The Client-Centered Law Practice (Part 2 of 2)
By Jim Calloway, Director, OBA Management Assistance Program
(Author's Note: This is the second part of a two-part article on planning to make your law office more "user friendly." The first part appeared in the January 17 Bar Journal and is online. That section discusses client communication issues and how many times the client's perception is more important than what you believe to be reality.)
A former OBA president was fond of saying, "It's not your grandfather's law practice anymore." I would add to that by saying, "Today's clients are not your grandparent's clients either."
While most lawyers today do not have a grandparent who is a lawyer, the point is that people are significantly different, with different belief systems and attitudes, than they were a few decades previously.1 People today tend to be more independent and self-reliant. They also have far greater access to information than the citizens of previous generations. They want more input, options, and empowerment - that is, they want not to be told what to do either by government officials or their own attorney.
In the past, lawyers who took clients by the hand and managed their important legal matters were greatly appreciated. Many clients were uneducated and unused to dealing with documents and legal matters. Legal services tended more toward directing a course of action as opposed to offering advice. Twenty-first century consumers of legal services are often well-educated and prize independence and control over their own lives. Such consumers want explanations, information, and options. This attitude impacts many aspects of the attorney-client relationship today.
Innovative lawyers now do not direct a course of action; they outline the facts and the law and empower clients with options and choices to allow them to reach a decision. This decision may be clear to lawyers at an early stage, but that does not mean that time invested explaining the options to clients is wasted. After all, clients must comprehend the situation. Consumers of legal services may have some attitudes that are almost contradictory. Time-challenged consumers may appreciate the convenience of "one-stop shopping" and a complete "turn key" solution. However, they still want to be informed of all options and to make decisions for themselves instead of being told what to do.
The Value of Legal Services
When discussing the delivery of legal services, you must consider the value of legal services to the client. Value is expressed in many ways. According to William C. Cobb, a well-known legal industry consultant in Texas, a "value curve" can be used as a tool to analyze the value of legal services to the client.2 The value curve is segmented into four classifications of legal work:
This is a "nuclear event" for the client. This is the type of work where only the best lawyer a client can afford will do and cost is almost no object. A life or the life of a business may hang in the balance. Less than four percent of the work in a market is truly unique work.
This type of work consists of a high-impact or high-risk matter for the client. Such important work is going to go to the lawyer the client feels will handle it personally. As a result, the client will find a limited number of lawyers qualified to perform the work. Approximately 16 percent of the work available in a market is experiential.
3. Brand Name
This type of work is more routine, but still important to the client. Such matters will go to the firm or group of lawyers who have established a brand name with the client. Size is an important factor here, but reputation for a niche is just as important. Approximately 20 percent of the work available in a market is brand name.
In the view of clients, this is work that practically any good lawyer can perform. The majority of the work available in a market, about 60 percent, is commodity work and, as a result, is very price-sensitive.3
Let us examine the two ends of the spectrum. At one end is the "nuclear event." Did O.J. Simpson pay too much for his criminal defense team? If the company's very survival hinges on winning a suit, are attorney fees a matter of concern? For these matters, the perception is that only the best lawyer will do. At the other end of the spectrum is the commodity practice. This type of work represents 60 percent of the legal marketplace. For these matters, there is the perception that almost any competent lawyer will do (remember the client's perception is your reality even though you may disagree). Therefore, service becomes more of a commodity. Where supposedly any lawyer will do, the major distinction is price. The most important aspect of these types of services is that they are extremely price-sensitive.
For example, there are situations where you go above and beyond the call of duty representing a client, sometimes obtaining great results when it may have looked hopeless at an earlier stage. At the end of the case, the client may be happy to pay your attorney fees promptly. Later, however, the client may call about another matter, but ultimately not hire you, despite the past success. On a rare occasion, the same client might even hire another attorney for all other matters. This can be especially annoying when the client's newly hired lawyer seems to lack your experience and expertise.
The value curve concept explains that, whether right or wrong, the client's perception may be that any attorney could handle small and routine legal matters. Therefore, the client may consider cost the most important factor in selecting a lawyer for such services. From your point of view, winning the client's high-risk case should engender loyalty for routine matters. In reality, even though the client may return to your office when there is another "nuclear event," the client is likely to look for the most competitive fee structure for other legal services. If 60 percent of the legal market can be now classified as such commodity work, this can negatively impact your bottom line. For most lawyers, especially those whose clients are primarily individual consumers, the more routine a service appears to be, the more price-sensitive it will be.
It is interesting to note that many types of legal matters start at a high point on the value curve and then slide down into the commodity type of practice as they become more common and easy to handle. For example, mortgage foreclosures were considered a typical civil case several decades ago. Many changes have impacted mortgage foreclosures. The law has changed, with requests for admissions commonly used and motions for summary judgment favored.
