Fees

The Taxes We Levy - The Taxes They Pay

Theory

"Legal fees are ... (save time ... insert here all the intellectual lawyercentric stuff about fees ... we won't repeat it, especially just to distinguish or disagree with it) ... and that's all you need to know. "

Our research and experience shows that most of us have major components of our professional vision that go beyond making money without regard to the benefits we confer to clients specifically and society generally. A recent study* showed that financial rewards ranked as only the fifth most satisfying aspect of practicing law, well behind the moral gratification of doing good for others. In that same study, however lack of financial security was frequently listed as a primary negative aspect. Thus, while making money does not automatically make you happy, not having confidence in your financial future can surely cause you stress. It is in that context that we address the issue of fees.

Practice

Legal fees have nothing to do with what it costs to run a law firm or lawyers' economic worth vis-a-vis others in society. It has nothing to do with the investment lawyers make in education or in what the put back into the community through pro-bono or community service work. In fact, legal fees have little to do with rational analysis and a lot to do with emotion.

From the standpoint of clients who are not satisfied with their legal service experience, legal fees are the psychological equivalent of taxes. That is, money they must pay for which they get no satisfaction. Traditionally the institutionalization of the legal profession called the bar defined the 'value' of legal services from the standpoint of the lawyer. 'Reasonable hourly rates' were reasonable from the standpoint of the lawyer, not the perceived value to the client. Fees, hourly or otherwise, were concluded to be 'reasonable' based on considerations that included:
1 the time and
2 labor required
3 the novelty and
4 difficulty of the questions involved, and
5 the skill requisite to perform the legal service properly:
6 the likelihood, if apparent to the client that the acceptance of the particular
employment will preclude other employment by the lawyer,
7 the fee customarily charged in the locality for similar services,
8 the amount involved and
9 the results obtained;
10 the time limitations imposed by the client
11 or the circumstances:
12 the nature and
13 length of the professional relationship with the client;
14 the experience,
16 reputation, and
17 ability of the lawyer or lawyers performing the service, and
18 whether the fee is fixed or contingent.

Two out of the 18 (results obtained and time limits imposed by the client) consider reasonableness from the standpoint of the client and 16 of the 18 from the standpoint of the lawyer. Compartmentalizing your planning to exclude consideration of fees on the basis that you conclude they are 'reasonable' based on these standards can be a fatal presumption.

Caveat

Consider your fees as the pricing of your services from the standpoint of the client. Your services must be priced at their value point to the client, not the cost point to your firm.

Caveat

Where your firm sends a bill at the conclusion of the service, keep in mind that getting the bill will be the last event in the legal service experience from the standpoint of the client. This is true even if you bill periodically during the course of the matter. Especially if you start out the matter by requiring a retainer, buy a litigator lunch and have her explain the 'primacy' and 'recency' aspects of trial and argument strategy.

If legal fees are not to be considered from the standpoint of the law firm, are they to be considered from the standpoint of the client? The answer is the obvious 'yes', but not an unqualified 'yes'.

Consider fees in terms of the MM~OPM / My Hide~Your Hide dialectic. As discussed elsewhere in these pages the MM~OPM continuum considers the value of money to a particular individual. The My Hide~Your Hide continuum considers the emotional value of the legal services to the individual. Even if fees are equated to taxes in the perception of the client, if the client pays those fees with OPM fees will be a small component of value. Where the client perceives the consequences of the service at the 'My Hide' end of that continuum it does not mean that the client is insensitive to fees. In fact, where the clients perceive that the firm has increased its fees on the importance of the matter to the client there is the real possibility of satisfaction backlash. What attorneys must do is to express fees in terms meaningful to the client's perceptions of value. What specific techniques or programs will be most efficient in this regard are dependent on the circumstances of the individual firm. One of the major benefits of client research is the improved understanding of the satisfaction process going on within the clients as pertains to fees.

Caveat

Attorneys and law firms can not 'buy' increased client satisfaction by lowering fees.

Even where fees are lowered and some improvement in satisfaction is obtained, the satisfaction improvement thus 'bought' is obtained at an inefficiently high cost to the firm. Just about any other program 'bought' with the economic equivalent of the resources spent in lowering fees will produce a larger improvement in client satisfaction. Generally, if your goal is to satisfy clients, they will not consider themselves more satisfied by fee reductions, either prospective or retroactive, compared to spending that money on other satisfaction enhancement programs. While a firm can't efficiently 'buy' client satisfaction, neither can it safely presume that the relationship between legal fees and satisfaction is inelastic in the other direction. You can not raise fees, especially on existing clients, without effect on overall satisfaction without a program to enhance perceived value. What specific perceived value programs are most efficient for your firm depends on the specific nature of your client constituency. Defining client constituency is an important part of practice development planning. Targeting market research to a defined client constituency will greatly enhance the benefits your firm enjoys from the research.

Improving the perception of value in legal services received from the standpoint of the client does not automatically mean lowering fees. To the contrary there are many situations where the amount of the fee is only indirectly related to the clients perception of value and conclusion of satisfaction. Even where the firm's circumstances are such that it could lower fees, doing so does not automatically raise satisfaction. Depending on a firm's practice development plan and the environment and market in which they practice legal fees may be only a minor issue. For example, firms that primarily receive contingent fees or those whose fees are fixed by a third party, are nearer the OPM end of the fee continuum and may plan accordingly.

* The study was done for the Tennessee Bar Association and reported in August 1997.


    Please call, mail, or e-mail with your comments or for more information.



Advocates Management, Inc.
1332 South 26th Street
Manitowoc, WI 54220
Voice: (877) ADVOCATES (toll free)
Fax: (920) 684-4414
E-mail: info@advocatesnetwork.com


Home Who We Are Articles Seminars Guest Book

Clientcentricsm Research, Success at Lawsm, Helping Law Firms Win The Futuresm and Personal Attorney are all trademarks and service marks of Advocates Management, Inc., and may not be used without its express written permission. All of the materials in this web site are the copyrighted property of Advocates Management, Inc., and may not be printed, copied, transferred, downloaded or the like without our express written permission. However, that permission is usually given and is just a toll free telephone call away.