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Legal Commentary

: In Search of Perfect Client Service

GCs: Mine your data!

By Patrick J. Lamb

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Interesting post on Adam Smith Esq. about the billable hour debate really being about trust. Largely true. I envision the billable hour model to be akin to the relationship between prisoners and prison guards, with clients in the role of guards. Like prison guards forcing inmates to behave according to some set of standards and stay within the walls, clients have to watch what their outside lawyers do to stop them from turning the proverbial inch into a mile.

In his post, Bruce MacEwen pulls together a number of quotes from GCs and outside counsel that are hugely instructive to those of us jumping with both feet into the alternative fee world. Here are the quotes with my COMMENTS following:

"If I hire a plumber to renovate my bathroom, I want to know what his time and materials are!" [GC, major corporation] "Don't you really just want a nice bathroom?" "But I don't want to be taken for a ride."

THIS IS WHY YOU GET COMPETITIVE BIDS. BUT TELL ME, WHY DO YOU CARE HOW FEW HOURS IT TOOK IF THE RESULT IS A GOOD ONE?

"How do I know I'm saving money with a fixed fee? Isn't the law firm just going to take the opportunity to pad their bill even more?" [GC, major corporation #3]

FIRST, MINE YOUR INTERNAL DATA SO YOU KNOW WHAT YOU EXPECT IT TO COST. SECOND, ASK TO SEE A DETAILED BREAKDOWN OF HOW THE NUMBER WAS ARRIVED AT. IF BASED ON HOURS AT ALL, IT SHOULD START AT EXPECTED HOURS AND WORK DOWN--CONSIDERABLY. THIRD, LOOK AT THE MODEL OF THE FIRM. SEEK FIRMS THAT ARE BASED ON EXPERIENCE AND HAVE A TRACK RECORD. FOURTH, MAKE SURE YOUR LAWYERS HAVE SIGNIFICANT SKIN IN THE GAME.

"Lawyers are risk-averse; we know that. So if they have to quote a flat fee, they'll estimate how many hours it will take and add a safety margin. I'll end up paying even more!" [GC #4]

THIS IS THE APPROACH MOST BIG FIRMS TAKE TO FIXED FEES. GIVES THEM A BAD NAME BECAUSE FIRMS DON'T TAKE RISK. GET COMPETITIVE BIDS FROM FIRMS WHOLLY COMMITTED TO ALTERNATIVE FEES.

The most critical point, here, is that most companies have significant data, or can access significant data through other companies based on personal and professional relationships. On most matters, you should have a good idea on what a matter has cost in the past. That should be the starting point for a downward negotiation.

Full post as published by In Search of Perfect Client Service on August 27, 2009 (boomark / email).