocks, Kate has been with international law firm Pinsent Masons since mid 2015 shortly after they opened in Australia. Reporting directly to Head of Australia, Kate is responsible for all Pinsent Masons Australian HR needs including recruitment, career advancement, ongoing training and education.

andrew_clarke_2Andrew Clarke, Marketing Manager, Aitken Partners

Andrew has been working with law firms for more than two decades with firms such as (current names only) Ashurst, K+L Gates and Aitken Partners. His work has been multi-dimensional, including areas of strategy such as branding to basic media profiling, as well as the basics of task such as door signage. At Aitken Partners, where he currently works, he looks after the management of client events, web and social media, tenders and media relations, as well as brand and business strategy.

 


Total CPD Units: 6.0

Practice Management & Business Skills: 3.0 Professional Skills: 3.0

 

Click here for registration

Technology,The Cloud & The Price

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A couple of weeks ago I attended a technology conference ( I can hear Ron Friedmann laughing all the way from Arlington VA) hosted by InPlace Solutions of which my friend and colleague Patrick Ng is Principal Consultant.

I employed Patrick over 20 years ago as our first IT Manager at Maddocks when I knew even less about IT than I do now. Patrick long ago gave up trying to teach me anything serious about technology (after all isn't that why law firms have IT Directors & HelpDesks for people like me?), but given nearly every law firm on the planet now boasts "innovation in technology" (if not always innovation in their business & pricing models!) and I have been an Apple convert for nearly 10 years now (my wife Karen tells me she thinks I love my Apple family more than my own at times), I figured I ought to see what some of the fuss is about.

The title of the conference was Taking IT to the Cloud 2017.I more than vaguely knew about the Cloud. In addition to Patrick himself there was a pretty impressive array of speakers, some of whom I know and admire greatly ( e.g. Jodie Baker founder of Hive Legal now running Xakia and Andrew Price from Inspire Management) and others I wanted to listen to (e.g.Gary Adler CIO of Minters and Berys Amor CIO Corrs) to hear first hand what some of the bigger law firms were doing in the Cloud tech space.

I didn't get to hear Andrew Price in Melbourne unfortunately but I have heard him speak before on the need for a systematic approach to continually developing, managing and ingraining change and improvements in law firms generally. From all reports those who heard Andrew present on change techniques for implementing technology in their firms were blown away.

As an admirer of Jodie and the Hive Legal model from way back, while I had read about Xakia it was great to hear and see how the cost effective & scaleable cloud based Xakia platform can, and is, making the life of GC's more palatable.Terrific to also hear Simone Zerial senior lawyer/legal manager at Toyota talk about how Xakia Matters has been used by Toyota now for over 12 months for more effective measurement and legal reporting.

Berys spoke about Corrs journey to the Cloud generally and their digital offerings to clients, especially CorrsEdge another innovative package for entrepreneurs and start ups in Australasia.

Gary Adler also talked about Minters investment in the Cloud, some of the challenges along the way (security, convincing partners, etc) and the benefits the Cloud now provides to Minters and their clients.

Many of InPlace Solutions Cloud partners, including reps from Hotdocs automated document assembly,NetDocuments, Introhive's CRM platform, Nikec, ESP Solutions Group, Ethan Group and TeleApps, also spoke and showcased their impressive array of cloud based solutions for the legal profession.

Patrick also presented the 2017 Cloud computing survey that Inplace Solutions and InfoTrack conducted across legal practitioners from around Australia.

Unsurprisingly the results reveal an increasing preference toward Cloud based solutions with law firms naming increasing productivity, online client collaboration platforms and more mobile working environments as their top IT priorities for 2017. Patrick expands more about the Cloud survey and cloud computing generally in the legal profession in a very informative and entertaining podcast available here.

As a recovering lawyer with a passion for value based pricing, I am of course very interested in how many of the law firms that are investing in technology that is designed to make them more effective in their services offerings and to speed up the delivery of their services, are going to price for this? Investing heavily in such technology yet continuing to bill by time makes no business sense at all as it must follow under the billable hour model the quicker they turn around delivery the less the firms will be paid!?

An example of yet another pressure point being exerted on the Oldlaw business model which leverages people x time x hourly rate.

How much more evidence does the profession really need before the penny finally drops that time based billing is as redundant as the 19th & 20th century "buggy whip" technology 21st century Cloud solutions are now replacing?

Related:

Is the billable hour slowing down innovation?

