Wednesday, August 22, 2007

Penny Wise, Pound Foolish? Are Firms Being Short-Sighted?

QUESTION #1: Is it realistic that firms with billed/collected hour targets over 1,800 can "require" or even expect any significant, meaningful business development efforts over time from most lawyers? According to statistics, only around 20% of qualified new business leads are ever even followed-up upon by lawyers/professionals. In almost every instance, following-up is crucial to closing the business or getting it in the door. Is there simply not enough time in the billable hour business model?

QUESTION #2: Can this follow-up job be "delegated"? Yes, it can. But, it is ethical, professional and tasteful to do so? Arguably not. First of all, very few prospective clients will hire a lawyer or other professional service provider without having met them and developing at least a minimum level of rapport, trust and/or confidence (unless they come highly referred by another trusted source). Second, having non-lawyers follow-up with prospective clients with the intent to develop business is an ethical violation of the ABA Rules of Professional Responsibility and the corresponding rules in every state. Third, is a person who will not be doing the work or involved in the work the best person to follow-up? To answer that question, put yourself in the client/prospect's shoes: would you like a person not actually involved to be 'selling' you? Finally, is the firm willing to compensate appropriately qualified personnel for this time-consuming and critical role? Most firms do not. Instead, they look to the least expensive person possible whom they hope will be qualified and able to do the task, then overwhelm them with many other responsibilities and hope for the best.

QUESTION #3: How relevant is realization? In the last five years, most firms have seen an exponential increase in the total number and actual percentages of discounts they give clients/prospects off their "rack" or standard hourly rates. Discounts can now amount to up to 20% of a firm's total hours produced and up to 30% off the standard rate amounts. So, "rack" rates are becoming increasingly irrelevant. The only number that really matters to boost the bottom line is what is actually collected -- or what the client is willing to pay. Is this increasing irrelevance of realization another symptom of the decline in the billable-hour business model?

QUESTION #4: What keeps you up at night?

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