Site of the Week: Gruntled Employees

I first became aware of the Shepard Law Group as a result of legal media coverage they received when they banished the billable hour from their firm. Jay Shepard came up with a very cute idea for the name of a blog related to employment law issues: Gruntled Employees. (After all you don't want DISgruntled employees, do you?)

Since most law firms are also employers, it is good to keep up with this substantive legal area and Jay's posts are always easy to read and well-thought out. But Jay's posts are not limited to employer-employee matters. Here's a great recent post (with links) on alternatives to hourly billing. But the post I really want you to read is one entitled "Your employees are the sizzle." He notes his experience in a restaurant and relates it to customer services generally. As a lot of Oklahoma lawyers are aware, I like to use restaurant analogies when I talk about client service. In fact I just recorded a webcast on improving client services for the OBA. You should be able to purchase by going to this Webpage in a few days.

Pay a visit to Gruntled Employees, this week's Website of the Week.

Scott Turow: The Billable Hour Must Die

The cover story of the August, 2007 ABA Journal is The Billable Hour Must Die by famed lawyer-novelist Scott Turow. No one who has read any of Mr. Turow's books would be surprised that it is a well written and persuasive piece.  He repeats a phrase I find very significant: "dollars times hours." Turow writes:

• Dollars times hours sounds like a formula for fairness. What could be more equitable than basing a fee on how long and hard a litigator worked to resolve a matter? But as a system, it’s a prison. When you are selling your time, there are only three ways to make more money—higher rates, longer hours and more leverage. As the years have gone on, the push has continued on all three fronts.

This may sound like it applies to large firm lawyers, but the math applies equally to lawyers in every size of practice who bill only by the hour. This issue may represent one of the greatest future challenges to our profession. But, of course, I've thought that for a few years now. Mark Robertson and I published Winning Alternatives to the Billable Hour: Strategies That Work, Second Edition through the American Bar Association in 2002. (And Mark is now waiting on me to finish my assignments for the next edition very soon.)

If I were to quibble with Mr. Turow's piece, it would be that he, like so many, mixes together what I view as two distinct aspects of the billable hour crisis.

The first is the dollar times hours aspect. Is a mechanical formula really the best and most fair method to determine a legal fee? Is it the best for the law firm? It is the best for the client? The case against hourly billing is pretty easy to make; it can reward inefficiency and the total cost is unknown to the client until a matter is concluded. While I would not state the ethical challenges as strongly as Turow, there is the inescapable fact that, for the most part, the one who makes the decision as to whether those eight depositions are needed is the same person who makes more money from those eight depositions.

But the ethical challenges would not disappear by changing to all flat fee arrangements. If an hourly payment arrangement presents an ethical challenge to do too much, then surely a flat fee for an entire matter presents the opposite challenge to do too little. Public perceptions notwithstanding, all but a very few lawyers take their ethical responsibilities very, very seriously in all circumstances.

The second aspect of "the problem" can be said to be even more critical than the first, however. For it involves people's lives rather than just dollars. The Billable Hour discussion is also a code phrase for the fact that too many lawyers are working themselves to death, both physically and spiritually. This lawyer may be the new associate at a major law firm struggling to ethically bill 2200 hours a year or the small town well-established solo who finds himself having to step up his work schedule when he should be enjoying the rewards of a fine career. Maybe this is caused by greater family needs, such as a child going off to college, or maybe it is caused by more time devoted to business that cannot be billed such as marketing or untangling the mysteries of e-discovery.

As Turow says in the essay, " Worst of all, however, is that when somebody is working 2,200 hours a year, he or she has less chance to pursue the professional experiences that nourish a lawyer’s soul."

I completely agree that a large part of the problem with the largest law firms is the fact that they publish earnings per partner and deem themselves winners and losers on that basis. But considering what these large firm lawyers are making, is that extra several thousand dollars worth adding the 10:00 p.m. to midnight shift an average of three days a week? Perhaps the more enlightened view someday will be factoring in average billable hours per partner and the law firm whose lawyers are all easily recognized by their children gets scored as the best.

We are living in a time of great change. We see the successful businesses. We know that they embrace the efficiencies of technology, they adapt to changing consumer needs and demands, they provide good customer service and they continue to improve and evolve. The question Turow brings us face-to-face with is how lawyers can plan for their future success in an environment where productivity improvements amount to an income reduction and a personal success story is getting a full night's sleep or just one time seeing all of the child's little league games that week.

