Happy New Year. I’m back.
I’ve decided 2010 is the year that I admit my Law Firm 2.0 thesis is wrong. I blew it. BigLaw is alive and well – perfectly efficient and constructed – and all of my ramblings were just that.
Yeah… right. It’s not April 1.
But I AM pretty pissed off at people not paying their lawyers. Even if their lawyers are inefficient, frustrating and sometimes comical. (But still more expensive than hiring Dane Cook or some other C+ list comic to perform at your kid’s Bar Mitzvah).
Why am I mad? Aren’t I the guy who is constantly picking at the big firms for their business model issues and imploring them to reduce client costs?
But the people refusing to pay their lawyers and / or are always demanding discounts are not helping the situation. They are only making it worse for themselves and the rest of us. Here’s the scoop:
I’m hearing from more and more lawyers (and “proud” clients) that their clients are expecting discounts on every bill their lawyers present them. It ranges from hard and fast rules (e.g.,we’ll pay 80% of your bill and 0-100% of the remainder depending on performance or if we feel like it) to haggling on each individual bill.
And what do the lawyers do? Well the first step is to protest, but normally, the firm bends and gives into to some form of discount. (a really interesting blog quoting internal Simpson Thatcher documents about client discounting is a must read)
At the end of the year, the firms figure out their revenue and profit margin and realize that they didn’t make as much as they would like, so what do they do? They raise their hourly rate. If they are going to provide discounts, they want a larger base to discount from.
The outcome of this is that now everyone is paying higher hourly rates and we are all worse off. In fact, those of us who pay our bills are subsidizing those who don’t during the year.
Lawyers used to never discount, but accounting firms have ever since I’ve been working with them. Accounting hourly rates were always known to be exorbitant, but the game was that they’d come and cut you a “good guy” discount, sometimes as much as 50%. So this game is nothing new. I fear this is where BigLaw is going.
Now, I’m not arguing that you should NEVER ask for a discount. There are plenty of instances where the firm deserves to give back some money due to a host of issues. I’m just peeved at those who make their Law Firm 2.0 thesis one of simply not paying their bills. If you have that much issue with your outside counsel’s billing rate, address the situation in a transparent manner or hire new lawyers.
Because if you don’t, you are only incenting the firms to create a billing eco-system that is even more inscrutable and opaque. This is ultimately worse for all of us, unless we all collude and adopt the same method of payment. Which we won’t. And besides, it’s stupid.
Law Firm 2.0 depends on the clients too. We must do our part. Short cuts like this aren’t Law Firm 2.0, rather short sighted window dressing. Work with your partners to get them more efficient and show them the way if the can’t themselves.
And if not, find a new firm. There are plenty out there that are starting to get religion.
Welcome to 2010.