“Hourly lawyers are paid to be inefficient, slow, inexperienced, overstaffed, and risk averse, at all costs.”

“Hourly lawyers are paid to be inefficient, slow, inexperienced, overstaffed, and risk averse, at all costs.”

And those costs are your costs.

John Toothman, one of my favorite thinkers and writers about law firm management and billing practices wrote that phrase here. Toothman was discussing this article from the Economist regarding how law firms are charging more per hour (as high as $1,800 an hour) but realizing far less of those bills. According to the Economist, law firms are only getting about 85% of their bills due to deep discounts given to ever more savvy customers. Just because your lawyer doesn’t charge $1,800 an hour doesn’t mean you are getting a good deal.

The idea that any lawyer is worth $1,800 an hour is absurd on its face. Even at a 15% discount, $1,530 per hour is just as absurd. Such hourly rates are more about vanity than about quality.

So the published “vanity” rates of lawyers are known by most sophisticated clients to be fictional — not to be taken seriously, let alone paid.  But when clients find out that the rates can be “discounted,” they just don’t know for sure whether they are ever getting a decent deal…  These fools might actually think the lawyer’s quoted rate is his or her actual, as paid, rate.

The greater joke is that even serving Fortune 500 companies, these Big Law firms can’t seem to formulate a budget, or if they can, they have a hard time living within that budget.

Who is more foolish, the fool who charges such a rate and then discounts so severely, or the fool who continues to consider a law firm who would even charge such rates, let alone haggle over such rates?

The real reason firms charge vanity rates is because they don’t want to deal with the “riffraff,” the unwashed masses of the small business and regular folk world, for whom $180 an hour is a steep price, let along $180 for a six minute phone call. But the greater travesty upon small business owners (who need legal advice as much as the Fortune 500), is that too many law firms, even the supposedly more economical regional or local firms, still charge by the hour! When a small business owner’s budget for legal service is measured in the 4 digit range per year, is a $500 an hour partner a “bargain?” What about a junior associate who bills $300 an hour but takes 10 hours to get anything done?

Clients should not pay attorneys for their time, but for their advice and/or work product. Scrutinize those bills and do your due diligence on who is doing work on your matter and whether they are really needed. Toothman’s advice is this:

Our message to all clients, great and small, is to shop for a firm that takes you seriously enough to charge you a reasonable rate and appreciate your business.  If you cannot trust your lawyer to treat you with honest respect about what they charge, how can you trust them to give you legal advice?

I would add something even more relevant for small businesses. If your lawyer can’t quote you a price or give you a budget for your legal matter, can you really trust them to take your money seriously?