The Taxes We Levy - The Taxes They Pay
"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.
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:
the time and
the novelty and
difficulty of the questions involved, and
the skill requisite to perform the legal service properly:
the likelihood, if apparent to the client that the acceptance of the particular
employment will preclude other employment
by the lawyer,
the fee customarily charged in the locality for similar services,
the amount involved and
the results obtained;
the time limitations imposed by the client
or the circumstances:
the nature and
length of the professional relationship with the client;
ability of the lawyer or lawyers performing the service, and
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.
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.
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
Consider fees in terms of the
/ 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.
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
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
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
Who We Are
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