Wednesday, December 12, 2007

Our Profession Has Stopped Thinking: How Else Could We Have Departed from Sound Economic Principles?

Have you ever wondered how the legal profession, which is trained to ask questions and be skeptical, has not asked why they bill by the hour let alone why we continue to do so? Have you ever wondered how most senior attorneys could have practiced law a lifetime and not realize that the practice of billing by the hour was a recent accident and product of the 1950's and cost accounting methods. Have you ever wondered why old lawyers bicker and banter about how fixed-pricing would not work when in fact it not only works in the legal industry in most other countries, but it also has worked for centuries before the 1950's when WE were a fixed-price profession? Have you ever wondered why professional satisfaction is at historic lows, attrition rates and depression rates at all-time highs, and that this trend STARTED in the 1960's and the problems have become worse every year. Have you ever wondered why law firms used to be an honorable profession, or why lawyers in my grandfather's time were "Primary Care" attorneys who had strong relationships with their clients. . .and why we are now a profession of only Emergency Room Medicine? Have you ever wondered why law firms are run more like an assembly line, with highly and narrowly skilled people with no transferable skill sets, just doing more and more of the same thing every day for the rest of their life? Do you ever feel like the prize for the pie earing contest is. . . well. . . MORE PIE? Have you ever heard of Karl Marx's Labor Theory of Value? Have you ever wondered what economic theory hourly billing is based on? Have you ever wondered if your business model is based on a theory that was refuted one hundred years ago and has PROVEN to have caused the same problems our profession is facing today? Have you ever wondered that? Have you ever thought of it? Ever? Do you EVEN THINK? Who are you? Please be at your office at 4pm . . . I'm coming over to to collect you law degrees and return them to the University that let them sneak out one day when they left the doors open, because the one thing I do know about the profession of law is that we are supposed to be a THINKING profession. We are supposed to ask the TOUGH questions. Our laws are based on centuries of wisdom and theory and it takes THINKING people to make this profession one of honor and integrity and to keep alive its founding principles. He who does the right thing but knows not what he does is not a wise man, for any follower can do what he is told. This profession did not start with thoughless minds and it should not end with them. Law firms who operate under an economic theory that is proven to produce miserable people, high attrition, depression, unhappy clients, and a life destined to be counted in 6-minute increments stands for something that is far too lowly of a true professional. Did you ever wonder why you wake up ever day and carry that flag? Do you ever wonder why you stand for your wallet over your people? Can you possibly stand for honor and integrity and dishonor your workforce every day? Can you possibly continue to operate under this model, never ask why, and then turn around and try to convince clients you are smart? Can you wake up every day and look your children in the eye knowing that they could one day be the victim of a model YOU perpetuate? Could you really put on your website that you believe in diversity and quality of life when it is abundantly clear to the world that you run a sweat shop and have only token diversity? (because of your business model} Can a Nazi waive the Jewish flag and be genuine? Can you look in the mirror every day knowing what you do to people by adopting the billable hour model? IS THAT WHY YOU REALLY DON'T WANT TO KNOW? Malcolm X put it best when he wrote: "If you are not part of the Solution, then you are part of the problem" Where do you stand?


Ted Waggoner said...

Tough language, but has some real merit to most of it.

Consider what else changed in these times- 1940s to 1960s. (I am a product of this, and it has taken me years to discern these thoughts.)

In the 1940s, after the war and the implementation of the GI Bill, the colleges and universities engaged in great expansion of the student population. Education became more middle class. Law schools were expanding soon thereafter.

The learning of the middle class went up, but the number of new lawyers caused the IQ of the profession to drop.

Have we stopped thinking? We did in the 1950s and got acclimated to the situation. Our vast middle class group of lawyers, now with better education and more learning, still had lost some inate abilities that we had prior to the War. We got "book smart" because that is what we were taught. All the firms were teaching a business model of hourly billing. It seemed easier, Rate x Hours = Cost of Service.

Never mind value, the client came to us so they must know value.

Another change was occurring at that time. Mom and Pop businesses were becoming larger and needed bigger law firms. It is hard enough for one lawyer to figure out what is a fair value for one client, but for a team of 3 or 10 or 100 lawyers working on a case or transaction to determine fair pricing, and then allocate the receipts between them is real work. And a source of great potential dispute.

So it went, until a handful of lawyers and other knowledge professionals said "this isn't working" and so we try something new. Lets see how the new thing goes.

Christopher Marston said...

Hi Ted,

Thank you for your contribution to the discussion. Your perspective adds some interesting and relevant background to the switch and I can see how the crisis started. Exemplar gets 5OO applicants or more per year from across the country, and I am very disappointed by what I see. It seems that attorneys coming into the profession today have a very high sense of entitlement, a lacking desire to work hard and appreciation for what it really takes to achieve excellence, and utter lacking in service-minded attitudes. We are in a position to change people's lives and we have a profession with a significant number of attorneys who don't even know how to draft a contract anymore. The billable hour itself prevents the knowledge transfer that was necessary to pass down the skills, which is a real shame because we will be in deep trouble if the skills critical to this profession die out with the generation of partners that will be retiring soon.

