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$1000/hour? Raise Standards, Not Rates

January 13th, 2014 / - filed under Law Firm Management, Resources & Surveys

Deep breath: The National Law Journal’s Billing Survey just came out. As I read the article summarizing the survey’s findings, my heart rate went through the roof, I tripped while scrambling around for stronger reading glasses, knocked over a cup of coffee and…  All in all, not a great harbinger for a new week in a new year.

Was I surprised that the surest stars at the finest firms command rates well north of $1000/hour? Of course not. The problem is, my life is oriented to un-know these little factoids. Unfortunately, as hard as I work to change the calculus of legal services, data like this comes around to remind me that the revolution may be in my own mind.

Look, I love lawyers. I make my living serving them because way down deep in my gut I feel there’s something really special about a profession rooted in trust. Lawyers are like moms. They have the answers. They’re reliable. They’re in the foxhole. They get it done. But for $1000/hour, they should close your deal or win your case and make your mom dinner.

The service standard is not in sync with the fee paradigm. To the contrary, while we see this mind-boggling data about hourly rates, we also see data that suggests clients aren’t getting more just because they’re paying more. In an earlier post, we referenced Altman Weil’s Law Firms in Transition Survey, which found that, in large part, while firms feel the heat, they’re not changing their outfit. They continue to add bodies and hike up rates while making tactical decisions instead of asking strategic questions. At rock bottom, these rising rate firms are concerned about firm revenue, not client value.

It can’t go on like this. It won’t go on like this. And frankly, the chorus that we-want-to-keep-our-rates-low-but-we-just-can’t-because it’s-so-expensive-to-run-this-big-giant-firm… it’s downright insulting to the in-house counsel who are under such tremendous pressure to reduce their legal spend. I defy a law firm leader to tell any Fortune 10 General Counsel: We really wanted to freeze our rates, but you know how it is…the insurance costs alone…whew…it’s just so hard out there…

No. I refuse this paradigm. The revolution is not in my own mind. Emboldened, pioneering clients are forcing law firms to focus on value by insisting on aggressive outside counsel guidelines. Tough GCs are working hard to lock rates, demand creativity, insist on most favored nation clauses and cut out the rubbish. (Dinner and car service home because you’re working at 8:30 pm? And you think it’s expensive to run your business?)

Better still, scores of law firms—even some really big & fancy ones—are shaking up their structure and challenging status quo. They are using technology to be smarter. They are listening more, even if it means making less. They involve associates in management. They are committed to diversity. They send one lawyer to a deposition instead of five. They have skin in the game.

And it’s a good thing because the next generation of business leaders, they won’t buy what the old guard sells. The future leaders, they don’t know from landlines, timesheets, secretarial pools and 18-cent copies. They do know what it means to have a huge network. So they will quickly realize that when you put to the side the handful of legal wizards that actually warrant a premium rate, there remains an ample supply of hot legal talent from nimble firms. Yup, there are tens of thousands of lawyers right here in New York City with major expertise, fine pedigree, deep bench and guess what…you can pay them reasonable rates and they’ll buy your dinner.

So in-house counsel, take note: If you’re sweating your budget, you have an alternative. A safe bet and a sure thing. Phenomenal lawyers abound who didn’t make the top of this survey, lawyers who will kill themselves to serve you and you get to call the shots.

And outside counsel, we’ve got work to do. We are looking in the wrong direction. We need to transform the service model. We need to forget what worked before and look forward to what’s next.

We need to change, not charge. Who’s with me?