The technology has changed. With computers, form documents, and document assembly techniques, dozens of petitions for foreclosure can be prepared in the time that it used to take to prepare a single one. The result has been that many mortgage foreclosure cases are now considered as commodity work, often done on a flat-fee basis with heavy use of legal assistants. While billing rates for lawyers may have gone up and legal fees may be greater in other areas, the "average" foreclosure likely costs a client less in real dollars than it did a few decades ago.
It is also true that clients may be more likely to question attorney fees or the method at which the fee is determined. Therefore, there must be new approaches to client communications without increasing costs to the client. Technological solutions can be the answer. In many circumstances, inexpensive approaches may work the best.
For example, you should consider expanding form letters to include reinforcement of advice instead of just listing the dates and facts.4 Voicemail also can be useful. People may hate having the phone answered by an automated system, but they love being given the option to record a voice message for you. Often it is easier to listen to a message than to try and decipher the notes on the phone slip. Moreover, there are now many online document repositories and online deal rooms where clients can get information about their case any time, day or night.5 These types of Internet services are less expensive than ever, but may be practical only for certain types of clients.
Lawyers "know" that our professional legal services are superior to those poor attempts by some of the non-lawyer document preparation services. Lawyers also know that years of experience provide much information that was not available when they were in law school. However, lawyers need to understand that the perception of the clients may be different than the lawyer's perception.
Moreover, pro se representation on matters like divorce is on the rise nationwide, and not always because the individual cannot afford a lawyer. Often, a litigant wants to retain as much control as possible and resists "turning over" the case to a lawyer. As a result, there will be increasing pressure on the courts to adopt procedures that better accommodate those who exercise their right to self-representation.
Thus, for those who do seek the services of a lawyer, billing alternatives are critical. Lawyers must re-examine and subject to the client-centered analysis their billing procedures. For example, hourly billing has advantages and disadvantages for both lawyers and clients. There is a certain innate fairness in hourly billing because more complex matters take more time and thus cost more, while simple matters cost less. However, imagine if the appliance store operated like a law office. Suppose you went to buy a refrigerator and asked the purchase price. The answer went something like the following:
"Well, it is hard to say exactly what the final price will be. It depends on a number of factors, including our suppliers, the union workers, and the weather. There are opposing parties that can increase the price through their actions. The local judge can affect it too. We really won't be able to tell you for sure what this refrigerator will cost you until it is actually installed in your home. So please sign here."
No one would purchase a refrigerator under these circumstances. Clients presented with an hourly fee contract might feel that type of purchase contract is exactly what they are being asked to sign.
Hourly billing will likely be with us in some form for most of our legal careers. For the more predictable cases, however, you may consider that a flat fee or a series of fees linked to steps in the process might be more "user friendly" and understandable to the clients. In the price-sensitive service areas, you can or should go only so low on total attorney fees. However, a client will clearly appreciate the certainty of a flat fee. It could have a great impact on the client's perception of your openness and value.
Alternative billing does not mean that you have to do everything, or even most things, on a flat-fee basis. A great client relations tool is to outline the steps and set forth exact amounts for possible future events that could increase the attorney fees. When the future event occurs and the additional fee is required, the client may be more likely to look at it as something that was specific to the case, rather than thinking, "that lawyer decided to charge me more."
Lawyers should always have written fee agreements with their clients, even when not required to do so. It serves as a protection for both parties and a verification of what has been agreed between the parties. However, there is no reason that an attorney-client agreement cannot be based on a timeline of future events rather than a recitation of hourly rates and disclaimers. Moreover, a client-centered approach to a contract means that it is readily understandable to the client. Use plain English in these contracts and where legal terms of art are required, provide definitions for them. Ask a high school student or a relative to read your contract for legal services and explain what they think it means. Consider providing the client with a timeline of the anticipated progress of the case so that the client can track events as they occur.
Implementing change is a most difficult thing for lawyers in part because they are just too busy. However, making the time to establish more client-centered practice standards will improve your law practice and its profitability. Schedule an appointment with yourself to work toward this goal for an uninterrupted hour. Try to implement certain tasks on a small scale at first or divide them into discrete goals, such as upgrading your form letters during one week. Schedule a firm retreat. No two law firms will handle these challenges the same way, but firms that make progress on these fronts will be in a much better position than those that ignore the need for change entirely.
1. As noted in Robertson and Calloway, "Winning Alternatives to the Billable Hour" (Chicago, L: American Bar Assoc. Law Practice Mgt. Section, 2002).
2. See "The Toxic Ten Assumptions of the Legal Profession" by William C. Cobb.
4. See Calloway, "Form Letters that you and Your Client Will Love."
5. Check out NetDocuments for an example.
Originally published in the Oklahoma Bar Journal February 14, 2004 - Vol. 75; No. 6