Thursday, June 21, 2007

Top 10 Reasons Why Professionals Don't "Get it" When it Comes to Pricing and Service!

Many professionals just can't seem to get it right. They are so caught up in thinking about how smart they are that they are completely blind to the fact that they are driving clients nuts. They are simply so out of touch with what clients want and yet so convinced that they know what they want all at once that I had to write a blog about it. Although I thank them all for sending business our way by completely missing the boat, it is a part of our mission to "give back" to the community and help professionals to serve clients the way THEY WANT to be served. Here are the Top 10 Reasons Professionals don't get fixed-pricing or the meaning of service!

1) Not Responsive
Yes - You have heard this a million times. The most common cause on non-meritorious malpractice claims in the nation is the failure to return phone calls. What is your problem???? It is not that you are too lazy, your problem is likely to be one of these two things:
1) You are smart as hell and socially inept, so you are a genius who dreads client contact and will never service clients well until you "get it!" OR
2) Your screening process sucks. You serve clients you don't enjoy working with so you subconsciously put off communicating with them and they get pissed off.
You see, this point is NOT about returning phone calls, it is about taking a look at yourself, your process, and you psychology and asking yourself what is going on.

2) No Respect
Yes - it's true. . . most clients do no feel like you respect them. You, their trusted advisor, who they are counting on, do not "explain" things to them, involve them in decision making, or empower them to decide on the strategic direction of their case. You even talk down to them sometimes. You probably don't even realize you do it. Next time you talk to a client, ask yourself if you are "treating them like a partner?" Maybe when you look in the mirror tomorrow you will see yourself differently. Treat clients with respect and they will certainly see you differently.

3) failure to understand scope?
Attorneys just don't get scope altogether. They think that lawyering is just some amorphous process that keeps going until they say it is done and so they lawyer the hell out of it. They bill people to death, and justify their action on the grounds that it would be malpractice not to bill you into bankruptcy because they have a "duty to advocate." Think: They bill by the hour!!! They get rich practicing cover-your-ass law at your expense because you give them a financial incentive to drag things out and lawyers do not hold themselves (or let you hold them) accountable to a SCOPE! Why? They cannot bill to educate and empower their clients and help them to understand what is going on so they don't. If your dog had a 1,000 foot leash what would he do with it? See spot run!!!!!!

4) Can't Comprehend Value
This is funny. . . lawyers just don't know how to look at anything other than their time to understand value. We teach fixed pricing techniques and time and time again lawyers go back to asking "well. . . how do you know how long . . . blah blah blah blah" as if the client gives two hoots how long it takes. Remember, they want it done faster!! Why do lawyers care how long it takes? Because they just don't get that their effective hourly rate has NOTHING to do with profitability, but since they have been clueless about how profitability is achieved in a "normal" business for so many decades, they have lost all ability to comprehend value except in terms of time. It is a darned shame, but let's talk about how to solve this problem.

5) Cost-Plus fixed Pricing WILL NOT WORK!!!!
Lawyers seem to think that a fixed-pricing strategy is about menu pricing. They have it all wrong. If they did their homework, they would understand that there are many ways to accomplish fixed-pricing and menu pricing will NOT WORK. We price on value to the client. A firm will not be highly profitable if it attempts to menu price because it is essentially a cost-plus pricing model where they shifted the risk of error (in time) to the service firm without compensation for the risk.

6) It's all about the quality .. . . NOT!!!!!!!!!!
If you did not get the memo, GET THIS ONE: All research studies show that clients do not hire you for your "quality" so put your pride back in it's big box and listen: Clients expect quality from any professional! Clients want a quality professional who CARES about them. So, while you are on your bathroom break after 12 straight hours in your sweat shop, ask yourself how you think your clients would respond if I called them up and asked them if they felt you really cared about them! If you are honest with yourself, you might be surprised what you find. Don't make me pick up the phone and try.

7) Lack Business Sense
Most business attorneys simply lack business sense altogether. They operate to "reduce risk at all cost" because somehow they feel like they were put on this planet to do this job. . . . It is like they actually believe brownie points come from the identification of problems rather than SOLVING THEM!!!!! Why do you think Law is one of 2 professions of 104 professions where pessimists perform the best? Pessimists have a knack for identifying all the problems with everything . . . they don't solve a damn one of them, and they drive everyone around them nuts . . . . they simply cannot help themselves! It has almost become an extra-curricular activity watching these bozos blow up a business deal and pound their chests like gorillas thinking they did something "valuable!"

8) Old White Men! :-)
Unlike "normal" businesses, our industry is run by a bunch of old risk-adverse white guys. So, while the rest of the world is innovating (mostly lead by young people who can live to benefit from the revolutions they are creating), the old whities at the top of the legal pyramid scheme are too busy lining their retirement plans at the expense of young associates who sold their lives for the "dream" of parnership they don't understand, let alone have a chance at making. WAKE UP! If the "Partners" did not tell you what the succession plan is at their firm yet, it's because they don't have one. It's OK, we are accepting resumes! Don't think they will start to care anytime soon! Why do clients care about this? Who wants to play with a dinosaur?

