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In Search of Perfect Client Service Why lawyers don't seem to get it

Do lawyers need to earn a profit on every matter?

By Patrick Lamb on Posted in Commentary

One of the things I learned as a college debater at Northwestern was that if you searched hard enough, you could always find somebody who had said or written something to support your argument, no matter how lame or stupid it really was.  You learn that anecdotes do not necessarily make for the truth.  They may illustrate a point, but just like you can’t determine direction from a single point of reference, a simple anecdote does not necessarily warrant a conclusion.

Why do I bring this up?  The February 21, 2011 edition of Crain’s Chicago Business includes a series of stories in a section called The Dark Side Of Alternative Fees, and the stories suffer from anecdote-itis.  Oh, and none talk about the issues from the client’s perspective.  The first article, When flat fees fall flat,  refers to a problem a firm had when it encountered problems filing a client’s trademark application.  It wanted the client to pay more money, and the client resisted.  The problem stems from the fact that lawyers believe they need to make a profit on every hour, every matter.  If you have an average price, you will have some matters that are above average and some that are lower.  But just like every hole drilled does not yield oil, not every matter will earn a profit.  Business people know this.  Lawyers have not yet learned the lesson, and the Crain’s story is a perfect illustration. 

Profit is not determined on an hour by hour or matter by matter basis.  Public companies report quarterly and annually.  Why should law firms be different?

  • Adam Spence

    I practice in a jurisdiction (Northern Ireland) where litigation costs are set by statute on the amount recovered by the Plaintiff. As a result of this there is a ‘swings and roundabouts’ approach by lawyers here (what we lose on the swings, we pick up on the roundabouts).
    We accept that some cases will run for years, have masses of paperwork and court time and settle for £10,000. Other cases will resolve quickly, require minimal paperwork and settle before court for …£10,000.
    In each case the fee will be the same but obviously the amount of work and effort expended will differ enormously.
    Lawyers here have learnt that each case has to be given as much attention as the next and very quickly get used to the fact that some cases will be much less profitable than others.
    These cases cannot be judged on an hourly rate or a time spent/fee received basis. The work simply has to be carried out to the clients’ satisfaction and the fee as prescribed by the legislation accepted as being adequate.
    With reference to the case in your last post, it seems that a clear retainer letter setting out the scope of the instructions would have prevented the stand off but in times such as these can any business seek to alienate existing or future clients or customers by being perceived to have moved the goal posts in an attempt to generate more fees?
    Can any of us afford to have discussions with clients about fees which are “a little difficult”?
    Perhaps it is time to take the long term view and accept that a realistic fee, which shall be willingly paid by a grateful client who will return as a client and refer further business, is much more useful to a firm than a one off increase in fees.
    In this jurisdiction we have all learnt to accept that not every case can return an identical level of profit.
    And guess what? Despite the obvious restrictions and frustration, the system works. The trick is not to increase the number of hours or the billable rate to ensure that the case remains profitable but to instead ensure that the work is carried out as efficiently and cost effectively as possible, so as to extract maximum value from the fee available.