Legal Marketing: You Are What You Bill (Hourly)

The relationship between lawyers and hourly billing rates might best be characterized with that over-used quote from the movie “Brokeback Mountain”: “I wish I knew how to quit you.”

For all the client-centric talk about alternative fee arrangements and value billing, hourly rates retain a firm grip on law firms and lawyers for both practical and psychological reasons. As a practical matter, it’s hard to beat elapsed time as the basic unit of measurement for professional services work, and hourly rates are the easiest — if not necessarily the best — ways to charge for service. But lawyers also cleave to the belief that hourly billing rate is the primary expression of  ability and status.

In the discussion thread of a recent post by Carolyn Elefant on high-end legal temp agency Axiom, one commenter noted: “Why would a good lawyer work for Axiom? Clients must understand that they’re getting junk for $150 per hour.” Really? What if a lawyer previously had been a successful solo charging $250 per hour? Is she less competent now that she’s billing at a lower rate?

As Elefant replied, “I’m not so sure they are getting junk. I mean, the lawyers have large firm and in house GC experience – but my impression is that they are not rainmakers and prefer the certainty of ongoing work and steady pay to a higher rate.”

Toby Brown opens his recent post 3 Geeks and a Law Blog on billing rate increases with a zero-sum rhetorical question:  “As a lawyer are you highly valuable (justifying a higher rate) or are you low value?”  Again,  hourly billing rates are erroneously linked directly to the quality of professional skills. Lawyers who bill at a higher rate are intrinsically better than those who bill at a lower rate.

Brown then goes on to inadvertently demonstrate how billing rates unnecessarily complicate fee discussions with clients. On one hand, Brown notes that “Rate increases are a relationship building opportunity,” yet he goes on to counsel that “Rates are merely the starting point for rate and fee conversations” and  “Have conversations with clients about pricing, versus rates. At the end of the year, or end of a case, what really matters to a client is the fee.”

Then why dwell on hourly rates at all? If the client ultimate cares most about the total fee and you make a compelling argument based on that, how you get to the final nut rate-wise becomes less relevant and less contentious. You could put rates into an appendix without reference to whether they’re going up or down, and only discuss them if the client asks.

One of the clearest examples of the pernicious hold hourly billing rates have on the lawyer psyche is a presentation by Victor Medina at the 2011 Ignite Law event. Though you’d be hard pressed to find a client to agree with his thesis, Medina posits that “Legal services are expensive, and they ought to be…Clients are really not in a position to judge your legal competence.” His solution: “Be better tea.”

“There’s $9 tea and there’s 40 cents [sic] tea, and the only way we know whether or not one’s better is by the packaging and the price.”

Gosh, if we only had a superfluity of ratings and reviews content on some sort of global interconnected web of computer networks…

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