June 2005

1. Reflections on Hourly Rates
2. Blogs Are A Good Tool – But Keep Them in Perspective
3. Pay Attention to Building Human Capital

Articles

1. Reflections on Hourly Rates

   McGuireWoods has drawn considerable attention to itself with a new ad campaign that challenges the billable hour. The firm is hardly the only one to consider billing alternatives -- fixed fees, success fees, and the like -- but it is making itself distinctive and different simply by talking about the taboo topic of how law firms charge their clients. "The longer lawyers take, the more they make," one of the ads says. "Does that align their interest with yours?"

   That's a question I think every firm and solo practitioner has to confront. I'm all in favor of law firms making money, but there's a right way and a wrong way to do it. Creating a marketing plan that targets specific types of clients and industries, and improving your accounts receivable and collections procedures, can do more to improve profitability and client good will than hiking up hourly rates. A fixation on hourly billing and fees can ultimately be self-defeating in any number of ways. Here are three factors to consider.

   Culture. Any firm that encourages lawyers to maximize their individual compensation may have fast near-term growth. But a willingness to approach compensation as an institution (lockstep compensation) makes for firm longevity. Perhaps it takes the entrepreneurial spirit to get going. Then the challenge is to change that into a managerial spirit, something that proves too difficult for most. Only a few really successful firms find a way to do it.

   Expenses. Even if your retainer with a client lets you charge for opening a file on each matter or for photocopying a file before giving it to a client on request, consider whether these or other charges will ultimately cost more money than they bring in. If other firms in your position aren't doing the same thing, you may stand out and lose a client or prospect. Clients get angry at their attorneys for "nickel and diming" on charges they consider overhead and part of the cost of doing business, especially with what they perceive to be very high hourly fees they pay to lawyers.

   Unbundling. If a client asks you to lower your hourly rate price, be sure you first list the things you do for the client for that price. Then, when you reduce your rate, take some of those things off the table. Thus, you are not really "lowering the price." You're adjusting the price to fit the appropriate level based on the service to be delivered -- and showing the client that the value is lowered as well.

2. Blogs Are a Good Tool – But Keep Them in Perspective

   Blogs are hot -- or not. It depends on who you ask, what you want them to do, and what kind of "return on blogging" you expect. As I noted in a recent Ezine article, readership of web logs was up 58% in 2004. I hope you've visited our blog, and if you have you'll know that we have links to many of the top legal blogs (blawgs) maintained by Matt Homann, Dennis Kennedy, Rick Klau, and a growing number of others.

   Using a web log/blog can be a powerful marketing tool. And it can be a fabulous learning tool. When done right by lawyers, a blog is more than a personal journal but not an electronic brochure. Blogs are creating a unique niche by combining personalized observation with facts and insights from the lawyer's (or marketer's) area of focus.

   Make blogs work for you. Target your market, be specific in your blog postings, be frequent and your market will learn what your value to them can be and why they need you and your services. Blogs, like all other marketing tools, must be considered in light of your entire marketing strategy, not isolated by itself.

   It's important to remember, though, that you shouldn't work for your blog. Making frequent posts and answering dozens, or hundreds, of email comments, can take time. Let's say it's just 2 hours per work week. If we assume 50 work weeks per year for ease of calculation, and 2 hours per week and $200 per hour billable value for an attorney (most are charging more today), the calculation is $20,000 of billable time used to maintain a blog!

   This is hugely expensive! Technology is great, but it needs to be managed just as any other communication modality must. There are many who passionately believe in the business power of blogging, but they should remember the recent observation of USA Today technology writer Kevin Maney, which I posted to my own blog: "Blogs don't seem to be the second coming of the printing press. They're just another turn of the wheel in communications technology. More likely, a few years from now, after the blog bubble has normalized, we'll look back and say that this technology made a difference and that our total fascination with it [today] seems quaint."

3. Pay Attention to Building Human Capital

   Longtime readers know that I'm skeptical about mandatory attorney training requirements. I believe that requiring 12 or some such number of attorney training hours a year perpetrates a fraud on the public: good lawyers will pursue continuing education anyway, bad lawyers won't learn from it, and clients bear the increased costs caused by the education requirements.

   There is a difference, though, between focusing on one's own skills and seeing the larger picture of teaching everyone in your office -- including staff and associates -- those skills (whatever they may be) to enable them to provide better service and enhanced skills to your clients. Everyone in your office should be taking hours of education programs each year.

   Bar associations give practice management training for attorneys short shrift. Yet, when more than 60% of today's discipline structure revolves around complaints over practice management, this should be the major focus of the Bar's education requirements.

   Average managers treat all their employees the same. Great managers discover each individual's unique talents and bring these to the surface. A recent Harvard Business Review article states the obvious: Lawyers, like managers in every profession, trade and other commercial endeavor, must connect with their staff. Failure to do so will cause conflict, will cause disharmony within the firm and, worst of all, will result in poor client relations -- the stuff of malpractice actions and Bar disciplinary complaints.

   Pay attention to your most important asset in the firm, your human capital. It walks out every evening. You need to make sure that it returns in the morning, willing and able to do what's needed for you and your clients. Our blog post of an article by Mary Helen Gillespie brought this point home. After three or more years of retrenchment, many organizations are finding they cannot have one person doing the job of six people and expect productivity to continue to flow. The bottom line can only be squeezed so far before the permanent damage is done. People will jump ship, simply because they can no longer bear the process they must go through to order office supplies, replace a piece of technology or improve and enhance operations.

   Do you have the kind of confidence in your human capital that Teddy Roosevelt once expressed? "The best executive is the one who has the sense enough to pick good men (women) to do what he wants done, and self-restraint enough to keep from meddling with them while they do it." If not, it's time to start building it, through skill enhancement and attention to service.