Legal Ease Blog

Do Something! Focus on giving

In these times of economic decline, it’s easy to fall into a scarcity mentality and to cut back on what goes out and focus more on what is coming in. But while it may make sense to revisit your financials and look for ways to save, don’t be penny-wise and pound-foolish – particularly when it comes to your network and your employees.

What goes around comes around, and what you give tends to multiply. So don’t stop doing pro bono work, providing reasonable perks and appreciation to good employees and loyal clients. And if you’re stepping up your marketing and networking efforts, don’t view those efforts merely in terms of what you can get out of it and what new business you can bring in. Focus instead on what you can do for others, what resources and information you can offer to help others reach their goals.

When you do good things for others, they remember you.

How New York Rules on Retainer Agreements Help Support Alternative Billing

Effective in 2002, the Appellate Divisions of the Supreme Court of the State of New York modified the Part 1215 to Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York regarding written engagement letters, setting forth particular requirements for New York Lawyers.

Specifically, the section requires that an attorney representing a client from whom the attorney would be collecting a fee provide the client with a written engagement letter before beginning the representation (or within a ‘reasonable time’ thereafter if it is otherwise impracticable or if the scope of services cannot be determined at the beginning of the engagement).

The rules specifically contemplate circumstances under which there might be a change in the scope of services as originally contemplated by the attorney and the client. The rule states, “Where there is a significant change in the scope of services or the fee to be charged, an updated letter of engagement shall be provided to the client.“

The letter of engagement is required to address the scope of the services to be provided, and must include an explanation of the attorney’s fee to be charged, as well as expenses and billing practices. Where otherwise required, the engagement letter must also specifically advise that the client may have a right to arbitration of fee disputes.

There are some limited exceptions to the above rules. Specifically excluded circumstances are: if the fee to be charged is expected to be less than $3000, if the attorney’s services are of the same general kind as previously renedered to and paid for by the client, where the matter is a domestic relations matter governed by 22 NYCRR 1400, if the attorney is admitted to practice in another jurisdiction and maintains no office in the State of New York, or where no material portion of the services are to be rendered in New York.

When speaking with attorneys about using alternative billing arrangements, one of the main questions that arises is the question of how to set the fee. Many lawyers fear fixed fee arrangements because they are afraid that they will under-estimate the amount of work required, or that unforseen circumstances will arise which were not originally contemplated by the attorney, and therefore were not factored in to the original fee calculation.

Contrary to popular belief, using fixed fee agreements does not require that lawyers have the ability to see the future and anticipate every single circumstance which might arise. In New York, the rules specifically address the potential for a change in the scope of services.

The key to creating an effective fee structure and writing a good engaement letter is to define the scope of services as specifically as possible at the outset of the engagement, and make it clear to the client that the fee quoted is based only on the scope of services contemplated by the agreement. Additional services not included in the orignal agreement will be the subject of a supplemental services agreement, if necessary.

New Magazine for Women Litigators - Sue Magazine

I recently learned about a new magazine for women litigators that is set to launch in January 2009 - Sue: For Women Litigators. The magazine will cover a multitude of issues relevant to women lawyers today, including diverse topics such as: effective trial presentations, subprime mortgage litigation,  women in technology, litigation in China, preventing domestic violence, and E-discovery. And of course, they'll be stories about successful women litigators.

I spoike with someone from Sue earlier today, and am working on an article for a future issue. Stay tuned for more details. In the interim, check out Sue. The website includes short bios of some of the authors whose work will be included in the magazine.

Value Billing Q&A

Not long ago, I engaged in an email exchange with a reader about Value Pricing. Here's part of the conversation:

Q: I'm still trying to figure out how value billing can be used to serve the client's best interests, as well as the lawyer's interests. How to set the fee is still a puzzle to me -- especially how the client's situation and "valuation" impacts the fee, and the relationship to the amount of effort the lawyer expects to expend on the case or transaction.

How can I figure out when and why a "premium" fee is warranted, or one client's situation would result in a higher fee than another's, although the lawyer believes he or she would be performing the same services for each client? Any help you can give me would be much appreciated.

ACS response: There’s no scientific method that can tell you how to set a fee when you’re using value billing, any more than there is a scientific method for determining your fee when you’re billing hourly. The lawyer’s time, effort and resources that go into the transaction are all costs that need to be taken into account by the lawyer when setting the fee – they’re just not the ONLY things that need to be taken into account, and the fee shouldn’t be entirely based on those factors.

I don’t believe that most lawyers provide ‘the same services’ to each client, regardless of how similar the clients’ situations appear to be at first blush. Much of this is based upon the client’s expectations, both in terms of the outcome and in terms of the services that are provided and HOW those services are provided.

