Value Billing by Architects
I found this great position paper (PDF) on the web from an architurcture firm Van Mell Associates titled "Why We Don't Bill by the Hour." Some excerpts:
To value each hour of work equally and to price and manage each hour is as corrosive a policy as any creative group of professionals could devise. To pretend that each hour is worth the same as every other is ridiculous. A brilliant insight can come in a flash, and save a client from disaster or find him millions. Other hours are dull or wasted and lead nowhere. It’s clear that billing by the hour is unfair to everyone.Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor's honesty to price and record their work effort fairly. Of course, professionals, like everyone, must track their time and their staff’s time. But tracking each hour draws the professional’s eyes away from the client’s needs and toward the professional’s own reward. Whether measured by the hour or minute, the client completely depends on the advisor's honesty to price and record their work effort fairly.
Of course, we still need a way to manage our time, both for efficiency and for estimating the work needed in a new assignment. Our solution: a Good Day’s Work. This unit avoids false precision and is based on our honest judgment of worth using even increments of 10%. If we honestly feel we put in 10% of the day working hard on a client’s problem, that’s what we record. If we honestly felt we worked hard, but only for a few minutes, we don’t record it. If we see we’ve helped the client enormously, frankly, we round up.
This is the best articulation of the benefits of value billing by a company I've yet seen on the web. Read the whole PDF to learn more about the Good Day's Work and the innovative ways this Company treats its relationship with its clients.
Gaming Strategy = Business Strategy?
Angie McKaig has a brilliant post titled On Game Theory and Entrepreneurship equating her computer game play strategies with her business methods:
I realized something about myself last night. I realized that I play games the same way I manage my business. ... Truth is, I've always played games the same way; for the strategy. I just never realized it. And over the last twelve hours I've come to realize that I can understand the way I do business more clearly by looking at the way I play. I can also learn how to do business better by keeping in mind the way that I play.
Angie's lessons (read her post for her explanations):
1. Short term sacrifices are sometimes made to pursue long term goals.2. Cooperation is preferable to hostile competition.
3. Build quietly and carry a big stick.
4. Amass only good resources.
5. Invest in your people.
6. Avoid conflict and keep successes tactical rather than bloody.
7. If I could win the game without decimating my opponent, I would.
8. In choosing between overtaking an opponent through brute force or your own skills, choose your own skills.
Angie muses, "Makes me wish I could play Master of Magic with my competitors. What a great way to quickly determine how my competitors do business. Is this why "good old boys" play golf?"
Primer on Value Billing
Ronald J. Baker is an absolutely amazing visionary. He is the accountancy profession's guru of "value billing" and is the author of two of my favorite books: The Firm of the Future (with Paul Dunn) and The Professional's Guide to Value Pricing . Anyone who is thinking about moving from the billable hour absolutely must read those books.
For an introduction to Baker's ideas, read his Burying the Billable Hour (PDF). I guarantee that you it will give you incredible insights into pricing your services and provides the best indictment yet of hourly billing (from both the consumer's and professional's perspective). If you read this blog and are at all interested in what I write about, you must read it this weekend.
Billable Hours
Scheherazade posts about billable hours at Stay of Execution.
Okay, let's unpack these numbers a little bit. Let's use 2000 hours for THEM and 1600 hours for my life now. That's a difference of 400 hours. Billable hours. Okay. What's that mean? Well, remember, my average is about 35 billable hours per week. And I'm here about 50. 8 to 6 daily, or maybe 8:30 until 7ish, give or take, in the office, M - F. That means a BIGLAW lawyer needs to work the equivalent of more than 11 weeks more than me, just to get to 2000. Or they could make it up with every single Saturday, billing 8 hours. I haven't been tuned into BIGLAW enough to know where 2000 hours falls in the heirarchy, but I have a hunch it's not considered that high
A Harvard 2L, at Waddling Thunder, mach 2.0 responds:
Obviously, I'm not a lawyer yet, so I defer entirely to her sharp observations. However, unless we're going to assume that billable hours were created by the American Law division of what I like to call France's secret Committee on Economic Illogic (responsible for their 35 hour work week, for example), there must be some reason that managing partners of law firms use the system. Whatever we might think, I don't really believe they enjoy torturing their associates. Torture isn't all that profitable in the long run.
Read the full posts for some interesting insights into the billable hour dilemma from someone who is there (Scheherazade), and someone who hasn't gotten there yet.
Some more billable hour stuff:
Yale Law School's The Truth About the Billable Hour
The ABA Commission on Billable Hours Report
The Billable Hour: Putting a Wedge Between Client and Counsel from the ABA's Law Practice Today.
