Legal Fees

A Lawyer’s Perspective on All that Hourly Rate Nonsense

“Our policy is to push the work down to the least expensive professional resource who can provide an excellent work product, and by doing so you get the best value for your money.”  

Said every partner in a law firm, ever. And they mean it when they say it. That is in fact their policy. And in theory, some day they will figure out how to manage their law firm so that they can consistently comply with that policy. Of course, there is a difference between theory and practice. For example, in theory communism works. Not so much in practice.

In law firms, there is a gap between the theory that says that the work will be done by a capable person at the lowest possible hourly rate and the realities involved in producing legal work. You see, the theory assumes a well-oiled team of collaborative professionals, each of whom is good at what they do, always has the capacity to do the available work, and works efficiently with the other members of the team to deliver the best results and value to the client. In fact, there are such teams in law firms, and where the system works, clients really do get good value. But often the system does not work.  Let’s take some examples:

  1. The partner is not too busy this week. He should delegate the work to the excellent associate with the much lower hourly rate, but that would result in his billable hours missing the target and impact his income. So, the partner does the work himself at the higher rate. The partner could discount his rate to reflect that he is doing work that someone more junior could do, but he rationalizes that he is more efficient than the associate and spends less time on the work, so no harm done. In theory.
  2. The partner is way too busy this week. She delegates the work to the associate who is not quite ready to take the lead on this type of work. The associate figures it all out but spends many more hours than the partner would have spent. Someone really should figure out if the end result costs the client more than it would have cost if the work had been done by the more senior lawyer and adjust the bill accordingly. Maybe they do, and maybe they don’t.
  3. The partner has just the right amount of work this week.  She wants to delegate the work to the associate who really knows how to do this type of work, but that associate is swamped, so it gets handed to an associate who has never done this before. Again, the associate figures it all out, but spends more time than the more experienced associate would have spent. The work is done more cheaply than the partner would have done it, but still costs more than it would have cost if the more experienced associate had done it. When it comes time to bill, the partner figures that the client still got a good deal because the bill was less than it would have been if the partner had done the work, so no adjustment is made.
  4. The partner is not that busy, not that bright and technologically challenged, but does the work anyway. It is not done very well, but it is expensive. The associate is a genius, has great organizational skills and has organized things to make the best possible use of technology.   The associate would have done it well at a lesser cost. But the partner never delegated it.

I could go on and on, but you get the point. Law firms are comprised of people. Some are smarter than others. Some are more efficient than other. People have good days and bad days. Some firms have lots of turn-over. Some people use technology well and some do not. Some firms have lots of bench strength and some don’t.

So, what is a client supposed to make of all this? I suggest the following:

  1. With the possible exception of an experienced in-house counsel with time to dive deeply into the inner workings of the firms that they hire, you will never figure out if the promise to have the work done by the most efficient resource at the lowest rate is being kept. Give up on that. In the grand scheme of things, it doesn’t really matter.
  2. What you can do is to get to know the lawyers who you are dealing with and determine if they are honest, ethical, efficient, practical, fair-minded, and conscientious, and whether it is important to them that your work be done as cost effectively as possible. When you find such a lawyer (and there are plenty of them), stay with them.
  3. Once you have found the lawyer who you trust, don’t ‘nickel and dime’ them.
  4. And finally, when you get a bill from that lawyer who you really trust that strikes you as being a bit too high, just pay it without complaining, unless you are also going to ask them to increase the bills that struck you as being just a bit too low. When you are dealing with good people, it will all even out in the end.

At the end of the day, having a relationship with a lawyer who you trust to work efficiently and bill you fairly is more important than whether or not a particular bill strikes you as being a bit high.

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