Law Firm Marketing

• Can the Rolling Stones teach marketing to lawyers?

by Trey Ryder

Mark F. Weiss -- a nationally recognized expert on the business and legal issues affecting healthcare providers and facilities -- wrote this article on value billing. It's called:

With All Due Respects to the Rolling Stones (and to the Composer, Norman Meade), "Time, Time, Time Ain't On Our Side, No It's Not."

By MARK F. WEISS © 2005 Mark F. Weiss (published in Lawyer Marketing Alert)

As a lawyer specializing in healthcare law, I'm in a particularly good position to comment on the trends, and on the self-destructive tendencies of our profession, serving to commoditize what we do and, therefore, lower our incomes: You see, I have seen physicians do just this.

And, yes, I said lower our incomes. I know that some attorneys think it's almost a crime (or, maybe, that it is a crime.) to actually want to earn more money for doing what we do. To those attorneys, I say go volunteer your services (I do), or go take a job with some deserving non-profit; just don't trample on my ability to earn as much as I can for the value I provide.

Once upon a time, lawyers charged a fee based on the value of their services. Then the bean-counters got involved, using hourly measurement to judge the cost of producing (rent, supplies, salaries, etc. divided by hours of services sold), not to determine pricing (the fee charged to the client), those services. As it was so much easier (i.e., lazier) to simply mark up the now-discovered unit cost of producing the work, lawyers began charging by the unit, that is, the hour. Corporations, which applied management tools that measured other aspects of their business, thought that the cost accounting approach of hourly billing was just what they needed.

But to count beans is not to cook them -- it's not to discern the difference between Santa Maria Style BBQ beans and Tuscan cannellini bean soup both wonderful but very different and, depending upon the nature of the meal they accompany, extremely delicious or quite disgusting. Yet to those counting beans (or hours), "beans is beans."

The issue not appreciated by bean (and hour) counters is that hours aren't what the client is buying. Here's a challenge: The next time a potential client calls, asking for your help on some matter, ask him or her if what they really want is ten or twenty hours of your time. The old saw that a person doesn't want a drill, he wants a hole, is dead on true. The client wants your advice and counsel, the client wants to be protected, the client wants the deal he or she expected the client does not want your time. Then why are you charging for the wrong thing? Focusing on the input (time) has no relationship at all to the output, which is value that you create.

Let's suppose that in response to an inquiry from a client and her trial counsel, you develop a strategy that results in a net gain to client of over a million dollars. It takes you 5 minutes, doodling around with a pen and some blank white paper, to work it out.

What's the value of that advice? At $475 hour, it would be "worth" $39.58 do you really think that that's the value you provided? If you do, then I posit that the real problem is internal you simply don't believe that your expertise is worth paying for. In fact, if you believe that the value of the million dollar silver bullet is the five minutes of "time" that you billed, then perhaps you should consider that you overcharged: The real cost to produce the advice probably wasn't even the time, it was the $.01 of wear and tear on your pen and one sheet of white paper at $.007 . . . the $39.58 you billed was an overcharge of more than 95 times your perception of true value.

All kidding aside, if you believe it's wrong to charge for "value", why do you think it's okay to charge for time? Believing that the amount of time put into a project yields its value harkens back to another manifesto, that of Karl Marx and his ideological predecessors who believed that value is tied to the amount of labor involved in creating the output. If that were the case, the value of mined copper would be the same as the value of mined gold; obviously, it's not. Time has nothing to do with the value that we create for our clients and time is not inherently a more fair measure of value than some other methodology; in fact, it creates a greater conflict between lawyer and client (rewarding inefficiency and undervaluing creativity) than an agreed-to fee based on value created.

The last time I looked, corporations as diverse as Cisco, Safeway and Ford Motors were in business to maximize their profits. Sure, as attorneys, we owe our clients a fiduciary duty, but even the ABA's Model Rules of Professional Conduct (see Rule 1.5 (a)) do not regard time as the sole measure of value.

And, speaking of Cisco, its general counsel and director of legal services were quoted in the September 2005 ABA Journal as seeking flat fees for outside work and expecting that year by year those flat fees will go down as a result of increased reliance on technology. Why? We are not selling routers; we are selling expertise.

Expertise is not a commodity unless and until we allow ourselves to fall prey to task-based code billing (as promulgated by the ABA's Section on Litigation) and the like, á la physicians a Trojan-horse like device that at first seems so simple (code . . . bill . . . get paid) until it dawns on one that measuring by task allows payors to gain control over pricing by simply ratcheting down the reimbursement per coded "task." This is exactly what has happened to physicians, both at the hands of insurance carriers, HMOs and other third party payors, and the government itself (e.g., Medicare, Medicaid).

I firmly believe that the value to a client, Cisco, for example, of negotiating the fiftieth or one hundredth iteration of a certain type of deal, say a patent acquisition, is as great as the first. The value created does not go down by reason of repetition or by reason of the fact that you use a super-computer instead of a ten year old desktop PC to put together the documents certainly your malpractice risk doesn't decrease.

As a profession, we have, through lazy reliance on hourly billing, nearly destroyed our ability to earn fair compensation for the value we create for our clients. Sure, there may be some services that clients or lawyers will still want to bill by the hour. But, if we simply keep up the rote billing of "hours" as the measure of our worth, or if we succumb to "innovations," such as Cisco's "technology discount" approach or the task-based code billing sponsored by the ABA's Section on Litigation (with friends like the ABA, who needs enemies?), we will further the public's perception, and apparently that of a significant number of our colleagues, that attorneys are simply highly educated production line workers, further commoditizing our services and decreasing our incomes.

Instead, we need to take the approach of successful consultants, who price based on value, not time, who sell their expertise, not their deliverables.
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Migalhas International is partnering with Trey Ryder, president of Trey Ryder LLC. We are pleased to feature his articles in this column. Trey is a law-firm consultant who specializes in education-based marketing for attorneys. His weekly newsletter features marketing articles, helpful tips, and proven advice on how to attract new clients, increase referrals, strengthen client loyalty and build your image as an authority without selling. He can be reached at [email protected]

© Trey Ryder LLC
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