There are many factors that might affect whether a ‘premium’ fee can be charged – and you can see many of those factors at work in other businesses. For example:

* Does the client want something in a rush?
* Does the client expect ‘additional’ services?
* Is this a needy client?
* Will you be dealing with one person within the organization or more than one?
* Will working for this client mean that you have to forego other business or put other clients off in order to get the business?

Q: Some of what I’ve seen written about value pricing worries me. For example, some proponents of value pricing seem to say that you should learn about your client's anxieties in order to charge more. At this point in my reading, it seems that value billing practitioners would encourage a lawyer to charge otherwise totally similar clients (for whom you expect to perform the same work under the same conditions) different fees, based on the client's personal characteristics -- e.g., if one of them had a higher anxiety level, or maybe more anger at the opponents, or was fighting to prove a point -- because that client might "value" your services more highly and thus be willing to pay more. That attitude might be fine if you make computers or widgets, but it sounds like you're saying that lawyers may price discriminate among clients based on information learned within the lawyer-client-fiduciary relationship. That makes me feel queasy. Can you somehow reassure me on this point? Thanks again for your willingness to help.

ACS response: Again, there isn’t a science to setting the fee, any more than there is a science to deciding whether to charge $200 vs. $250 vs. $400/hour. That being said, I do not believe that value billing practitioners are talking about learning your client’s anxieties in order to charge more –they’re talking about learning about your client’s anxieties in order to better able to discuss value. Those are two very different things.

Similarly, the issue isn’t really charging a client more solely because of their personal characteristics. Instead, in the lawyer’s experience, those characteristics inform how the engagement will be managed, what the client expects and what services will be provided.

A client who is more anxious, wants to ‘prove a point,’ or has more anger at the opponents may be more likely to do any of the following:

* Use more of the lawyer’s resources – particularly time;
* Be less likely to listen to the lawyer’s advice;
* Make the engagement more contentious or more difficult in other ways;
* Have unrealistic expectations;
* Make more work for the lawyer;
* Cause more problems for the lawyer or the lawyer’s staff;
* Be more demanding;
* Want work done ‘right away’; etc.

All of these factors can, and should affect the fee. If the lawyer were billing by the hour, no one would bat an eye if one of the clients described above ended up with a larger legal fee – as usually would be the case. At least if you’re value billing, the client is aware of the fee up front and has an opportunity to reject it at the outset if the client doesn’t believe the services are worth the quoted fee.

The client’s anxiety about the problem (or opportunity) they are faced with – and how that anxiety affects how they value the services that are being provided – should be explored with every client regardless of how you price your services. Whether you’re ‘value billing’ or not, the client still has to see the value in what you’re providing, and has to agree that the value is at least equal to the fee being quoted. The client’s expectations and anxieties will play a large role in the engagement, how it is managed, and the type and scope of services to be provided.

Although your email suggests otherwise, so-called ‘difficult’ clients are often quoted a different fee even by lawyers who are billing hourly. Many lawyers quote a higher hourly rate for clients they believe to be ‘difficult.’ Many lawyers have different rates for different kinds of clients, even if the kinds of services they are providing are the ‘same.’

Finally, lawyers are ethically required to charge a reasonable fee for their services, whether they’re pricing based on value, an hourly rate or any other pricing method. The principles of value billing don’t require a lawyer to determine the fee in a specific way, or to set a different price for every specific client. In its most basic form, value billing simply means that the fee has to be tied to the client’s needs and values, rather than the number of hours involved.

Why Your Firm Needs a Mission

I recently read the book, Personal Branding, by Patrick Hanlon. According to Hanlon, really great brands key into a 'primal code' that helps them to connect with people. The primal code consists of seven elements, including what Hanlon calls the creed.

Your law firm's mission is its creed. It's the statement of what your firm believes and values. The most powerful ones, as Hanlon says, are "simple, concise statements that embody hugely bold ideas."

Your articulated mission is one way to connect with clients and potential clients. But that same mission must be not only communicated to your employees, but it must be a part of your firm culture. It must be in the heart of every person who works for your firm.

This quote specifically struck me from the book:

Defining, understanding and communicating your mission are critical to the success of your brand, both internally and externally. Confused employees and coworkers cannot motivate and persuade others. Confused prospects do not buy...

Mission statements - creeds - motivate. By definition, they communicate a difference. What's your creed?

To learn more about why law firms need mission statements, see this post. And if you want to know how to create law firm vision and mission statements, take a look at my article on the subject.

Do Something! Highlight staff members in your newsletter

If you are sending out  a firm newsletter, either by regular mail or email, you’re already well on your way to establishing ongoing relationships with clients, potential clients, strategic alliances and referral sources. (See my earlier post about sending out a firm newsletter).