If it were easy, all the smart lawyers would have already done it.  But there are smart lawyers and smart clients who are using alternative billing methods. How do you start? Let me suggest modest steps. You recall the old saw "How do you eat an elephant? Answer: One Bite at a time." So litigators, are there some routine tasks that should be billed on a task completed basis rather than an hourly basis? What about filing documents with government clerks? Hourly or fixed? Consider this and revise your policies accordingly.

Read Scott Turow's essay. Think about improving your future and serving your clients better at the same time.

Very Short Course on Retainers and Billing

ABA members recently received the following link in their MyABA e-mail. But for the rest of you, (or for those who didn't pay attention the first time) this should be of interest. At ABA Midyear meeting in Miami a few weeks ago, the Young Lawyers Division and the Law Practice Management Section co-sponsored a program on retainers, fees and billing. The presentation materials are available online. Viewing PowerPoint slides without seeing the oral presentation often loses a lot in translation, and some of these are pretty sparse. Nevertheless, here is a great opportunity for a 15 to 20 minute refresher course on retainers and billing. Most readers should take advantage of this opportunity. Read the summary here and then download the PDF file with the materials. Priya Harjani's nine points about billing at the end are definitely worth your effort.

Improving Your Life a Bit and Toward More Flat Fees

Self-Improvement and flat fees. What do these two topics have in common? Not much except that they were both the subject of good articles in June's Law Practice Today.

Tom Mighell's Strongest Links column is about web sites that help you improve. But these are not, for the most part, self-motivational websites. Rather as Tom says, "one way or another, these sites will definitely help you with something, whether it's getting your job done faster, de-stressing from the hassles of the day, or taking a vacation." Several sites and services I use frequently are listed here and this is definitely worth a read.

I recently got to meet Christy Burke of Burke and Company LLC of New York. At the time I didn't knwo she was an alternative billing believer. Read her article "Flat Fee Nation," focused primarily on one law firm's experiences. The "money quote" is from Carol Cummings, Managing Director of South Carolina-based Rogers Townsend & Thomas:  "Unless you have your process systematized, you cannot survive and you cannot make money – it’s that simple."

I believe that this is critical for law firm success. There are many things in the mix for success; good client service, relationsships, and results, to name but a few. But tight, efficient and well-managed systems to deliver the work and the client communications are key for a Twenty-First Century law practice.

Basic Management Skills

The typical law school graduate may enter the practice of law with little, if any, training in business management. This is perhaps not a critical problem for the new lawyer who goes to work for as an assistant district attorney, a public defender or an associate in a large law firm. But for the solo and small firm lawyer, this can be a significant gap in skills. To their credit, law schools are moving to fill this gap. In fact, next week I will be giving a two hour presentation to a class at the University of Oklahoma College of Law that focuses on starting a law practice.

The quandry of the solo/small firm lawyer is that he or she needs to manage well in limited time. Administrative responsibilities are non-billable and the more time that is spent on them means less billable business production that day. So there is a built-in temptation in the small law firm to give short shrift to those tasks in favor of providing client services. Client services are a priority. But good management is also critically important. It may be easy to fail to regularly review the financials because there is money in the bank or defer making decisons because of lack of time to consider alternatives. But what advice would you give a business owner client who failed to regularly review the financials?

I've located a good short course in management, thanks to the BizzBangBuzz Blog. You may be surprised to learn that it was written by an electrical engineering lecturer at the University of Edinburgh and is over ten years old. Read Basic Management Skills by Gerard M. Blair. Read these ten articles when you have time to think about them.

The Tyranny of the Billable Hour

The cover story of the Washington Lawyer this month is The Tyranny of the Billable Hour by Robert Pack. It is not really about methods of alternative billing, but rather the impact of minimum billing quotas on the lives of larger law firm associates and, now, even partners. There was mention of how a firm might require 2400 hours billed per year even though the stated target is only 1900. The firm cannot recruit associates so easily if they were told it is 2400 hours. So they just lie? The difference in one's family and recreational time between quotas of 1900 and 2400 is staggering. Solos may not find much in this article, but every managing partner should read it. It just doesn't make much sense to invest all that money into hiring and training associates only to have them burn out or bail out once their student loans are paid. Solutions are not easy. Given the salaries that starting associates are paid at larger firms, they have to generate significant fees.

Alternative Billing for the Main Street Lawyer

I direct your attention to an article entitled "Alternative Billing for the 'Main Street Lawyer' " by Mark Robertson and myself. It was excerpted from the book Winning Alternatives to the Billable Hour, Strategies That Work by Mark Robertson and myself. Too often publications about alternative billing focus on the larger firms. This article talks about alternative billing for the small firm, small-town lawyer.