The New Firm Begins
It's official. As of May 1, 2004, Homann Law and Mediation officially becomes "The Silver Lake Group." The biggest news is that another lawyer will be joining me as I officially leave the land of solo practice. My new partner, who is now winding up his present partnership (on good terms), will be formally announced here next week. There are over one hundred things on my "to-do" list, so my blogging may be a bit sporadic, but here are some highlights of our business plan that I'll flesh out in individual posts on this blog.
1. No client will be billed by the hour. I'll unveil our Service Pricingsm plan in more detail next week.2. We will guarantee each client's satisfaction with our service or refund their money.
3. We will hire a "client concierge" who will be responsible for one thing: keeping our clients happy. The client concierge will contact every client weekly, organize monthly seminars of interest to them, write topical newsletters, send birthday and holiday cards, solicit client feedback, and manage our firm's master client to-do list.
4. We will set up the "Silver Lake Small Business Foundation" and contribute ten percent of our profits to it. The money in the foundation will be used to teach entrepreneurship in local schools, donate books to public libraries, encourage people to start small businesses (with micro-loans), establish mentoring programs, and fund scholarships and work-study programs for local students.
5. We will share our methods, forms, letters, and experiences with others to encourage all of us in the legal profession to move away from the billable hour and toward a saner, customer-centered way of practicing law.
6. We will have a hell of a good time.
To say that I am excited is a massive understatement. I started this weblog to write about transfoming my practice, and I feel that I am almost there. Look for more details here over the next two weeks.
Administrative Professionals Day 2004
April 21st is Administrative Professionals Day 2004 (also called Secretary's Day, Administrative Assistants Day, or Exceptional Assistants Day). Instead of the traditional gift you have given your administrative assistant, how about one to make him or her deliriously happy: let your assistant fire one client.
Several years ago, I told my secretary she could fire one client, no questions asked. After she picked herself off the floor, she chose a client that surprised me. Turns out that this client, while perfectly cordial to me, was consistently rude to her on the phone and made inappropriate comments to her when he came into the office. I sent the client a nice letter telling him I would be unable to represent him any longer, and my secretary told me it was one of the best presents she had ever gotten.
The moral to this story is that there are clients who, if they treat your staff badly, don't deserve your hard work. Every day you work for them sends a message that you value their business more than the happiness of your staff. The trouble is that you probably don't even know who these clients are. So ask your assistant, and go ahead and give yourself a little bonus and fire your least-liked client too.
Of course, flowers are also nice.
UPDATE: Seems like Evan and I are on the same wavelength. I hadn't read this post when I wrote mine. I wonder if we're talking about the same client?
Another problem with hourly billing.
A pretty insightful post from BeckyTuttle, an anonymous law firm associate blogger:
I sometimes feel sorry for the partners. It's because the savvier clients, even though they like the partners, will go to one of the associates with five or six years of experience to do a lot of the work. One, it's because they can often get us on the phone quicker, and two, it's because they know they're getting something nearly as good for a lot less money. I mean, a partner might write a better letter than me on behalf of the client, but it's not going to be THAT much better, and it might not be better at all. And I don't care whether you've been practicing law twenty five years, writing a decent letter is going to take a partner about the amount of time it's going to take an upper level associate. But it's going to cost the client $200 or $300 more for your letter than for mine. Wierdly enough, the further along you go in the profession, sometimes the less you are able to give your clients a really valuable service.
Trust makes a holiday.
Saw a link to this article on The Nub about how the concept of "trust holidays" has been imported to Britain from this country, "where accountancy, law and advertising firms have all adopted the idea." Now I don't know how many law firms have adopted the idea, but according to the article, firms that have instituted the scheme:
allow staff to decide among themselves how much time they want off, so long as between them they get their jobs done. Each employee's performance is assessed at the end of the year to ensure that they are performing up to standard.
One firm (with 30 employees) allows "everyone from the cleaner to the managing director" to take part. There are only two conditions: customers must not suffer and all holidays have to be agreed by their immediate colleagues.
This certainly has some merit. Define your employees' roles, duties, and responsibilities -- and reward them for the work they do, not the time they spend. Sounds kind of like value billing.
Top 10 reasons.
I just found the "Top Ten Reasons to Work at Google" on the company's web site. They are:
1. Lend a helping hand. With more than 82 million visitors every month, Google has become an essential part of everyday life—like a good friend—connecting people with the information they need to live great lives.2. Life is beautiful. Being a part of something that matters and working on products in which you can believe is remarkably fulfilling.
