Warning: The article below contains 30 seconds of material about accounting. Please power through and do not tune out.
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How I Was ‘WIP’D Into a K Car
Tag: law firms
How can you possibly explain why a lawyer at a substantial firm took on a file that was outside of his expertise and made a costly mistake, when that very same lawyer had three partners and two law clerks in his department, all of whom would have easily spotted the error if consulted? To make matters worse, had the lawyer involved one of the law clerks on the file to keep costs down, as would normally be done, the clerk would have immediately spotted the error. However, this lawyer chose to do all the work himself at a billing rate higher than the billing rate of the law clerks.
I once had a law partner named Marvin who taught me what he called the “fish theory” of marketing. According to Marvin, marketing was simply a matter of throwing a fish back to every referral source who threw a fish to you. If you were referred a file from someone, you owed that person a file, and so it went.
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How Law Firms Drive Associates Crazy
(Part 1 of Many)
Law firms like to encourage their lawyers to produce as many billable hours as possible. In order to keep the lawyers ‘motivated’, law firms usually set a target number of hours that they expect each lawyer to bill. Some firms like to set the target at a number which is higher than they expect the lawyers to bill.
I am, of course. But I don’t have to make sure that everyone else knows it. Whenever I forget this simple truth, the client ends up paying for it somehow.
There is an easy way and a hard way to develop a good client base in the legal profession. The hard way is to work extremely long hours and be phenomenally good at what you do. I have met a few people who have done it this way, but not very many.
Law firms being partnerships, someone must decide how to split the pie at the end of the year, and except in some small firms, the pie is rarely split evenly. The task of deciding how large a slice of the profits should be given to each partner in medium and large firms usually falls to the compensation committee. One might think that the compensation committee would consist of human resources professionals with specialized knowledge in evaluating job performance, and perhaps that is the case in some firms, but in many firms the primary qualification for membership on the compensation committee is a large client base and big billings.
Whenever someone makes a pop culture reference to the 80’s, 90’s or 2000’s which I don’t get, I always say, “I was busy working.”
The “organizing principal” and basic building block of law firm economics is the billable hour.