I'd like to expand a bit on one of the points from my earlier post:

Include news about your firm and its members. Even if your clients are businesses, it’s people within those businesses that are hiring you. And those people have relationships with all of the people in your office - not just the lawyers. People do business with people they know, like and trust. The more you highlight the staff members with whom your clients interact, the more your clients will feel a strong bond with your firm and with the individuals that work there.

As a practical matter, many clients interact more frequently with staff than with the attorneys handling their files. They see your receptionist when they bring documents to the office or come for a meeting. Your receptionist or secretary greets the client on the telephone each time the client calls. Your secretary calls the client to confirm appointments or follow for receipt of documents and information. The billing department sends out invoices and follows up for payment. Perhaps you have a calendar department, or a paralegal who may also have relationships with your clients.

People hire people, and they're much more likely to be loyal to those they know than to those they don't know. Your staff is important to your clients. To generate even more firm loyalty, highlight non-professional staff in your newsletter, along with your professional staff.

Liked this post? You might be interested in an old post: Why Your Receptionist May be the Most Important Person in Your Office.

Are you a generous referrer?

I've been having an ongoing conversation over the past week with an attorney about attorneys referring business to one another, and here's what she told me today:

My experience is most attorneys will do whatever walks in the door regardless of experience or expertise and also will only refer if they get a referral fee even if they do nothing to earn it.

I was actually floored when I read this. I know that there are some attorneys out there who think this way, and my first thought was that she needs to associate with a different group of attorneys. But I have to wonder whether these ideas are more widespread than I thought.

Some reasons why the above is an exceedingly poor and short-sighted way to run your practice:

1. Malpractice. No lawyer can or should handle everything that walks through the door; there are some areas of practice that are extremely specialized and contain numerous malpractice traps for the unwary. It is far easier to screw up even a 'simple' case if you're unfamiliar with the rules and procedures (not to mention the substantive law) involved.

2. Scarcity. This way of doing business represents a scarcity mentality. Lawyers who insist that they can handle anything that walks through the door do so more out of fear that they won't have enough work if they turn away clients than out of a conviction that they can actually handle anything competently.

3. Ethics. Many jurisdictions prohibit lawyers from taking a referral fee if the lawyer does nothing but refer the case out to someone else. If you aren't providing value for the client, you can't collect a fee - including a referral fee.

4. Concern for your clients. If you truly want to provide a service for your clients and potential clients, sometimes the best advice that you can give them is that they should find another lawyer who is more well-versed in that practice area or industry. Taking on a matter for which you are unprepared or ill-equipped does a disservice not only to that new client, but to your existing clients, whose matters may be neglected while you try to learn a new practice area.

5. Economics. If you're working on too many different practice areas at once or taking on matters which are entirely unfamiliar to you, it's likely that you'll be spending more time getting up to speed than an experienced practitioner would. If you're billing hourly, that means that you'll either be cutting your hours or charging a reduced rate due to your lack of experience, since most clients aren't willing to pay for your time to learn something they expect you to know already. It's much more productive to focus on what you do (and know) best.

6. Relationships. If you practice this way, you're likely to alienate other lawyers, potential referral sources and clients. Since relationships are the foundation of any law practice, you're playing with fire if this is your attitude.  What goes around comes around -- if you don't refer out, chances are others aren't referring to you, either. Referrals strengthen your relationships with those to whom you refer and with your clients - sometimes the client is so appreciative that they ask you to stay involved in the matter even after you referred it - so both you and the new attorney get paid!

7. Hypocrisy. Lawyers will constantly tell their clients that they shouldn't proceed without competent legal representation, because the consequences can be devastating. Lawyers often rail about the prolifiertation of 'do it yourself' forms, websites, and lay advice that you can do your own will or negotiate your own real estate contract or represent yourself in court. But lawyers that take on matters they are not equipped to handle are making the same mistake for their clients.

If you want to take on a new practice area or learn something about a new area of the law, by all means do so - but go about it in a purposeful way, by setting aside the time to educate yourself and to get help from experienced practitioners in the field.

10 [More] Reasons to Rethink Hourly Billing

Yesterday, Matt Homann posted a great list on his blog, the [non]billable hour. He calls his list, "10 Rules About Hourly Billing," but I like my title better. I encourage you to read Matt's whole post, but here are some gems:

4.  Sophisticated clients who insist on hourly billing do so because they’re smarter than you are, not because they want you to be paid fairly.


7.  Every time your clients jokingly ask you, “Are you going to charge me for this?” they aren’t joking -- and they’ll check next month’s bill to be sure.

8.  The hardest thing to measure is talent.  The easiest thing to measure is time.  The two have absolutely no relationship to one another.  Your law firm measures talent, right?

and my personal favorite:

10.  There are 1440 minutes each day.  How many did you make matter?  How many did you bill for?  Were they the same minutes?  Didn't think so.

