the [non]billable hour

Why Lawyers Procrastinate

Can the source of lawyer procrastination be traced to law school?  Joel Spolsky, in his always-insightful Joel on Software Blog, takes on colleges teaching computer science, and squarely blames them for turning out students poorly prepared to tackle time-based, collaborative projects. 

College students in their final year have about 16 years of experience doing short projects and leaving everything until the last minute. Until you’re a senior in college, you’re very unlikely to have ever encountered an assignment that can’t be done by staying up all night....

Students have exactly zero experience with long term, team-based schedules. Therefore, they almost always do crappy work when given a term-length project and told to manage their time themselves.

If anything productive is to come out of these kinds of projects, you have to have weekly deadlines, and you have to recognize that ALL the work for the project will be done the night before the weekly deadline. It appears to be a permanent part of the human condition that long term deadlines without short term milestones are rarely met.

Lawyers, does this sound familiar?  I'm doing some more thinking on this, but it seems to me that law students not required to meet deadlines (and work collaboratively) are ill-prepared to become good lawyers.  Your thoughts?

Bonus Your Staff Before Your Attorneys

In this great TED talk by author Dan Pink, he argues that while incentives improve people's performance on routine tasks, just the opposite is true when creativity or problem solving is involved.  Incentives not only fail to improve performance on creative tasks, they diminish it.  What's more, the larger the reward, the worse the performance.  Might be something to think about when deciding just how to motivate lawyers. 

Watch the entire talk (it is roughly 18 minutes), it is worth your time.

Clients Care About Price, Not Cost

Last week, I posted a Q & A on Flat Fee Pricing.  Just as I've finally found the time to respond to the comments, Jay Shepherd does me one better in this thoughtful piece titled Hourly Billing: The End of the Beginning.  Please read the entire piece, but I'll share here Jay's response to lawyers who argue that time determines price (even in flat-fee models) and should be tracked:

The price depends on only one thing: the amount the customer will pay at that time. You can prattle on all you want about costs and budgets and efficiencies and inefficiencies, but it doesn't matter a whit. It's up to you to set a price that is less than or equal to the value the client places on your service. If you do, you'll be hired for the job. If the value to the client is high enough, you should be able to charge enough so that your revenue exceeds your costs, giving you a profit. But don't expect your client to care about your costs or your profits — that's not their job.

Q and A on Flat Fee Pricing

I was recently interviewed by the Minnesota Lawyer newspaper for an article on flat fees that grew out of my Twelve Truths of Time presentation in Duluth, MN.  We did the interview as a series of questions, which I'm reproducing below.  Once I get a link to the actual article (if it isn't behind a subscription firewall), I'll post that here, too.

In what types of cases does flat fee billing work best?

There's no one type of case where it works best, but there are certainly cases where it works easiest: ones with a certain beginning and ending that fall squarely within the lawyer's expertise.  However, any case can be priced on a flat fee basis provided the attorney has the experience to properly evaluate the matter and has the systems in place to handle it economically.

The key thing to remember is that a lawyer doesn't need to make the same money on each case as they'd have made by billing hourly.  Instead, so long as lawyers price right on average, they'll win in the aggregate.

Is it possible to do flat fee billing in litigation matters? If so, how does that work?

Litigation is really no different than other complex transactions -- such as building a sky scraper -- that are handled on a fixed-price basis every day.  The key is to enter into a mutual understanding with the client that accounts for the unexpected.  Much like "change orders" are used by contractors, lawyers, too can utilize them to account for a case that takes an unexpected turn.  The key is to define ahead of time the kinds of things that are truly out of the ordinary and make certain the client understands that when circumstances change dramatically, so too can the price.

Another simpler way to begin down the road of fixed-fee pricing is to assign a price to each discrete service (such as depositions, interrogatories, days in court, etc.) that the client agrees to before the representation begins.  Then, in partnership with the client, a lawyer can map out a strategy for litigating the case and give the client a pretty accurate picture of the costs before they are incurred.

Can/are large law firms also using flat fee billing? If so, in what kinds of cases?

Large firms should have an advantage in flat fee pricing, because they're not only able to absorb better the "one bad guess" on price, but should have a far greater amount of date from which to accurately estimate what their costs are in each matter.  The irony is that while large firms have a significant advantage in doing flat fee work, they are the least likely to adopt it as a primary method of pricing their services.

What are the advantages of flat fee billing?

There are so many, but the principal one -- and the one clients embrace, too -- is that the lawyer's and client's interests are now aligned.  Both now desire to handle the case in the most expeditious way, and law firms are now driven to embrace client-friendly innovative practices instead of eschewing them.

What are the disadvantages?

The key challenge in implementing flat fee pricing is that because so many lawyers don't have accurate records of their cost per case or client, they often guess wrong on price.

Are clients demanding other options to “billing by the hour”?

Not all clients are demanding options, because many don't know options exist.  I do know from personal experience that my lawyer clients who are introducing flat fees to their customers are receiving an enthusiastic response.

