Does General Counsel Trust You?

How much trust exists between General Counsel and their law firms? Well, if the latest survey conducted in Europe is any indicator, not much. According to a survey in Europe of 2,852 lawyers conducted by The Lawyer, the results are rather abysmal. (Results of the survey were presented in Inside Counsel Magazine, May, 2007.)

73% of GCs reported their outside counsel have padded bills

95% of in-house lawyers believe that billable hour targets encourage padding, compared to only 50% of law firm partners that believe that billable hours targets encourage padding. Are in-house lawyers too cynical? Or are law firm partners too naive? Considering that many of those in-house lawyers were formerly law firm partners, I think the latter is more true.

68% of in-house counsel believe that project-based billing is the best alternative to the hourly rate. I believe this is referring to what we hereabouts call flat rate billing.

So to answer the question posed, I don’t believe that General Counsel here in the states are any more trusting than in Europe regarding the tendency of firm attorneys to pad their hours. I would imagine that the healthy dose of skepticism escalates sharply when dealing with firms which relatively have much higher hourly requirements. So don’t be as naive as your brethren in Europe. Do something about it. Because the more comfortable your clients are with your bills, the less likely they will jump ship when the waters get choppy from time to time.

It’s a proven fact that hourly billing does nothing to encourage or reward best practices and efficiency in handling matters. And it’s a proven fact that clients hate uncertainty about the cost of their legal needs. Put both of those factors together, and it makes sense to embrace a different paradigm.

Of course, billing on a flat fee basis can be scary. That’s because you probably don’t really know what goes into accomplishing legal tasks at your firm. In order to do this “right” your firm has to keep scrupulous time records. And you have to analyze the time spent on the component tasks which will be required on a matter, look at historical numbers, and then find ways to be even more efficient. The result is that clients get predictability and are happier. And the firm can reap much greater rewards.

If you’re not a believer, take a look at my previous post entitled “Increase Profit by 90%” which recounts how one firm diligently worked through this process, and had an amazing return on its investment and improvement.

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