The billable hour must die-10 years on.

The death of the billable hour-one funeral I would love to attend

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www.chisconsult.com www.timelesslegalnetwork.com  www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

"The billable hour must die"-10 years on

Earlier this week I wrote a post titled Death Of The Billable Hour and I am encouraged by the support the article has received from many quarters (if not from Oldlaw partners, from several Oldlaw employed lawyers). In that post I mentioned that serious calls for the death of the billable hour have been occurring regularly over the last decade.As evidence of this I came across an old ABA Journal dated August 2007.Here is the front cover.

It contains a 6 page article by Scott Turow calling for the billable hours' death. It is well worth reading the article in full.

The article describes the billable hour as:

  • rewarding inefficiency
  • making clients suspicious, and
  • it maybe unethical

It it however the author's final paragraph that is well worth reprinting in full and reading aloud.

"If I had only one wish for our profession from the proverbial genie, I would want us to move toward something better than dollars times hours.We have created a zero-sum game in which we are selling our lives, not just our time.We are fostering an environment that doesn't provide the right incentives for young lawyers to live out the ideals of the profession.And we are feeding misperceptions of our intentions as lawyers that disrupt our relationships with our clients.Somehow, people as smart and dedicated as we are can do better."

Here, here. Mr Turow.We can and we MUST do better.

I do not know Mr Turow (except via the books he has written) and now as a partner at Dentons I do not know whether he still shares the same views as he did in 2007. I hope so.

10 years on and still the calls are being made for the billable hours demise and while there has been some progress away from time based billing since 2007 it is incredibly slow and very painful to watch.

Oldlaw still maintains the billable hour via the timesheet life support.

Shameful Oldlaw shameful.

Death of the billable hour.One funeral I would love to attend.

Baker buries billables copyThere are several excellent commentaries on the recent Georgetown/Thomson Reuter's 2017 State of the Legal Market (US) but Richard W Smith's concise observations titled "Death of the billable hour is nigh-really?"is one of the better ones-especially on pricing & for Australian audiences.I recommend you read both. Much of the profession's discussion on the Georgetown/Thomson Reuters Report has centred around the following comments:

" Death of Traditional Billable Hour Pricing.One of the most potentially significant, though rarely acknowledged, changes of the past decade has been the effective death of the traditional billable hour pricing model in most law firms. This isn’t to suggest that most firms have done away with billing based on hours worked; indeed the majority of matters at most firms are still billed on an “hourly basis.” But focus on that fact alone misses a fundamental shift that has occurred in the market. This change has been overlooked principally because of a definitional problem. In much of the writing on this subject, the focus has been on so-called alternative fee arrangements or “AFAs,” pricing strategies that are based on fixed-price or cost-plus models that make no reference to billable hours in the calculation of fees. Since other pricing models typically incorporate some reference to billable hours, it has often been assumed that only AFAs are genuine non billable hour alternatives and every other approach is simply business as usual. That conclusion, however, overlooks a major shift that has occurred over the past decade: the widespread client insistence on budgets (with caps) for both transactional and litigation matters. (my emphasis)"

I agree with Richard's assessment that, to be frank, caps are crap. They benefit no one and if anything have helped extend the life of time based billing.

While I would not score an invitation, I would love to read the eulogy at the billable hour's funeral but alas, while it is sick & has been for a long long time now, it is experiencing a slow tortuous death and not quite ready for burial. It is kept on life support by any number of those with misguided and/or vested interests.

I strongly believe the billable hour will never totally be killed off until the providers of legal services make a paradigm shift and change their business model.

It seems every week around the world, thank goodness, newlaws/nextlaws/disruptors and some innovative incumbents law firms (plus many in other professions), have made or are making the paradigm shift to totally change their business model to something more meaningful and fulfilling to both themselves and their clients.

However while Oldlaw still leverages people x time x hourly rate in the misguided belief that TIME is not only a cost to a law firm but THE major cost, (and therefore continues to measure and reward TIME over all else instead of measuring what really matters), billable hours, either naked or in drag will hang in there.

For so long as time is recorded firms will forever remain fixated on the Oldlaw "we sell time" model and will always default and compare everything to time which in turn perpetuates faux AFA's (of which capped fees are but one example) at the expense not only of genuine strategic pricing alternatives but a better and more sustainable profession.

A billing model change to fixed fees for example without a genuine business model & mindset change won't cut it now or in the future.

