The article details the fact that a local company Fee Technology Inc. has acquired a patent for “a mathematical process for creating a direct relationship between the prices charged to the cost structure of a business.”
Correct me if I am wrong, it is called cost-plus pricing and the patented process is called multiplication.
Our Australian colleague John Chisholm wrote about The Australian Legal Affairs Section of August 20th being primarily devoted to the problems and hopeful demise of the billable hour.
All the articles are worth reading, but the one that caught my eye was devoted to Lavan Legal, the Perth firm that is on track to eliminate timesheets in approximately two years.
This is a 200+ lawyer firm. So much for the argument that only smaller firms can achieve this transition.
John also reports that next week’s Legal Affairs Section (it runs every Friday) will also have more articles dedicated to this topic.
Obviously we are nearing a tipping point Down Under.
Another article in Lawyers Weekly on the Perth firm Lavan Legal and its quest to rid itself of timesheets.
Lavan was mentioned in a prior post, which also linked to a local article on the firm.
Dean Hely, the deputy managing partner, said the firm established a pricing committee as of July 1 and is aiming to move away from time-based billing to showcase its innovation credentials.
He also noted:
You do get used to timesheets but the thought of not having timesheets is like the lawyer’s utopia.
Of course Utopia means “no place,” but there are firms out there without timesheets.
I’m not about to claim they are all utopia, but we do know it’s possible.
Another law firm is profiled in this article in The Lawyer:
CMS Cameron McKenna has launched a marketing campaign to promote its alternative billing structures, which include a ‘pay what you think its worth’ option, to clients.
This firm has also established a pricing team.
Since pricing is a separate function, we are big advocates of turning it over to people who are good at it.
Poor pricers should not be allowed to price.
Congratulations to these two firms. More cracks in the dyke of the obsolete billable hour.
Thanks to John Chisholm, some of Australia’s legal firms are taking Value Pricing seriously and establishing value councils, while a few are placing the timesheet on the dust-bin of history.
One of those firms is the Perth firm Lavan Legal, with 20 partners and 200 team members. It has appointed a 10-person pricing committee. As this recent article in The West Australian makes clear, Lavan is planning to trash its timesheets.
John and I have had the pleasure of working with Lavan, and the managing partner, Greg Gaunt, and the deputy managing partner Dean Hely, are both visionaries in the legal profession.
Lavan does major litigation, and although they are still making their way towards pricing this work based upon value, early results are encouraging.
There’s another firm in Perth going down the same road, as well as other firms throughout Australia.
Another firm with an innovative business model is Marque Lawyers, founded by Michael Bradley. I’ve had the pleasure meeting Michael and he truly has a Zen perspective on the practice of law—a refreshing and optimistic point of view about the future.
Michael was recently interviewed by Lawyers Weekly, where he linked timesheets to depression in the legal profession.
Earlier this year in May, The Honorable Wayne Martin, Chief Justice of Western Australia, delivered a speech on the perils of both the billable hour and the timesheet. You can read the Judge’s speech here.
Obviously, something is going on Down Under.
It’s not enough to advocate that firms move to Value Pricing. The timesheet must be attacked as well.
After all, it is the timesheet that is the ultimate cancer, because it is the wrong measuring device for intellectual capital.
Thinking that we are measuring the efficiency, let alone the value, of knowledge workers by denominating everything into hours is simply ludicrous.
It’s the equivalent of arguing that Jonas Salk’s polio vaccine is valuable to the extent of the time it took him to develop it. Or that we could make Einstein more efficient if he had only completed a timesheet. Otherwise, how would we know he was on budget?
With firms like Lavan and others in Australia, true business model innovation is taking place.
By ridding their firms from the hegemony of timesheets, these firms are showing real change is possible, not just lip service about “alternative fee arrangements.”
If you are still are tracking time to justify your firm’s pricing, or to measure the “efficiency of your team,” you are billing by the hour and not doing anything new since timesheets were introduced in 1919 to the legal profession.
You are simply “selling time” just as much as any union employee. The world has changed since 1919.
Real innovation will only come when timesheets are trashed. And Australia may just be ahead of the United States, at least in larger firms.
Congratulations to Lavan Legal, a Trailblazer Firm in the making.
This has nothing to do with Pricing on Purpose, but I since we have quite and international following some of you might enjoy it. Others will want to take me on, so please do so.
Too low scoring. As a baseball fan I do enjoy the occasional pitcher’s duel, but most Major League games average over 4 runs per team per game. With soccer it is ridiculous, it is always a defensive battle. The solution is three balls in play at the same time. Better two white balls and one red ball, with the red worth three points instead of one! Not only will this increase the scoring, but it will increase the number of breaks in the game, this will allow more beer commercials to be shown.
Too many ties. North Americans do not like vaguery, we want a clear winner and loser especially in a once every four years competition. It really get crazy in the bracket rounds of the World Cup when after a brief overtime, they go to penalty kicks. This would be like a baseball game ending in a tie after 12 innings and then deciding the winner by playing home run derby. Nonsense! I would like to see them keep playing until they fall down from exhaustion except for the goalies. How cool would that be? Goalie on goalie until one of the scores! Of course, adoption my three ball proposal would also help reduce the number of ties.
The clock is not the clock. Again, this is a problem with vaguery. I mean really, only the referee knows when the game is going to actually end. I know they have added the approximate extra time, but still, it is way too arbitrary. Technology must exist to allow the referee to add this time exactly onto the clock. Oh, by the way, the time runs in the wrong direction. We want it to count down, not up. This ain’t track and field!
