November 2005

This issue contains the following articles:
  1. Are Cab Drivers Smarter Than Lawyers?
  2. Does Making Partner Mean Much Today?
  3. Which Files to Keep, and Which to Destroy?


  1. Are Cab Drivers Smarter Than Lawyers?

    When traveling in New York recently I had to engage a taxi to go from the airport to my son's home, and didn't realize the New York rule was that taxis are shared. When I engaged the taxi, I was told the fee was $30; another person also engaged a taxi and was told that the fee for him was $20. I didn't realize at first that we were both going in the same car. As we were driving, I started to think about the fact that we were being double billed. The taxi company was getting $50 when, if only I were the passenger, it would get $30.

    Was there anything unethical about this? Not at all! Taxi companies charge a fixed fee based on the value of the ride, not based on time. Contrast that with lawyers, who almost universally bill based on time alone. If a lawyer is sitting on a plane or waiting at the courthouse in order to handle a matter for Client A, can he or she use the time to work for Client B? The rules of professional conduct in most states require billing only one client at a time because time, billable minutes, is the measure of value.

    Businesses that do not bill on the basis of time can earn more for their service or product when they become more efficient. The more efficient lawyers become, in our current business model, the harder we have to work to earn the same money as before. Lawyers don't really sell time. Our goal should be providing value: advice that means solutions to our clients. Yet since the mid-1960s, when clients began demanding detailed billing statements, lawyers have used time records as our management tool to seek greater efficiencies. Today, most lawyers are paid by the hour almost in the same way as an hourly laborer. Our billings are "features" lists: this is what I did, this is the time I worked and this is what you owe me. That approach doesn't address value and benefits, the worth, as opposed to the cost, of the service.

    Good service, value and solutions shouldn't be vague buzzwords. All lawyers, sole practitioners and members of mega firms alike, can structure what they do to consistently encourage a high client perception of value. Here are just a few ideas.

    • Return phone calls quickly, at least within two hours at most
    • Have information about your practice available in your clients' primary languages
    • Prepare clients for what they'll experience in negotiations, depositions and court testimony
    • Ask clients for feedback about how well you're serving them.

    Lawyers who charge for the concept of value, and not strictly for time, have more control over their practice. Often, when I coach attorneys who are dissatisfied in their practice, it's soon apparent that their real dissatisfaction is with measuring their days in six or ten-minute increments and losing focus on the essence of their skills. Lawyers work hard, spending many hours in their efforts to meet clients' needs and objectives. It's much better, more effective, to say that our time is measured in value (investment) rather than cost (expense).

  2. Does Making Partner Mean Much Today?

    Two recent events got me thinking about the state of the "partnership" in today's law firms:

    • A survey by marketing guru Larry Bodine reported that most law firms require their associates to have business development skills and to bring in new business, yet 57% of those firms fail to provide any training to generate new business.
    • A roundtable of large law firm managing partners that I chaired reported that, in the big New York firms, only 1% of the lawyers make equity partner. The limited number of partners creates no incentive to stay at these firms, a situation worsened by the significant income disparity between partners and associates, and between junior and senior partners.

    Today, ascension to partnership is still an event, but partnership itself may be less of an achievement. Despite being called partnerships (or LLPs or PCs), the governance of large law firms has fallen to a very few in the organization ("the management committee"). The remaining "partners" have begun to look, act and think like employees, not owners.

    When I was practicing as an associate, I had a conversation with the managing partner. I showed him what percentage my billings were of the firm and what my expense and profit to the firm were. After getting over the shock that I would attempt to create this "P & L" for my own work in the firm, he asked me why I did this. I said I enjoyed my job, wanted to keep it and knew that the firm could/would not keep me if I were not profitable for them, for the year if not for every month. Shortly after that discussion I was invited to become a partner.

    Associates who don't know how to develop books of business, or who face second class partnership status at best, will neither know nor care about the financial workings of their firm. No such firm can expect to stay financially strong.

  3. Which Files to Keep, and Which to Destroy?

    Hurricane Katrina brought home the importance of file management and record security for every law firm. Make it a point to regularly back up all computer data and store important records and documents off-site, perhaps even in another part of the country. This also applies to crucial paper records such as master files, time and billing records, court dates and appointments, wills, powers of attorney and corporate records. The frequency of computer back-ups depends on how much work you produce between back-ups and how much you can afford to lose. Store all important data and paper backups at a secure and specially designed location.

    Security concerns involve the broader issue of efficient record management. Lawyers know they have to retain, indefinitely, the valuable property that belongs to clients where they are unable to return such property to the client. Valuable client property includes documents such as original notes or securities, original wills and settlement agreements. The best approach, of course, is to return such property and not pay the storage costs. Consider a provision in your engagement agreement that allows for return of the valuable documents and property to a last known address at the conclusion of a matter or by a date certain (e.g., in estate planning matters), whichever first occurs.

    An alternative is a formal letter to clients directing them to pick up their files within a stated time, say 30 days. Although your client notification letter may state that clients must pick up their files within 30 days, you should keep these files for two years, unless, of course, the rules of your jurisdiction require a longer storage period. The rules and specific time periods for storing or destroying client files vary by jurisdiction. Depending on your state's statutes, after the storage time has lapsed, destroy the files in accordance with your file retention policy. Then, the question becomes, how best to destroy the files. Here are some suggestions about what to consider to get this task done right:

    • Bring in an outside person, perhaps from a work training program for the disabled, to collect the materials without disrupting office workflow.
    • Use a photocopy machine to scan documents and place the files in .pdf format, which does not involve a photocopy charge.
    • Destroy oldest files first, and use a file storage house to shred the tossed materials to avoid identity theft and other security issues.
    • Have a lawyer or someone with the requisite knowledge review the files and remove all original documents before destruction of the files after scanning
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