Any final thoughts/tips for practitioners when it comes to flat fees?

Don't be afraid of flat fees or other alternative pricing methods.  So long as you know your business and know your clients, you can implement alternative ways of pricing your services that can make you more money and satisfy your clients.  And if you're not sure about how to go about developing a flat fee pricing model, ask your clients.  They'll love to give you some advice for a change.

Some Tips for the Suddenly Solo

The fellas at Lawyerist caught up with me in Duluth after one of my presentations at Minnesota CLE's "Strategic Solutions for Solo and Small Firms" conference. Sam Glover asked me to share some tips for the "Suddenly Solo" lawyers out there.  Here's the video:

Interview with Matt Homann from Lawyerist Media on Vimeo.

Because You Can Do It Doesn't Mean You Should

A quick tip that popped into my head while speaking in Minnesota earlier this week:

Tape the telephone number of your IT/Tech professional under your desk near the tangle of cords coming from your PC (and on your server, router, etc.) so you see it when you're most likely to try to work on your tech stuff yourself.

Still tempted?  Next to the number, write your billable rate and write theirs.

Culture Lessons from NetFlix

Netflix recently released a "Reference Guide" titled "Culture" on Slideshare, giving everyone a chance to peek "behind the curtain" at the values the innovative company expects from its employees. There are some real nuggets in the presentation.  Here are a few of my favorites:

The "Keeper Test" for managers:

Which of my people, if they told me they were leaving in two months for a similar job at a peer company, whould I fight hard to keep..."

The irrelevance of "hard" work:

It is about effectiveness -- not effort -- even though effectiveness is harder to asses than effort.  We don't measure people by how many evenings or weekends they are in their cube.  We do try to measure peole by how much, how quickly and how well they get work done -- especially under deadline.

The refusal to tolerate "Brilliant Jerks" in the workplace:

For us, the cost to teamwork is too high.

The preference of "Rapid Recovery" from vs. Preventing error:

You may have heard preventing error is cheaper than fixing it ... not so in creative environments.

The entire policy for expensing, entertainment, gifts and travel:

Act in Netflix's Best Interests.

Please read the whole thing, and while you do, imagine how a law firm would thrive (or fail) if it adopted a similar culture as Netflix's.

Culture

View more presentations from reed2001.

Thanks to the Emerging Leadership Circle blog for the pointer to the presentation!

Twelve Truths About Time

In early August, I'm headed to Duluth, Minnesota to speak at the Strategic Solutions for Solo and Small Firms conference. One of the presentations I'm giving is called the Twelve Truths About Time. In it, I share twelve reasons why attorneys should abandon the billable hour. Here's the slide deck for that presentation. 

Twelve Truths About Time

View more presentations from mhomann.

It is still in "draft" form, and I expect to tweak it a bit before I use it live, so please let me know what you think. My friend and artist/designer, M. Jason Robards, drew the clocks. We're working next on a "Real Innovation for Real Lawyers" slide deck.  I'll share that as soon as it is done. Thanks!

Let Your Clients Pick Your Next Associates

Seth Godin shares how he narrowed down 27 finalists for his "Alternative MBA" program to just ten participants: he let the applicants decide. Here's how he describes the process:

More than 48,000 people visited the page that described the program and 350 really cool, talented people applied. I picked 27 finalists and all of them flew out to New York to meet each other. This was the most fun I’ve ever had at a cocktail party (it helped that it was at eight o’clock in the morning).

The conversations that day were stunning. Motivated people, all with something to teach, something to learn and something to prove. I asked each person to interview as many other people as they could. After three hours, I asked everyone to privately rank their favorite choices... “who would you like to be in the program with you?”

After they left, I tallied up the results. It was just as you might predict: nine or ten people kept coming up over and over in the top picks. I had crowdsourced the selection, and the crowd agreed. (It turns out that the people they picked were also the people I would have picked).

On January 20th, the most selective (one in 40 got in) MBA program in the world got started. Since then, they’ve never failed to live up to my hopes.

What if your firm choose its associates this way, by letting the applicants choose the others they'd like to work with? Or be even bolder, and bring your applicants in to spend a day with a mixture of your best clients -- and let the clients decide!

100 Tweets: Thinking About Law Practice in 140 Characters or Less.

I really like Twitter.  For those who follow me, you know that I try to share lots of legal-themed tips, thoughts and ideas.  In fact, most of my Ten Rules posts started out on Twitter -- where I'll test 15-25 "rules" to see which ones work best before picking the ten favorites.

However, there's lots of stuff that lives on Twitter now that used to live here on the blog.  And since I don't expect everyone reading this to follow me there (or go back and read through my 2000+ Twitter messages), I decided to compile a "Best Of" list of my favorite tweets. 

So, here (in .pdf form) is a little e-book I've titled:  100 Tweets: Thinking about Law Practice in 140 Characters or Less.  It contains my favorite 100 tweets, in no particular order, and should give you a sense of what I share on Twitter that you don't always see here.

If you enjoy it, and would like to follow me on Twitter, I'll see you there.