There has been increasing widespread dissatisfaction with the billable hour- and the profession's real innovation and collaboration killer, the time sheet- now for well in excess of a decade. The profession can bleat all it likes about clients demanding more certainty around price and wanting"more for less" but it can't say it was not warned and cannot complain it didn't bring all this on itself.

The profession can also not complain that they are blissfully unaware of any alternatives to time based billing when genuine alternatives have not only been written and spoken about during this same period but an increasing number of legal services and other professionals have been successfully operating a different and better business model for several years now.Regrettably the majority of the profession has been exposed to all this but has chosen to either ignore it completely or apply a band aid to a festering and potentially mortal wound-and then only when forced to by clients.

The current Oldlaw business model is of course not sustainable ( "we are investing in technology & improving our processes to get work done in quicker time but we are still going to bill you by time" is a business model heading in only one direction) but regrettably Mark Twain's quip "the report of my death was an exaggeration" rings true.

It does not have to be of course, but perhaps the legal profession needs to go through this death by a thousand cuts for another decade or so before it will make real change? There will come a tipping point and then the late majority and the laggards will be falling all over themselves, and in the meantime the innovators and early adopters will have moved on.

This will all take longer than it should and longer than any opportunistic billing model change, but the change will be structural, long lasting and the legal profession, its clients, business generally and the community will be all the better for it.

 

 

 

 

 

 

 

 

Ready reckoner Table of Advocates for the Retention of Timesheets

imgres                                                      "Lets make timesheets great again"

advocates-for-the-retention-of-timesheets-in-law-firms-table-1*Glossary for the billable hour

1.   'Rush hour' - trying to perform as many tasks that take fewer than 6 minutes as possible, in an hour, knowing that the practice management system deems everything to have lasted for at least 6 minutes. In some cases, this can mean 2 hours of chargeable time recorded in any 1-hour block.

2.   'Nearest whole hour' - under this methodology, any task that takes at least 30 minutes is rounded up to a full hour, again potentially delivering exponential returns.

3.   'Parallel plains' - this strategy involves charging one client for travel time while working on (& also charging) another client's matter.

4. ‘Going for the $10,000 hour’ – this involves getting as many lawyers of a firm as possible into a project ‘strategy meeting’ – benchmark of ‘success’ is normally set at around $10k worth of time charged for the hour.

5. ‘Penalty provisions’ – where a client is not paying what the partner believes is otherwise fair, the ‘Donkey Principle’ of work performance is imposed – i.e everything takes as long as humanly possible.

6. ‘Who will ever notice’ – these are the clients of other partners who have matters where a few random entries for ‘reviewing’, ‘advice’ or ‘attendance’ will never be second guessed – a great technique when there is no ‘go to matter number’ otherwise easily to hand (see below).

7. ‘The go to matter number’ – used when a partner will try to have at least one matter where they can dump a few chargeable units at the end of any day, week or month (depending on when they actually get around to filling in their timesheet) to ensure they get to whatever targets they might otherwise miss.

(with much thanks to my friend and one of my partners-in-crime in killing timesheets Matthew Burgess )

 

Related 

Trashing the Timesheet

What you should be tracking instead of time

10 Rules About Hourly Billing

Why timesheets are damaging to your practice

Burn Baby Burn

Pricing on a whiteboard

Recently Verasage founder and The Soul Of Enterprise radio host Ron Baker, while visiting Australia for the highly successful ALPMA Summit, ran a Pricing Workshop in Brisbane for some clients of the unique Brisbane based legal provider Viewlegal. Dyan Burgess ,the amazingly talented other half of Viewlegal founder, 'lawentrepreneur' Matthew Burgess, had the role of being the visual note taker for the day.

So impressed was I with Dyan's handiwork that, with the kind permission of the Burgess', I wanted to share these visual notes with a wider audience. Here they are:

Those motivated professionals familiar with Ron's work who have already embarked on the timeless journey will hopefully look at these as a reminder of why we do what we do.

For others, these visuals might give you some insight into what you are missing out on.

Enjoy.

InTheBlack | Why value pricing is the new billable hour

This article, by Stephen Craft, was originally published in the September 2016 issue of InTheBlack magazine. View the original article here.

Why value pricing is the new billable hour

For professional services firms, value billing can deliver higher margins and more satisfied clients. But how do firms make the transition?

