July 2017

Jeff Carr sent me a link to a post by Richard Smith of Sydney, Australia.  I don’t know Mr. Smith.  He is a “business development expert with over 20 years’ experience.” He works to develop and implement “successful business strategies for leading professional services firms; including working closely with stakeholders to maximise revenue potential from existing and targeted clients.” He recently wrote a commentary on an article by Firoz Dattu and Dan Currell of AdvanceLaw. I do know Firoz and Dan, both highly respected members of the legal service community.  I hope my acquaintance with them does not color this post, but perhaps its does. The Advance law post that leads to this article is here.

Richard Smith takes issue with this paragraph in the Advance Law article:

Third, flat fees. A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper. You now know that we think this is a half-question (and not the interesting half). The whole question is: do alternative fees work better, all things considered?

Mr. Smith responds with this:

Let’s look at that third question again with highlights by me:

“A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper.”

Actually, that’s a very, very long way from the natural question.

But then we get…:

“The whole question is: do alternative fees work better, all things considered?”

And while that question may seem a lot closer to the answer we seek, it is still – well – the wrong question.

Flat fees, or other alternatives to the billable hour, should not be about whether they are cheaper. In many cases they are more expensive.

Nor, per se, are they about whether they work better (and by that i am unfairly reading “easier”). In some cases they are far more complicated and getting them to work is a real art of communication (that is, if you have scoped the matter and given appropriate thought to LPM, etc).

But, crucially, what alternatives to the billable hour should be about is simple: ‘Do they offer better value?’; To the client? And to the lawyer?

And if they don’t, the simple truth is this: maybe you shouldn’t be using them.

It seems as if Mr. Smith ignores the fact that the AdvanceLaw team is writing about questions presented by data they have accumulated from their clients.  Of course it is interesting to know if flat fees have proven to be cheaper that hourly fees for similar work. Is Mr. Smith really suggesting we should not examine relevant data?  And then, even though the AdvanceLaw authors make it clear that there is a more important question that simply the comparison of fee totals, Mr. Smith quarrels further, leading to the conclusion that AFAs have to provide better value to clients and to the lawyer, or they shouldn’t be used.

Having been using AFAs for nearly 10 years, AFAs can provide great value to lawyers, but only if they change the way they do their work.  The old way is burdened with fat and excess, and it is why clients grew so frustrated with the billable hour.  Second, firms need to decide if customer service is a core value of the firm.  If it is, you find out what is of value to your clients and you figure out how to provide it.  It is an exceptionally rare matter in which, over the duration of a matter, an AFA cannot be used.  The challenge must be to carefully and precisely identify the client’s objectives. Once that is done, a fee to incentivize the accomplishment of those objectives is possible.

Forgive this rant–it is unfair to take a point made in one context and criticize it for not addressing points that are not in the context you want.

I was just having a conversation with a passing acquaintance, who runs a mid-size law firm.  He told me the firm had decided to be innovative, in the sense of saying “starting next Tuesday, we will be innovative.”  I hope I kept my smile inward.

Innovation is not something you simply flip a switch to turn on.  It is hard work, and there is no simple recipe for “doing” innovation.

I am a firm believer that every law firm should have an innovation lab, where the right people, in the right environment, with the right objectives, can undertake the work needed to become innovative.  A good starting point would be to debrief as many acknowledged innovators as possible so you can develop a working list of characteristics, tools, processes and kickstarters.  What are the things that make innovators innovative?

Research.  Learn. And then do the hard work.

Before leaving for the Amazon, Nicole left an article for me from the Illinois Bar Journal, The Checklist Manifesto for Lawyers. It discusses Atul Gawande‘s incredible book, The Checklist ManifestoThe IBJ article is not special, but Gawande’s book is a must read.  Many years ago, I bought copies for everyone in Valorem and we became disciples.  When I wrote Still thinking: More things I think I think in 2014, I lauded checklists and Gawande’s book.  Nicole’s note to me was “They are only a few years behind!”  It surprised me that in this day and age, when efficiency is become so important and firms need to lower they cost of production on matters being handled on fixed fees, firms still have not enthusiastically embraced the power of checklists and that it was worthy of an article to mention them.

Actually, it doesn’t surprise me.  But it does baffle me how these firms continue to operate.

I am honored to report that “Clients recognize Valorem Law Group for its unparalleled client relationships in the brand new BTI Industry Power Rankings 2017: The Law Firms with the Best Client Relationships in 18 Industries.”  Specifically, “clients rank Valorem Law Group a Leading Core Firm for the Manufacturing Industry, among the top 15% of all law firms,” and “clients also rank Valorem Law Group a Leading Recommended Firm for the Manufacturing industry, in the top 10% of all law firm.

BTI’s report is “based soley on direct, unprompted feedback from over 950 top legal decision makers” at major US and global businesses.

Needless to say, we are deeply appreciative of our clients’ continued support.

Not outer space.  No, the point is that the space you meet in, the space you operate in, or the space you interact with people in can make you more creative.  Everyone has been to a conference in a hotel ballroom, right.  Mind-numbing. Plain.  Boring.  The space sucks the very life out of you.  We at Valorem believe space matters.  That’s why we have always had a devoted collaboration space–whiteboards, chairs but no table, stuff to throw at each other.  An environment to make you think better.

Yesterday, Nicole and I spent the day with Matt Homann of Filament.  Matt is a victim of “idea surplus disorder.”  A couple of hours with Matt gives you a notebook full of things to think about, to dream about.  Matt, like us, recognizes that the right space makes the event, the meeting, the brainstorming session.  And he knew that such spaces are rare.  So he created one.  It is the best meeting space I have ever been in.  My words cannot do justice to the space.  Take a look.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The space is in St. Louis.  Believe me it IS worth the trip if ideas matter to you.

Utah Business recently published Industry Outlook: Legal, which featured a question about alternative fees.  It appears that Utah is an hourly billing utopia, immune to much of the turmoil firms face in the rest of the country.  This quote, from Darren Reid of Holland & Hart, struck me:

As a litigator, I can tell you that the billable hour is alive and well. We hear about these mythical beasts, these boutique firms that are doing all of these amazing things. They advertise in all of the national magazines and things. I don’t know how they do it. They clearly have different cases than the ones I’m working on. But I can tell you that I’m not putting food on the table unless I’m billing hours. That’s what our clients generally expect. At the margins, maybe there’s some room for innovation. But usually that’s maybe in the patent world or some other kind of niche practice. But as bread and butter commercial litigators, the billable hours drives the engine.

I’ve never been called a mythical beast before, though I have to confess I have been called just a plain old ordinary beast on occassion.  I take exception to the assertion that “they advertise in all of the national magazines.”  Valorem has never run an ad, let alone in a national magazine.  I am not sure of whom Mr. Reid speaks.  I was struck by the “I don’t know how they do it” line.  How, in this day and age, could a partner in any law firm, let alone one as prominent as Holland & Hart, not have insight into what clients demand and how law firms are being forced to respond.  It makes me wonder if Holland & Hart has developed some special formula to keep its realization rates from falling year over year, as has been the case for most law large law firms.  But regardless, if a firm wants to improve, to remain competitive, how can its partners not know these things.

In case there are people from Utah that read this, I just want to make clear that there are a growing number of law firms that do complex litigation of every stripe and variety using alternative fees.  We’re real, not mythical.  We embrace change and innovation not just because clients want us to, but because we need to be better at what we do every day to maintain client relationships.

When it comes to change, there are two categories of people–those who shape it and those who fall behind.