At the Association of Legal Administrators Conference in Nashville TN 17-20 May I was fortunate to do a 5 minute Ignite talk.Below is a "transcript" of that talk.
I am an Aussie, over 60, over weight and over lawyering. I am a recovering lawyer but for 25 years as a partner, managing partner and CEO I was part of the traditional law firm business model which leveraged people x time x hourly rates.
I believed our profession sold our time. And we sold it in 6 minute increments-in fact it is really doing my head in that this talk is only for 5 minutes.
Only one problem with selling time is that after 25 years I realised clients actually don't buy our time. So if clients don't buy our time haven’t we got to stop selling something clients don't buy?. What clients do buy from lawyers are outcomes, results, piece of mind,they buy our intellectual capital and if you don't believe me when you leave this room ring one of your clients and ask them what they buy from you. I can guarantee they will not say time.
Nearly 10 years ago now I discovered the concept of value based pricing-that is, that value is subjective,that it is our clients perception of value not ours that matter, and that you agree the scope of your work and the price or prices of your work with your clients up front. And if the scope changes the price may change.
One discussion however that creates unwarranted fear & scaremongering (even more so than the suggestion of firms getting rid of the billable hour) is when it is suggested firms should also burn their timesheets. After all, it follows doesn't it, that if you don't keep timesheets you can’t possibly be tempted to bill by time. As Chicago lawyer Pat Lamb stated recently one of the great benefits of not billing by time is that it “frees you from the tyranny of timesheets.”
Not so say the die-hards who claim that you still need timesheets even if you don't bill by time. That is, I am sorry to be so blunt, absolute rubbish.The reasons espoused for the retention of timesheets have been debunked a multitude of times, both from a theoretical perspective and by the real world experience of professional firms both within and outside the legal profession, who run very successful and profitable practices without timesheets.
So, let me state it once more, and unequivocally, if you want to truly move away from billing by the hour, you must not only ditch all time based billing, you must also burn your timesheets.
Timesheets are the real cancer in our profession in my view-time billing is simply a symptom of the time recording disease that is holding firms back. Timesheets are huge innovation killers. There is a very valid reason start ups and innovators that are springing up all over the legal profession all over the world have different business models and different pricing models-because time based billing and time recording as a measure of value is both demeaning to yourself and to your clients.
I can assure you anecdotally that those firms that have made the transition to a timeless practice tend to have a more collaborative,more innovative culture are more profitable than they previously were and they have better quality,more contented, stickier clients.
As US author William Gibson said “The future is already here-it is just unevenly distributed”.
I would urge you to dip your toes in the water and make the change yourself before it is made for you or before you face irrelevance or obsolescence.
Value based pricing is not a billing model change-it is a business model change. Yes that is what makes it hard. The concept itself is simple but it is the unlearning we have to do as a profession that is hard and, excuse the pun it will take time, but it is oh so worth it- for your sake, for the sake of the professionals you employ, for the sake of your clients and I think for the sake of the future of our profession.