John Chisholm is a third-generation lawyer. In a career spanning 37 years, including 18 as a partner and five as chief executive, he has witnessed firsthand the innovations that have reshaped his industry – from the rise of legal process outsourcing to the advent of international mega-firms such as K&L Gates, which absorbed his former practice, Middletons, in 2013.

Yet amid all this change, one aspect of legal practice remains unchanged from his grandfather’s day: time-based billing, driven by the humble time sheet.

It isn’t only lawyers who continue to bill in the same way as in the 1950s. Many accountants, engineers, IT consultants and other professionals still charge by the hour, even if their time sheets are now on screen, rather than on paper.

So, why has time-based billing persisted in the professions for so long? And perhaps more importantly, could you create higher margins and more satisfied clients by doing things differently?

Are you leaving value on the table?

“Billing by time is just a dumb model,” says Chisholm.

“There are only 24 hours in a day, so that’s the most I can charge. I could be leaving a lot of value on the table – in five minutes, I could save you $50 million in tax.”

The traditional billable hours model puts a ceiling on a professional’s earning potential and surrenders the benefits of recent efficiency gains. After all, the more efficiently you complete a task, the fewer hours you spend and the less you can charge.

“Any profit gains I make from investing in technology just go straight out the window,” says Chisholm.

Chisholm has now started his own business, John Chisholm Consulting, designed to help build the professional firms of the future, and has become a senior fellow of the VeraSage Institute, a US-based think tank that has advocated value-based pricing for 20 years.

The institute’s founder, Ron Baker, says pricing by value is fundamental to success in a knowledge economy.

“We can’t measure value by the amount of time someone spends on something,” he says.

“The value of the polio vaccine isn’t determined by the amount of time it took Jonas Salk to invent it.”

Instead, he argues that the value of a service is determined by the customer, not the supplier. The same service can have a very different value, depending on the customer’s needs.

“If I’m in the desert and I haven’t had water for days, a bottle of water is worth a lot, because it’s going to save my life,” Baker argues.

“If I’m home washing the dog with the same quantity of water, it’s worth a lot less. But if my basement’s flooded with water, now what’s water worth to me? Its value is negative, and I have to pay somebody to come and pump it out. In all three cases, we didn’t change the product, but the value went from almost infinite to negative, depending on the context I’m in.”

Peter Docherty is general manager of public practice at CPA Australia and a strong supporter of value pricing in accounting. He says that in a world where cloud-based automation makes accounting faster and more efficient, value pricing allows firms to increase profitability and productivity at the same time.

“We’re seeing members automating their work and reducing fees, rather than actually looking at what is the value that those services provide to the client,” says Docherty.

“But with value pricing, firms can use automation and technology to reduce the time taken without reducing how much they charge.”

Advocates argue that value pricing can also boost client satisfaction by highlighting the value the provider creates, and can provide certainty so clients can budget ahead.

Making the transition

Dr George Beaton is the founder of Beaton Research + Consulting, which provides advice to the whole spectrum of professional services firms. He says that while accountants are still well ahead in switching to value pricing, law firms are starting to catch up.

In a recent study, Beaton Research found the proportion of legal work charged by the hour among top-tier and mid-tier Australian firms has fallen from 80 per cent to 74 per cent over the past three years, with a further drop to 60 per cent forecast for the next three years.

He says that an intensively competitive legal market across the Asia-Pacific is encouraging firms to experiment with alternative pricing models.

“Many law firms are seeking to work with their clients to find better pricing ways, to create more value for the client, which means more certainty and a better indication of the commerciality of the fee they are paying,” says Beaton.

“To stay profitable, firms have to adjust the way they practise and [have to] allocate their resources more scientifically to keep up in this new, more efficient environment.”

As Beaton’s comments suggest, the transition to value pricing usually takes time and effort. Chisholm says it involves fundamentally restructuring the way firms measure, reward and value their work.

“It’s a business model change, not just a billing model change,” he says. According to Chisholm, legal services is now a buyer’s market, giving firms little option but to evolve.

“Until recently, most clients accepted there wasn’t much choice,” he says. “Now they realise there are a lot of choices, so clients have the upper hand.”

In this changed landscape, value pricing can be a genuine point of difference. As Chisholm notes: “Those law firms who have done it, I speak to their clients and their clients just love it.

The path to value pricing

Step 1

Understand what value really means to your clients The value of a service is simply the value your clients place on it, so experts say the first step is to have an in-depth conversation with each customer about their needs, goals and expectations.