3. Appreciation is the best motivation, so we've created a fun and inspiring workspace you'll be glad to be a part of, including on-site doctor and dentist; massage and yoga; professional development opportunities; on-site day care; shoreline running trails; and plenty of snacks to get you through the day.
4. Work and play are not mutually exclusive. It is possible to code and pass the puck at the same time.
5. We love our employees, and we want them to know it. Google offers a variety of benefits, including a choice of medical programs, company-matched 401(k), stock options, maternity and paternity leave, and much more.
6. Innovation is our bloodline. Even the best technology can be improved. We see endless opportunity to create even more relevant, more useful, and faster products for our users. Google is the technology leader in organizing the world’s information.
7. Good company everywhere you look. Googlers range from former neurosurgeons, CEOs, and U.S. puzzle champions to alligator wrestlers and ex-marines. No matter what their backgrounds Googlers make for interesting cube mates.
8. Uniting the world, one user at a time. People in every country and every language use our products. As such we think, act, and work globally—just our little contribution to making the world a better place.
9. Boldly go where no one has gone before. There are hundreds of challenges yet to solve. Your creative ideas matter here and are worth exploring. You'll have the opportunity to develop innovative new products that millions of people will find useful.
10.There is such a thing as a free lunch after all. In fact we have them every day: healthy, yummy, and made with love.
I've got to get working on the top 10 reasons to work at my firm -- or just chuck this whole law thing and check out the new job postings.
Reinventing your firm.
Frequent readers of this weblog know that I am reinventing the way that I practice law. Jennifer Rice, responding to this Harvard Business School Working Knowledge article suggests her twelve ways to revive a brand here. They are:
1. Listen to customers and understand what they want.
2. Determine how your customer experience measures up to what they want.
3. If it doesn’t measure up, fix it. If there’s a list of things to fix, start with what’s most important to customers.
4. Do you have a meaningful point of difference from competitors? If not, create one using the understanding from #1.
5. Create a focused, durable brand position that meshes with the previous 4 items.
6. Communicate that brand message consistently over time throughout every customer touchpoint.
7. Break down internal silos to ensure that all departments are working together to build the brand.
8. Create mechanisms to gather ongoing feedback from customers.
9. Make sure your employees understand how they can build the brand, and make sure they’re happy. Happy employees make happy customers.
10. Happy customers generate referrals. Measure your buzz factor.
11. Now that you’ve built your brand from the ground up, it’s worth spending more money on advertising.
12. Have discipline to follow – and continually reevaluate – all the points on this list.
As I move away from time-based billing and towards service-based billing, I will keep this checklist front and center. You should too.
The joy of lawyering.
Another anonymous lawyer blogger who claims to be the "hiring partner at a large firm in a major city," at the aptly titled Anonymous Lawyer. I know he/she is truly a large firm lawyer because you just can't make this stuff up:
I hate Fridays. Everyone else in the world loves Fridays because it means the weekend is here. I hate Fridays because it means another weekend when I should be home but instead I'll either be at work, thinking about work, or wondering if I should be at work. Saturday at least. Sunday I don't work. Well, 80% of the time. Sunday is help my family spend my paycheck day. Anyone want a pony?
Or this:
A kid that I interviewed this past fall -- I can't remember exactly which one -- commented on all the stacks of paper in everyone's office. It was just idle small-talk, it wasn't like he asked a question about the paper, or made a big deal of it. He said he'd have thought so much more would be electronic. And a lot of what we do is electronic -- I certainly don't print out every e-mail I get -- but you can't mark up a document on the computer, you can't carry it down the hall and wave it in someone's face and ask them what they were thinking when they left out the comma on page 17. I never thought about it before, but I can't imagine ever getting to a point where there wasn't all this paper. You just can't walk into an associate's office, slam your laptop on his desk, and scroll down to the place where he made a mistake. You need to have that brief printed out, you need to be able to tear those pages right in front of eyes, to scatter them wildly across the room, to fill the sheet with red lines and crosses and corrections, to crumple those papers up, toss them in the trash can, light them on fire, and watch them burn. Sure, we could probably afford to destroy a couple dozen laptops a day just to make a point that we demand perfection -- but paper just works so much better for that.
