A Guest Post, by lawyer, law professor and process consultant, Larry Bridgesmith.
Beauty is in the eye of the beholder” — Margaret Wolfe Hungerford , Molly Bawn, 1878
Our son was born with orthopedic challenges which required him to be in thigh high casts from the day he was born. He was also born “sunny side up”, or face first. As a result, his bruised and swollen face and both legs in casts made him look like the loser from a brawl in the nursery.
What surprised my wife and me was the worried and sorrowful glances our friends cast in our direction when they first saw him. In our eyes he was as handsome as our own Prince George. (Which is exactly what he turned out to be.)
The question of value pricing is all the rage in legal services circles today. As is the case in the determination of beauty, the issue is – who gets to decide what constitutes “value”?
The Client’s Perceptions
Long before the Great Recession of 2008, client dissatisfaction with the price of legal services was mounting steadily. It has not slowed.
Globally, the realization rate for billed legal invoices stands at 83%. In other words, despite the rate reductions and discounting that law firms have implemented, 17% of all legal bills remain unpaid. That is an enormous economic loss or “unappreciated value”.
If we require tangible evidence, the metrics tell the story; the client determines value.
Like beauty, the determination of value is largely subjective. What’s missing is the means of agreeing upon value between client and attorney.
How is this possible in law when outcomes and the steps needed to achieve them are so unpredictable?
Defining Value in Legal Services
It requires conversation, listening and reaching agreement.
- Conversation – Every legal engagement begins with the lawyer/client conversation. This is not earthshattering. What might be novel is how much depth is required to determine exactly what clients want and need to achieve their goals. The lawyer who can take time to determine with clarity “what’s the problem we’re trying to solve?” and “what does success look like?” has gone much further than most to explore how the client determines value. Helping the client answer these critical questions provides the lawyer with a road map to assure a successful outcome measured from the client’s perspective. Advice and counsel, the lawyer’s stock in trade, comes to bear to help the client understand the obstacles and options to better define the journey to achieve the client’s objectives. A significantly different beginning point has been achieved: one with the end in view.
- Listening – We lawyers are notoriously urgent. Cutting to the chase and getting to the bottom line are characteristics in our DNA, and often a great skill set to possess. However, at the outset of an engagement this innate urge must be throttled. It has been said, the greater the ego need, the smaller the ears. That’s why elephants have such big ears. What do they have to be afraid of? By learning to listen to our clients, their stated and unstated needs, fears and expectations, we significantly improve our ability to satisfy them. We need to be secure enough to listen to the answers. In spite of a tendency to make quick assumptions about what is best, only the clients are able to ultimately define need. We must learn how to become the master of the question. Not interrogation or cross examination, but open ended inquisitive questions designed to learn what our clients need and expect. Our clients are our colleagues; and we need to understand, as best we are able, what they need from the engagement. If they are corporate clients, who are the internal clients (stakeholders) they must satisfy and how would they define success? This listening process leads to the all-important engagement letter which defines the terms of the engagement, the scope of the project (and what is out of scope), the terms of payment and the means by which changes in scope are to be negotiated going forward.
- Agreement – As simple as the above process sounds, it is difficult and contrary to the basic nature of most legal engagements today. The collegial, collaborative relationship established at the outset of each engagement defines value as the client and attorney determine it to be (not simply as assumed by the lawyer). Most importantly, it is not a static contract, it is a living agreement which matures over the course of the engagement. Done well, the agreement between lawyer and client results in the pre-negotiation of each invoice before it is received by the client. There are no “45 day surprises”, or invoices which lead to refusals to pay for unexpected legal fees. The original scope of the engagement only changes through conversation, listening and agreement. It’s a cyclical process. The process defines value.
The practice of law should return lawyers to the role of trusted advisors. Our business cards can label us “Counselors at Law” again. Realization rates can approximate (but never fully achieve) 100%. Less waste. Less unrealized income. More value.
Legal services value is neither binary, nor exclusive. It is the collaborative and mutually agreed upon outcome of great lawyer and client engagements.
It is not rocket science. It is just good customer relations.
It can be beautiful.
Larry Bridgesmith has practiced law for over 35 years. He is a conflict management professional, a professor of law at Vanderbilt School of Law, and a consultant to businesses and law firms in process improvement and profitability enhancement. He is a co-founder of ERM Legal Solutions which provides legal pricing and planning software solutions to legal departments and law firms, and he brings deep experience and credibility to the discussion of the business of law.