I know something you don’t know; if I share it with you, I will ask you to pay for it.
I am guessing this doesn’t sound like a compelling proposition; indeed you might tell me where to put “it” and I am also guessing it might be somewhere where the sun don’t shine.
…Even if you were minded to hear more you would want to better understand why it might be valuable to you before you paid anything; and you would probably suggest paying something only if the true value was fully revealed.
And yet the “I know something you don’t know; if I share it with you, I will ask you to pay for it…” approach is a model for charging for legal services that is still commonplace today.
It always felt anachronistic to me and I never liked it, but the prevailing attitude appeared to be that anything else would work less well. In recent years however things have changed a lot. We are still nowhere near value-billing and even so called “innovative pricing” (always asked for in every panel review pitch) induces eye-rolling and hand-wringing in equal measure; even so a great deal has changed.
Take just one example, as we know there is a trend for certain types of legal work to strip-out individual lawyer time and to replace this with process and paralegals to drive the cost down.
For the right kind of work this is exactly what should happen and it is impressive to see it in operation. The approach sees law firms managing risk through efficient process, sending high volumes through the machine and making their profit from lower margins, but increased capacity. The lessons being learnt in this space however are also being applied to increasingly complex transactions/litigation. Again I think this is a very good thing.
Better cost management is a key part of value and anyone who has spent any time in a non law firm environment is familiar with the annual edicts from on high – put in a process where there isn’t one; then drive down costs within the process; finally never spend money that doesn’t have to be spent.
In this regard law firms still have a long way to go; nearly all legal work has a significant administrative element and change is therefore long overdue to put in place process and to drive out cost…But value is never as simple as this and I am very concerned that in the rush to reduce costs and to commoditise legal work, we are mismanaging perceptions of what value means.
Not everything is just process, administrative or routine.
Lawyers must of course drive out unnecessary cost, but over time this will become an expected norm. What is now also needed is a sense of what is valued by clients and what is not valued by clients.
The distinction I would like to see drawn therefore is between information, which I believe carries much less value than ever before, and wisdom which I believe we do not value enough
Indeed in my view law firms must quickly appreciate that in order to secure profitable work (and not chase the price to the bottom of the market) they must learn to give away much more. They should give away precedents, templates, checklists, case notes…in fact anything that can be described as information.
On the other hand they should be properly rewarded for insight and wisdom. Insight and wisdom is where the client can better manage risk, more fully appreciate opportunity, and perhaps even find competitive advantage. A few words of wisdom might save or make fortunes – and should be paid for accordingly.
Yet we are often stuck with the same time-based charges for some work that clients increasingly feel should carry minimal cost (or no cost at all) and for other work which they would be prepared to pay a fee linked to value.
This failure to differentiate is plain daft; it represents a systemic failure in our legal profession and makes traditional law firms look really very vulnerable, especially in a less structured market.
Unless the profession collectively wakes up to the fact that it cannot continue to charge high fees for something that a Google search will reveal for free, it is probably signing a warrant for a slow and painful demise. I am obviously not suggesting that Google is a legal knowledge management system without risk; but it is a system all clients know and all clients use – and it’s free.
I’may be wrong, after all today is just a moment in time with many options still open to everyone, but for me the direction seems clear – in future knowledge is going to be valued less, so we must ensure wisdom is valued more.
Will clients pay for wisdom? I think they will. A law firm that can genuinely help a client to a successful outcome (or avoid a disastrous one) is adding significant real value. We should all be prepared to pay for that. The challenge is for relationships to be so strong that the relationship itself carries trust and therefore value. In the context of a longer term, mutual gains approach, the law firm should be able to trust the client to give away a great deal; and the client should be commercially savvy enough to pay for wisdom.
Time will tell. For the time being there are therefore two questions unanswered: First can law firms re-engineer their offering to break free of the past, so that they charge a premium for their wisdom while allowing ever cheaper access to knowledge? Second, will clients be brave enough to properly reward wisdom even if the time on the clock is modest? It won’t be easy, but I think the alternatives are worse…