This one is specific to this World Cup - vuvuzelas. Sorry, they are worse then the insidious thundersticks that occasionally make their way into various North American events. The worst offense being the 2002 World Series between the Los Angeles Angels of Anaheim and the San Francisco Giants. There has got to be a way to filter this sound out of the feeds.
Hat tip to Jay Shepherd for pointing out the Wall Street Journal article, “Raise Your Prices!,” which Ed wrote about yesterday.
I finally read all of these articles this morning. They are all excellent, but one in particular stands out: “The Myth of Commoditization,” by Michael Schrage, a research associate wtih MIT’s Media Lab.
As readers of VeraSage know, we vehemently disagree with the notion that any product or service is a commodity. It’s a cop-out.
The Hon Wayne Martin, Chief Justice of Western Australia, gave a speech on Monday, 17 May 2010 to officially launch Law Week 2010.
The address, titled ”Billable hours—past their use-by date?, reviewed the criticisms of time costing and suggested new approaches to charging for legal services.
It was presented by the Perth Press Club at Frasers Restaurant in Kings Park. You can watch a 50-second clip from a news report here.
I had the good fortune of having a private meeting with the Chief Justice on my last trip to Australia. The meeting was arranged by David Garnsworthy, a cost consultant in Perth, and my colleague John Chisholm.
We had an incredibly candid discussion with the Justice, and he asked many penetrating questions regarding alternatives to the billable hour. You can tell he has given this issue much thought.
After our meeting, I send him two chapters from my forthcoming book, Implementing Value Pricing: A Radical Business Model for Professional Firms.
I was humbled to see he cited me in his speech, and used some of the material I had sent him on the deleterious effects of hourly billing.
He also makes many valid points regarding the perverse effects of the billable hour. If you are a lawyer in Australia, this speech is a must read. If you are a lawyer in the USA, or anywhere else, the speech is worth reading to gain a perspective of the billable hour from a Justice’s point of view.
Is there any doubt that the pressure points on the billable hour are far greater than merely from law firm customers?
There is a Perfect Storm brewing against this antiquated model from all sides.
Greg Kyte is the self-proclaimed “Champion of the Dissenters.”
Here is Greg’s second contribution in defense of the billable hour and timesheet.
Ron Baker, you were wrong once again. The night before last was one of the biggest nights of the year for my firm. You and the rest of the VeraSage flunkies could have had a piece of it too, but I guess you ditched the timesheet an hour too soon.
You see, we have an annual tradition during the heart of busy season. Everyone in our firm is expected to work the night before daylight savings time. We all work until 3:30 a.m. at which point we have a party. The party consists of waffles and a cheese tray. How we can afford to treat our people that good, you ask? Well, it’s all thanks to Ben Franklin and a little thing that we like to call the TIMESHEET because at precisely 2 a.m. we set our clocks ahead to 3 a.m. With a staff of 52 and an average billable rate of $120, our firm pockets an extra $6,240 just for staying up late and “springing ahead”.
Talk about leveraging people power! The lever is the timesheet and the hands pulling it are the hands of our clock. Hey, relax; we know this doesn’t work for our affiliates in Arizona or Hawaii. And we are very careful in that we forbid our people from working late when we “fall back”. (Imagine that: we’ve thought it through even though we don’t have the luxury of a think tank.)
Boom! Did you hear that? That was the sound of another hole blown in the hull of the Good Ship VeraSage. Sorry, Cap’n Ron.
Hear the sledges with the bells - Silver bells! What a world of merriment their melody foretells! How they tinkle, tinkle, tinkle, In the icy air of night! While the stars that oversprinkle All the heavens, seem to twinkle With a crystalline delight; Keeping time, time, time, In a sort of Runic rhyme, To the tintinnabulation that so musically wells From the bells, bells, bells, bells, Bells, bells, bells - From the jingling and the tinkling of the bells.
In a recent paper, ’The Death of Big Law,’ Larry Ribstein, a law professor at the University of Illinois, argued that after decades without changing, law firms are likely to have an outburst of experimentation with different business models: even the venerable and lucrative “billable hour” method of charging clients is in doubt.
It reads like an obituary doesn’t it. We hear at VeraSage anxiously await the wake!
Congratulations to Mark Bailey and the whole team at Mark Bailey & Co. for being named the Best Accounting Firms to Work For by Accounting Today for a second straight year. The article specifically identifies the trashing of the timesheet as the reason for their tremendous success.
"We threw out timesheets," explained Mark Bailey, the firm’s managing partner. "But the motivation to throw them out is that they didn’t really reflect the value of the service that was being given. What we came to realize very quickly was that a timesheet is a control tool."
The 16-person firm decided that controlling professionals didn’t drive productivity; instead, it hampered innovation and creativity.
I don’t know most of the other Legal Rebels, but I would bet that Chris Marston is the only practicing lawyer among them who doesn’t do timesheets. I don’t know how you can be a Legal Rebel if you still complete a timesheet—the buggy whip of the intellectual capital economy.
Also, check out Exemplar’s new Website and our Australian colleague John Chisholm’s blog post on meeting Chris on his recent tour of the USA.
Congratulations Chris and Exemplar—you are truly a Firm of the Future!
You can also register to receive the newsletter at John’s Web site. Well worth reading if you have an interest in the legal profession, or wine—John’s daughter Kate offers reviews of some fantastic Australian wines.
This has nothing to do with Pricing on Purpose, but I since we have quite and international following some of you might enjoy it. Others will want to take me on, so please do so.
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