Thanks again Ted

JK said...

I am not sure where you are coming from in your complaints about today's young attorneys, so maybe I am echoing what you have already said, but it seems to me that the high sense of entitlement, the lack of a strong work ethic and appreciation for what it really takes to achieve excellence, and the lack in service-minded attitudes which you note among young attorneys are a direct result and logical end point of the billable hour system. I think it would be a mistake to lend credence to the notion that the problem is somehow an inherent character flaw in this generation of young lawyers. To do would allow all those billable hour dinosaurs to pass the buck and avoid the fundamental problem which lies within their own business model.

Ted Waggoner said...

Jk's comment is interesting. The question is a chicken/egg thing. Did the Billable Hour cause the problems Chris describes (not part of my comment) with younger attorneys (must mean attorneys younger than I), or was the wide adoption of the Billable Hour the result of failures of attorneys, starting in the 1950s (I guess that includes all of us), perpetuated by either a lack of natural curiousity, or the general intellectual laziness of people who know we are fairly smart?

We did not see it was broke, so we did not try to fix it, until now.

As a dinosaur on many things, and slow to adapt to the VP issue, I will always try to pass a buck.

Here, I am wondering if Hourly Billing is the cause of many of the problems, or just a symptom of some intellectual laziness on the part of attorneys, the real cause? The more I spend time with clients working on a VP agreement, the more I appreciate the ease of "just give me a price." I recall the client deserves better.

Did you see the Dilbert comic strip on Sunday Dec 9? Looked like a natural for this issue.

Christopher Marston said...
This comment has been removed by the author.
Christopher Marston said...

Hi Ted and JK<

Great thoughts. I really think it is hard to say that the billable hou is the ONLY problem. However, the model is the cause of most of the problems that are well covered in the news, such as Skyrocketing salaries (competing on price for candidates because time-based billing commoditizes our profession}, lack of mentoring and loyalty to people (because of the leverage model of the billable hour, lacking diversity {again, a commoditization issue} and low professional satisfaction {due to over-specialization, low interpersonal communication in the office because you cannot bill for that, and repetitive un-challenging work}

As far as our culture is concerned there has been a shift. Post 9-11 and tech-boom the younger generation has come to understand the brevity of Life, and realize that there is so much more to life than just money. . . so the old tricks of the carrot dangling in front of the nose don't work. Plus, they are smart enough to know that they can leverage today's firms to get a better offer elsewhere if they are treated poorly. The feeling of entitlement is partly culture and partly the model. first, competing on price for candidates is a fools game and the pricing has gotten to the heads of candidates. What's more, many law student, while very book smart, never worked a hard day in their life for earnest money. So, I think there is a sentiment among them that they are entitled to "start at the top." Unfortunately, you cannot have it both ways. . . either you start with high salaries and work your tail off or you stand up for your values and focus on having a fulfilling career at a reasonable value to the organization.

By and large though, the leaders of firms hold the bag in the end. This country's business leaders are responsible for creating a workplace that people want to be in, for treating them right, and adapting to market changes. . . as a leader, that is what you sign up for. Just complaining or passing the buck won't cut it. We all have to to take responsibility for our part and fix the problem.

Thanks for the great comments.

11:20 AM

Tim said...

As a young lawyer (about 5 years in), I find the complaint that we have a "significant number of attorneys who don't even know how to draft a contract" unsurprising. Litigation associates in large firms (and even some smaller ones) don't learn such things because their lives are consumed by discovery. Even further along, it seems to me like the dedicated litigator seldom gets an opportunity to draft a contract that isn't a settlement agreement. If a firm organizes its labor such that transactional associates spend all their time doing due diligence -- the transactional analogue of discovery -- or writing SEC disclosures and reports, those associates are equally unexposed to contract drafting. Each of those other activities involves valuable skills, but if one spends all of one's time focused on just those activities, it's hard to be a well-rounded attorney (to say nothing of what it means to be a well-rounded human being). Of course, the same analysis applies to the transactional attorney who doesn't know how to review a balance sheet or a title commitment, or the litigator who doesn't know how to draft discovery requests because all of her time has been spent researching cases for appellate pleadings, or so on and so forth.

Christopher Marston said...

Hi Tim,

Good thoughts an yes -- a very common problem. The super-specialization of labor is a product of operating under Karl Marx's Labor Theory of Value. As a result, mentoring sucks, there is no diversity of work, and the workforce is full of highly specialized people with NO transferable skill sets at all. The model leaves behind the interest of the client (Who value perspective} and the interest of your people (Who value challenging, diverse work} in the name of revenue. Ironically, revenue is not the goal in business, profit is. . . . and it is actually counter-productive to profitability to operate under a billable hour model.