VeraSage Institute founder Ron Baker recommends you start by explaining that you are going to offer them price certainty, then gain a thorough understanding of the scope of the work they need from you and its value to them.

“There’s not a customer alive who doesn’t want to know the price of something before they buy it,” says Baker.

“You can easily get a customer to move over to the new pricing method if they know they’re going to get price certainty. We’ve seen this happen as quickly as three months.”

Step 2

Create a value council Not everyone is cut out to be a pricing expert, and professionals often tend to undervalue their services. To overcome this issue, Baker recommends creating a value council, bringing together leaders from across the firm as well as outside experts.

“All authors and actors have an agent, because they can get them a better price than they can get themselves,” says Baker.

“The value council acts like an agent, so that you don’t sell yourselves short. They’re the ones that are going to understand the value and price for it.”

Step 3

Build a flexible pricing model The next step is to create pricing options for each customer or group of customers, depending on the level of service they want. Baker recommends the “Goldilocks pricing” model: offering three options, such as American Express’s green, gold and platinum cards. That allows customers to choose their own trade-off between price and value.

Higher-priced options can offer a range of extra benefits, such as unlimited access to meetings and telephone calls, guarantees on response times for client queries or regular meetings with senior partners.

Baker also recommends firms offer money-back guarantees as a mechanism for increasing both client satisfaction and the perceived value of the service.

“Offering a guaranteed service can get you a price premium, because a service that’s guaranteed is worth more than one that isn’t,” he says.

“Structuring payment terms around a customer’s cyclical cash flow can also be attractive to seasonal customers – and can also be worth a premium.”

But what if some clients just won’t accept your new pricing model? Baker says that if your reasoning is sound, you shouldn’t necessarily change your prices to keep just a few customers.

“It’s usually not that the price was wrong,” he says, “but that the customer is the wrong fit.”

Step 4

Beware of scope creep Now that you’re charging for the value you create for clients, rather than the time you spend, it’s important to charge appropriately for the value you deliver. That makes it essential to define and track the scope of the services you provide. If that scope increases, you need to let the client know immediately and adjust accordingly.

But that doesn’t necessarily mean charging more. “Everybody thinks that a scope creep automatically means a price change; it doesn’t,” says Baker.

“It could mean just a deadline delay or a quality change.”

Step 5

Throw away the time sheets Baker insists that to make the transition successfully, firms need to let go of their dependency on time sheets. For many, this can be the hardest step of all.

“If all you do is implement fixed pricing or option pricing, but you keep the time sheets, you’ve still got knowledge workers chained to the desk and worrying about the time they put in,” says Baker.

Chisholm agrees. “You get what you measure – so if I measure time, I’m going to get time,” he says.

“Time-based billing is a disincentive to both innovation and collaboration.” As a result, focusing on value delivered rather than time spent is liberating for professionals and clients alike.

“It releases young accountants and young lawyers from what I call the shackles of time sheets ... so they can use their intellectual capital much more creatively,” says Chisholm.

That can make value-based billing a distinct competitive advantage for firms looking to attract both high-quality staff and high-value clients.

The accountant: how value pricing has grown his business

Brad Golchin CPA is a director of Wise Advice and XO Accounting and a member of CPA Australia’s Public Practice Advisory Committee. XO Accounting’s journey toward value billing began when the firm first introduced cloud-based systems to make its work more efficient – only to find that those efficiencies weren’t being reflected in their time sheets.

“With billable hours, staff get rewarded for being inefficient,” he says. “A task that could have been done in 10 minutes could get recorded as one hour.”

The solution was to move to a value-based subscription model, allowing clients to choose an option that matched the level of service they need – from basic compliance to virtual CFO.

Golchin’s firm also offers a money-back guarantee. “If our client is not happy after three months, they can cancel,” he says, “so they’re not locked in for life.”

Golchin says that since implementing value pricing, his firm has grown its business by 20 per cent to 50 per cent a year, with client retention improving markedly.

“They are generally happier,” he says, “because there are no surprises and no arguments with the fees.”

To make the changeover successful, he suggests putting a communication and marketing plan in place to educate clients on how the different pricing system works. You also need to educate clients to interact with an automated system.

“If a client comes in with a shoebox full of receipts and paper,” he adds, “it’s obviously not going to work."