And finally:
Someone, and I think I know who, keeps "borrowing" my stapler and never returning it. So I have to get my assistant just to come in here and staple some papers for me. Or if it's 7:30 in the morning, and my assistant isn't here yet, I have to go wandering the halls looking for someone else's stapler, so I can steal it, and bring it back to my desk. I shouldn't have to go combing the halls for a stapler. I'm a hiring partner. Staplers should be lining up at my door, begging for me to use them. Like summer associates. The hiring process is very rewarding, but having thirty insufferable law students here for 10 weeks every summer is a real chore. None of them know how to do anything, but they don't realize it and just end up making everyone else's lives more difficult. There are two types of summer associates that bother me the most. The first are the ones who half-ass everything and turn in memos that my five-year-old niece could write. The second are the ones who are hell-bent on finding a "mentor" and follow me around all day. "Can I look over your shoulder while you read a three-hundred-page contract?" No! If I like the work you're doing, I'll come find you and take you to lunch and, if you're lucky, make you feel like you actually belong. But if you make yourself my shadow, the only thing you're doing is making me wish we never gave you an offer. Those stakes really aren't high enough. We need to fire more summer associates. That would make the summer fun again. I need a stapler.
From the senior partner, with love.
From the And What Thanks Do We Get blog from one of the anonymous firm partners, complaining to/about his associates:
And while I'm on the subject, who is the "us" you refer to when you moan about how much the client is paying us? The "us" that I am thinking of is my partners and me. You figure into the equation as overhead. I don't hear the desks and chairs complaining about what our clients pay. The nonprofessional staff is blissfully unaware of what our realization rate is. Be more like that. The day may come when you are asked to participate in the discussions that the partnership has on these matters. I assure you, these meetings are much less about oysters and caviar and lighting cigars with $20 bills than you think. Be glad that you are presently spared from the grind of partners' meetings-- I do not know a single partner in a law firm anywhere that enjoys that aspect of what we do, and you will be no different. For now, you are called upon to work enough to justify what we pay you, and the work we have is what enables you to fulfill your part of the bargain.
I wish the firm partners weren't anonymous so I could find out if they are seeking additional "overhead" and send them a resume:
HELP WANTED: Traditional law firm seeking qualified, blissfully unaware, overhead. Flexible hours -- work enough to justify what we pay. Challenging work with partners and the support of nonprofessional staff. Apply by sending resume to ...
I hope I get the job.
The Problem with Competing on Price.
Rob at BusinessPundit has a great post on the dangers of competing on price -- especially with Wal Mart (as learned by Toys R Us). Rob says:
Blame it on Wal-Mart. Toys R Us should have seen it coming. Maybe they did, maybe they didn't, but rule number two for leaders is embrace the inevitable. Competing on price is, in my opinion, not that great of a strategy. Toys R Us needs to give people a reason to come to the stores other than just cheap toys. People can go to WalMart for that.Competing on price is almost always dangerous. If you are able to offer your clients competent legal representation at a price lower than your competition, that's great. However, matching the lowest-priced lawyer in town can be a risky strategy -- unless you can match his or her low overhead, staffing costs, etc. If you can't, offer something that lawyer can't -- better service, quicker turnaround time, higher competence -- and charge accordingly.
I am reminded of the time I started working with another lawyer as his associate. He advertised "free consultations" in the yellow pages, believing this would bring in business, and then delegated to me most of the initial client meetings. I liked the work and enjoyed meeting a number of people, but found that at least 60% of the people I met did not retain the firm. When I opened my own office, and continued the free consultation policy, I tried to find out why. I first thought that I had somehow failed to communicate my competence or answer the potential client's questions. Instead, I found just the opposite to be true -- in many cases I had managed to answer the potential client's questions and/or solve their problems in the initial consult. They often felt that after the initial meeting, they no longer needed a lawyer any more. Since then, I have charged for initial consultations (though other lawyers in my area still do them for free) and have never had anyone complain about the cost of the consult. Most people want to talk to a lawyer and they appreciate one who will take the time to listen to their problems and offer suggestions for solving them. After all, nobody goes to the dentist for a checkup and expects to get the service for free, even if they have no cavities.
Maybe the billable hour isn't so bad after all.
David at ethicalEsq notes that competition is coming to Chicago law firms.
The Law.com Daily NewsWire says that major competition over lawyer fees is coming soon to Chicago, as Detroit's largest firm, Dykema Gossett, is acquiring a 78-lawyer Chicago firm (bringing its total to over 400 lawyers) -- and, "says it plans to keep average partner rates near $300 an hour -- about half of big firm rates" in Chicago.
Tongue planted firmly in cheek, David says, "This warms my antitruster-consumer-advocate heart. Any chance of trickle-down competition for the masses?"
Gee, if I could get $300 per hour and convince my clients that it was a good deal, this hourly billing thing wouldn't seem so bad. On the other hand, if we were in India, then that $300 buys the whole day (and maybe even the week), at least according to this article on outsourcing legal research to India attorneys. (Thanks to Carolyn at MyShingle.com for the India story).