9) Phone Call and Photo Copies!
If you bill for either you are either dangerously stupid or simply don't care about your clients!!!! I deal with CEOs of companies and they don't bill me to talk to me! If you fall into the category of dangerously stupid, read on:
-- Let me enlighten you: CLIENTS HATE IT! STOP BILLING TO TALK TO PEOPLE! Every shred of information in the market shows that clients are absolutely enraged by this process. Now, you are on notice, so if you continue this practice you have effectively graduated from "dangerously stupid" to "I simply don't give a damn about what my clients want" Seriously, I have no idea how you rationalize it except that you are so "entitled" as to require people pay to have a conversation with you that you simply cannot let go of it OR God forbid you could not bill a client for your next toner cartridge!!!! for God's sake, clients understand that you have to operate a profitable business, but could you please do it in a way that does not drive them absolutely nuts????

10) Managing Resources
Lawyers simply don't get how to manage resources to do a fixed-price job profitably. Project management is not an art that lawyers tend to understand. We find that we need to teach attorneys the principles of project management. for instance, law firms suffer from systemic under-delegation. Part of this is ego, because lawyers tend to believe that they can do things better than someone else. It is also about control and profitability. Since they bill by the hour, they actually make more money by doing things that really can and should be done by someone else! Client's are more savvy than ever, and lawyers will not get away with this practice for very long!

OK. Please find attached bottle of e-lotion for your wounded back-end. The problems in our industry are real and need to be addressed by bringing them out in the open and discussing them to solve problems that change lives and the customer experience. It is within our power to make change, but first attorneys have to face the music. Exemplar is leading the movement. Will you rise to the challenge and be a part of the discussion?


7 comments:

Anonymous said...

Every time I read one of your posts I am want to ask, What do you charge a client to defend a frivolous case that will take 10,000 hours to defend?

just to make the question real, assume that the case pends in a judicial hell hole, where it must be defended, like Madison County, Illinois and where, regardless of the merits, the trial judge will not dismiss the case and the only solution is a trial

Justin Barnett CPA said...

Dear anonymous,
Geez! If I had a nickle for every time I've seen the "What would you do if...?" or "How do you know if you are making money?" questions I'd have retired a millionaire!

I have been without timesheets for 11 years and last year I was so profitable I bought my own office building which I rent the downstairs to (gasp!) hourly billing lawyers!!!

Your question shows that you have completely missed Chris' points. See Point 1 sub 2, You have made an error in client selection!

What Chris is talking about takes courage, that translates to risk taking not risk avoiding. I survived the trial by fire of being Ron Baker's partner while he and I took our practice out of the "make a job for myself" world of tracking hours and billing for them no matter what we were accomplishing, to a fixed price based on value model. I suggest that you read ANY of Ron's books but first MAN UP and have the courage to name a price that matches what the hell the client wants. If it is a 10k hour hell hole frivilous trial then ask for a TON of $!!!

Chris, keep spanking 'em!

Christopher Marston said...

Dear Anonymous,

If we decided to take the client to begin with, I would charge the client what it is WORTH to them. HOW'S THAT for A CONCEPT? Once again, a hypo that includes no facts about VALUE. . . so when when you preface your unrealistic hypo with "just to make the question real" and then just include a bunch of crap about how much time it takes, it just drives home how much you are missing the point. first, at client intake you know NOTHING about time and have the opportunity to learn EVERYTHING about value! Even in your limited world of cost plus pricing, your hypo is simple to answer: If you knew it would take 10k hrs you would just multiply that by your rate and VOILA! You have a price. Attorneys who "Get it" charge what the deal is WORTH and get better results in half the time because we are rewarded for our creativity. It is simply amazing what can happen when you put the incentive in the right place!

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Anonymous said...

Do you use timesheets internally?
I am having trouble letting go of timesheets for internal firm management and am not sure if I should even be trying to.

Externally we fixed-price our services, but if I really think about it we arrive at our pricing by asking ourselves 1) what is a client willing to pay and 2)will it be profitable enough for it to make sense for us to service it. It is that second part that requires the measurement of time.

Although the time we spend on a project does not dictate the value we create, it does dictate how profitable the firm can be.
There is a reason that the Big 4 (very scalable, profitable and successful businesses) still use timesheets even when using value pricing.

As the firm grows my personal involvement and knowledge of project profitability becomes further removed. Without timesheets how do you determine:

Which jobs are least profitable and need to be re-priced or eliminated?

Which resources are the most efficient and therefore should received bigger raises?

How many engagements (and therefore how much revenue) an efficiently functioning delivery team can service at full capacity?

Anonymous said...

Do you use timesheets internally?
I am having trouble letting go of timesheets for internal firm management and am not sure if I should even be trying to.

Externally we fixed-price our services, but if I really think about it we arrive at our pricing by asking ourselves 1) what is a client willing to pay and 2)will it be profitable enough for it to make sense for us to service it. It is that second part that requires the measurement of time.

Although the time we spend on a project does not dictate the value we create, it does dictate how profitable the firm can be.
There is a reason that the Big 4 (very scalable, profitable and successful businesses) still use timesheets even when using value pricing.

As the firm grows my personal involvement and knowledge of project profitability becomes further removed. Without timesheets how do you determine:

Which jobs are least profitable and need to be re-priced or eliminated?

Which resources are the most efficient and therefore should received bigger raises?

How many engagements (and therefore how much revenue) an efficiently functioning delivery team can service at full capacity?

Alexander said...

hi Great blog very interesting