Upcoming CPD Workshop: Practical solutions for implementing timeless pricing (27 October 2016)

JohnChisholm with David Wells and Liz Harris'Cutting edge for the profession by people who have under taken value based pricing' 'Best CPD program I have attended at Leo Cussen to date'

'Inspiring! Challenging! I will go away with lots to think about and ideas to help design my legal practice'

If you want to learn more about 20th century law firm BS such as realisation, utilisation, time recording, hourly rates & WIP write ons & offs, this workshop is definitely not for you (There are plenty of other programs around that will assist you to remain an undifferentiated Law Firm Of the Past).

But for those 21st century motivated professionals wishing to 'test the waters' of being a timeless law firm and exploring value based pricing David Wells, Managing Principal of Moores and Liz Harris, Costs Lawyer and Principal at Allocatur Consulting and I will once again be presenting a full day workshop at Leo Cussen Centre For Law.

This is an opportunity to gain a comprehensive overview of value based pricing and insights into both the challenges faced and the results that have and can be achieved by transitioning away from time based billing.

Free yourself, your team and your clients from the restrictions of timesheets and the billable hour and learn how to run a timeless law firm.

Modern law firms are being challenged by various market and operational factors like never before. These challenges can create great opportunities for those law firms open to a mindset and business model change.

This workshop confronts the conventional wisdom embodied in the traditional law firm business model, which operates by leveraging people x time x hourly rate. The workshop presents an increasingly popular alternative business model offering bold, proven strategies for restoring vitality and dynamism to your practice.

Topics covered include:

  • Starting with why: your purpose, strategy and positioning
  • How is the Timeless Law firm different to the Law Firm of Yesterday?
  • Your value proposition – Quality, Price, Service and Intellectual Capital
  • A better practice model – moving from cost plus pricing to pricing on purpose
  • The pros & cons in moving away from time based billing to value based pricing
  • A case study – How one firm runs a timeless legal practice-tips for implementing a new pricing model
  • What clients think
  • The ways your firm could make the transition to timeless pricing

This workshop will provide real life experiences and insights into how legal practices and their clients have and can adapt to this better practice model.

David Wells will discuss his firm's journey in moving away from time based billing and time recording and Liz Harris will provide both an understanding of the clients perspective and law firms' compliance with the Uniform Law.

Places are limited.

For further information & bookings contact Leo Cussen Website or ring them on 1300 039 031 or  +61 (3) 9602 3111

Date: Thursday 27 October 2016

Time: 9:00 AM - 5:00 PM

Total CPD Units: 6

Venue: Leo Cussen Centre for Law, 360 Little Bourke St, Melbourne

Cost: $620.00 (inc. GST)

 

 

www.chisconsult.com  www.timelesslegalnetwork.com   www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

 

 

 

 

10 Rules About Hourly Billing

images-3These "rules" were written sometime in 2010 or earlier by U.S. lawyer, blogger & creative entrepreneur Matthew Homann who at the time was the founder of LexThink. I loved them then and still do now. I recently asked myself has much changed in 6 years? Thankfully both for the legal profession and our customers, for more and more law firms yes, but for many others.....................?

"1.            Ask your clients what they buy from you. If it isn’t time, stop selling something they don't buy!

2.            Imagine a world where your clients know each month how much your bill will be so they could plan for it. They do.

3.            If you don’t agree on fees at the beginning of a case, you’ll be begging for them at the end of it.

4.            Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.

5.            When you bill by the hour, your once-in-a-lifetime flash of brilliant insight that saves your client millions of dollars has the same contribution to your bottom line as the six minutes you just spent opening the mail.

6.            Businesses succeed when their people work better. Law firms succeed when their people work longer. Your clients understand this -- and resent you for it.

7.            Every time your clients jokingly ask you, “Are you going to charge me for this?” they aren’t joking -- and they’ll check next month’s bill to be sure.

8.            The hardest thing to measure is talent. The easiest thing to measure is time. The two have absolutely no relationship to one another. Your law firm measures talent, right?

9.            Would you shop at a store where the cost of your purchase isn’t set until after you’ve agreed to buy it? You ask your clients to.

10.         There are 1440 minutes each day. How many did you make matter? How many did you bill for? Were they the same minutes? Didn't think so."

 

A timely (excuse the pun) reminder as to why all professional firms should be timeless.

What do you think? Do these "rules" still apply? Are we changing the "we sell time" mindset and business model of the legal profession? Are we changing it quick enough?

As usual I would be interested in your thoughts.

 

 

www.chisconsult.com  www.timelesslegalnetwork.com   www.verasage.com

@ChisConsult Influencing motivated professionals to make a difference.