It's time for us to reconsider all of the comfortable reasons for continuing to bill by the hour and devise alternatives that work both for lawyer and for clients. The lawyer that does so successfully will likely have an even bigger competitive edge in a difficult economy when budgeting is becoming much more popular (and necessary).

Social Networking is Exploding - Are You Taking Advantage of the Opportunities?

I don't know about you, but these days, I can't turn around without hearing something about social media and social networking. This week alone I've received several invitations for programs about social networking, and the other day I attended a networking event that included (unbeknownst to me when I signed up for the event) a speaker talking about LinkedIn.

Facebook, LinkedIn, Twitter, Plaxo, are they really worth it for lawyers? What about online websites or forums that allow lawyers to answer questions from the public? What can be gained by using these tools? Are there ethical problems with using these tools?

I'm new to social networking as well, and haven't had an opportunity yet to join all of the above, or even to get them all straight. But here are some things you may not have considered:

Social networking benefits your clients. Your clients, whether they are individuals or businesses, have many needs. Some of those needs can be met through using your legal services, but others may require help that is outside of your area of expertise. The better your network, the better equipped you'll be to refer your clients to other quality service providers - thereby increasing client loyalty and making you more valuable to your clients.

Social networking can be a means to educate your clients. Your clients are using social media and social networking site in increasing numbers. These tools may be some of the easiest and quickest ways to alert clients to new information that can affect them and their business. They may be a quick and easy way to alert them to new information on your website or blog, or to news items that interest them.

Social networking helps you get to know your clients better. Through social networking, you'll learn things about your clients and referral sources that you never would have known before. Following your clients on Facebook or Twitter may give you insight into their additional needs and ways that you can fill those needs. But it may also give you insight into your clients and referral sources as people, deepening those relationships in ways you may not have anticipated.

Social networking allows you to increase your reach without spending a huge amount of time or money, and allows you to stay connected with a wide range of people all at the same time.

These are just a few of the reasons to take a look at social media and social networking.

Any thoughts, comments or questions are welcome. Feel free to share your social networking experiences!

The ABA LPM section is planning to do one of the "Third Thursday" teleconference on the ethics of Social Networking in February 2009, and I'll keep you posted.

There's No Such Thing as a 'One Off' Client

Recently I was speaking in front of a group of lawyers on productivity, systematizing your practice and client selection. One lawyer stood up to ask a question and began with, “Most of my clients are ‘one off’ clients, so…” I immediately cringed, as I do any time any lawyer makes assumptions about ‘one off’ clients.  But since I wasn’t there to speak about ‘marketing’ I chose not to address his ‘one off’ comment – although I will address it here, because I think lawyers make a big mistake when they make those assumptions.

Many lawyers think their clients are ‘one off’ clients and they make mistakes such as:

• Failing to keep in touch with former clients after the engagement is over;
• Failing to find out additional information about clients such as their other needs, both legal and non-legal;
• Failing to create a consistent client experience;

While a lawyer with a ‘one time only’ kind of practice (like bankruptcy) may rarely or never see the same client twice in the lifetime of her practice, that lawyer misses huge business opportunities by thinking of clients as ‘one off’ clients. Why? Because there’s really no such thing as a ‘one off’ client.

For example, if you have a bankruptcy practice, you may be in the enviable position of having more work than you can handle right now. But when the economy recovers, what will your practice look like? Many lawyers with cyclical practices have partners who practice in a complimentary area (such as real estate), or who practice in both of those areas themselves. While a consumer bankruptcy client may never return for bankruptcy services, they might need real estate services in the future.

Even if your practice is limited to one practice area, statistics show that it’s much easier to get business from those with whom you’ve done business in the past than it is to get business from ‘new’ clients all of the time. Your existing and former clients are your best source of referrals. They might have friends, neighbors, colleagues, business associates, or relatives that might need your services in the future. You can’t expect them to remember you if you treat them as ‘one off’ clients and fail to keep in touch with them to keep ‘top of mind’ awareness with these individuals so that when a referral opportunity arises, your name will be the obvious choice.

The practice if law is all about relationships, which are built on trust and strengthened over time. Once you’ve worked with a client and built a strong relationship, it’s foolish to squander that relationship by ignoring those former clients, all the while working much harder to establish relationships with a new group of people who might be potential clients or future referral sources.

The more you know about your clients, the stronger your relationship will be. If those clients need legal services in the future, even if those legal services don’t involve your practice area, your clients will likely seek advice from you – allowing you to prove your worth by becoming an information hub and possibly referring that business to another lawyer – strengthening a relationship with other lawyers who may, in turn, be referral sources for you.

If you want more information about improving client service at your firm, check out the articles, information and resources at LawyerMeltdown.com