Motivating Legal Employees II
This post from The Nub relates how the managers of a BMW Mini Plant in England have saved nearly twenty million dollars in the last two years by listening to their employees:
Every employee has a target of implementing three ideas a year to improve the business. 11,064 ideas were put into practice from a total of 14,333 submitted in 2003, an 80% implementation rate.
When is the last time you asked your employees for an idea to improve your practice?
Motivating Legal Employees
I think I am a pretty good boss. I have one full-time employee, and my mother works for me on Fridays. My secretary is great at what she does, but she doesn't have the time to do all of my legal-related work and pay the bills, deal with vendors, etc. Therefore, in the next two months I will be hiring at least two more part-timers, including a business manager to help me run my firm, and a customer-relations/marketing manager to help me keep my clients happy. I do not want to hire any more full-time staff only because I can attract a higher-caliber person if I am able to be flexible with work hours and scheduling. I told this to my secretary (who has become a close friend) last week. Though she seemed OK with the idea, I worry that she will feel a bit shoved aside when I delegate some of the tasks she is presently performing to someone better suited to do them.
Here are some tips on motivating employees that I ran across in an article on Training Zone (registration may be required).
Step 1: Set achievable targets. Targets must be realistic, fair and relevant to the individuals’ job responsibilities. If a significant uplift in performance is required, it must be justified. The best way of setting targets is often to ask individuals to set their own. This frequently results in figures greater than originally specified by the director. This approach means that commitment to achieving the target is greater because the figures are ‘mine’ not ‘yours’. They actually become ‘ours’.Step 2: Have lots of winners. Nothing succeeds like success. Being able to recognise and reward all those who have succeeded provides a more positive environment than one with lots of losers
Step 3: Make rewards frequently. Make awards frequently throughout the programme. If the campaign is for a year, shorten the payout horizon to monthly or quarterly. The award values need not be huge, but the motivation value is. This keeps interest levels high.
Step 4: Have a 'most improved' award. A participant who has a poor performance in a month or a quarter, can be re-vitalised by the opportunity to qualify for an award in the next period, based on improvement. This method encourages participants to keep trying,
Step 5: Have an employee of the month. In a sales environment, it might be for the most orders taken or new accounts opened. This allows Mr/Mrs Average to compete more fairly.
Step 6: Encourage sustained effort. Nothing de-motivates Mr/Mrs Average more than to see Mr High-Flyer streaking ahead from the start, leaving all in his wake. However, if everyone starts afresh each quarter, or each month, with plusses and minuses wiped out, everyone has a chance to compete on equal terms.
Step 7: Present the awards with style. Do not under-estimate the power of public presentation. Mr/Mrs Average will value the experience of being recognised by you and his peers.
I hope that I can keep everyone happy. One thing that I will be doing is letting my secretary sit in on the interviews. I will solicit her feedback before making a hire. Thanks to The Nub for the link.
Trading Up
Ran across the Business Evolutionist Blog today and found this post on Trading Up, the book by Michael Silverstein and Neil Fiske. John Strande highly recommends the book and has gotten me to order it. I'll let you read his post, but one of Strande's readers suggests that the lessons in the book seem equally applicable to selling both goods and services. I'll post my thoughts on the book (and applying its ideas to legal practice) once I finish it.
Time to make the donuts.
Found a new weblog today -- Cracked Cauldron Spillings -- which is kind of an on-line diary from a mother/daughter tandem who are opening a bakery in Oklahoma. In this post, the bakers hit upon a fundamental business truth:
Having discovered the most wonderful donuts in town, we will not provide donuts in our bakery. It seems - redundant - to try to make donuts when someone else makes really really good donuts. Especially since they are located just down the street from the locations we've been investigating. . . . Like any other sensible people, we will buy our donuts from The Best Donuts Shop. . . . So, it will work out well. Their donuts are soooo good. Yes, we could probably make donuts every bit as good (or better), but why? It's not part of our menu, equipment purchase plans, or business plans. I don't think there is any point at which we will be offering donuts.
As a general practitioner, I still find it very difficult to stop trying to help everyone who comes through the door, and instead focus on that small segment of legal consumers I can help most (and best). However, I have reluctantly come to recognize that other lawyers in my area can do many things better and more efficiently than I can. I now know that offering a novel way to deliver legal services to my core customer is the way that I will achieve my goal of becoming a more satisfied (and more successful) lawyer. I just wish that I would have realized five years ago that I didn't have to make donuts when my competition was already making great donuts.
Top Ten Business Ideas, 2003
In his How to Save the World Blog, Dave Pollard sets out his list of 2003's Ten Most Important Business Ideas. Dave's weblog is always an interesting read, and this is some of the best business writing I've seen on the net in a while. Very cool.