 

Is the billable hour slowing down innovation?

  "Is the billable hour slowing down innovation?" was the title of a webinar I had the privilege of being part of recently.

The webinar was organised and facilitated by Ivan Rasic founder of LegalTrek one of the few practice management vendors out there that I know of who is a thought leader in the legal profession and who is genuinely interested in innovation and the future of law rather than simply trying to sell a product.

The other panel members were D.Casey Flaherty noted former In House & Out House Counsel and founder of the US technology, training and benchmarking consultancy procertasand Jonathan Tobin IP and Technology attorney at Counsel for Creators.

A link to the YouTube video of the webinar with slideshow can be found here.

I think fair to say that while each of the panel might have differing views on the ongoing role of the billable hour in law firm pricing (no prizes for guessing my view-there should be no ongoing role!) each of us agreed that the billable hour has impeded and will continue to impede genuine innovation in the legal profession.We agreed that innovation (which admittedly is relative & contextual, especially when it comes to the law) seems to be all too often inextricably linked solely to technology and little else,yet as Casey so eloquently pointed out in the webinar:

“I, as a huge proponent of technology, am very skeptical when people refer to introducing new technology as an innovation. It is one thing to purchase technology, it is another thing to use it, and it is yet another to use it well.

I spent a lot of my time focusing on technology we already have and how poorly we use it. We tend to fall into the exact same patterns – no matter what the technology can do we use it the way we do and have done things before.

And innovation is about doing things differently. Innovation is a discipline. Technology can support a process improvement. But technology can not substitute what you need to do in order to be innovative." (my emphasis)

While still lagging far behind most other industries and professions, in recent times our profession should be lauded for at long last starting to understand the role technology can,and increasingly in the future will, play in both lowering our costs to serve and more effectively servicing ours and our customers needs. But I too query whether merely purchasing and using technology can really be described as innovative, especially if, as Casey rightly says, most firms use it to prop up their existing patterns and thought processes.

With a couple of notable exceptions, notwithstanding law firms PR claims to the contrary, most firms use of technology can hardly said to be a differentiator in the marketplace.Technology these days is simply a table stake and at best allows firms to stay in the game (at the moment) but is hardly any guarantee of future sustainable success, let alone evidence of true innovation.

Most firms use technology to incrementally improve their Oldlaw business model which essentially is to continue to leverage people x time x hourly rate. Oldlaw firms are not adopting new technology to change their business model nor their mindset which for most is still inherently buried in the the 20th century "we sell time" mantra.

While firms continue to adhere to the Oldlaw business model I do not believe they will ever truly maximise the benefits they and their customers could receive from technology, let alone differentiate themselves to any significant degree.

As is evidenced in other industries,real innovation is built on a mindset of entrepreneurship and a culture of collaboration which are not the traditional hallmarks of a lawyers.The billable hour together with its partner in crime, the timesheet, as I have said many times before is a huge collaboration & innovation killer.It measures and rewards the deeds of an individual over the best interests of both the customer and the firm.

In industries that do not subscribe to the "we sell time" mantra, if someone were to come up with an idea that would mean instead of taking 5 hours to do a task it could be done in 1 hour they would be applauded and rewarded. But in Oldlaw world under the billable hour model such an idea would be ignored.

Think about it.Under the Oldlaw business model any investment in innovation or technology that reduces the time it takes to do something is not rewarded with increased revenue or profits.Exactly the opposite-a firm's revenue is actually reduced and any benefits of investing in such an innovative idea go straight out the door to the customers.An unsustainable business model in the extreme.

This is not to say even Oldlaw is adopting methods to reduce the time it takes to undertake some tasks,but in the main that is because they are being forced to by client and market pressures-not because they want to or they see it as the right thing to do.

Contrast this with the Nextlaw/Newlaw providers of legal and associated services, the lawtrepreneurs, the start ups, the genuine disruptors, the real game changers.  They have adopted a totally different mindset and business model having dispensed with the restrictions and disincentives imposed by the billable hour, and are reaping the rewards of using technology much more creatively and effectively to benefit both themselves and their customers.

As the late Andy Grove said:

"Disruptive threats come inherently not from new technology but from new business models".

Unless Oldlaw makes a paradigm shift and adopts new business models,technology for them will continue to be mainly limited to process improvement. There will come a tipping point (I am not sure when,perhaps not in my lifetime) but until then only those with courageous & different mindsets will drive true innovation in our profession.