Print This Article

Jeff Carr: It’s not the way that lawyers have billed traditionally. I think this is something that came up in probably the 70s or so if history serves me right. It used to be that bills were given on a bottom line for value rendered services.

Ed: Sort of like legal services rendered, Five Thousand Dollars?

Jeff: Exactly. There’s a famous story about a Washington lawyer, I think, or it might have been a New York lawyer that sent a bill like that. The client questioned it, and then they sent him back another bill for Twenty Five Thousand Dollars, and the Twenty Thousand was to prepare the justification for the first bill.

Ed: That sounds like Edward Bennett Williams.

Jeff: I think it might have been. I think this was driven largely by corporate counsel and insurance counsel in the 70s, maybe the early 80s, when people were frustrated with that kind of billing system. We went to the billable hour as a way to impose some cost control and as a way to understand the way law firms were billing us. Now of course we’ve got a whole generation of lawyers that know nothing else at this point. I’m in that generation. I mean I’ve never worked under any system when I was in private practice other than the billable hour.

Ed: Well, there’s a lot of dissatisfaction, at least verbalized, with the method of hourly billing, in recent times. One of the questions I would ask just as a starting point is, is there anything right with this system?

Jeff: Oh absolutely. Hourly billing is a rough surrogate for value, time rendered. If you take time away from a lawyer, that’s really the only thing that the lawyer has to give to you. It’s very difficult. If you take an hour from a lawyer, he can’t really replace that hour. And that’s the way I think a lot of lawyers think these days. If you use varying billing rates, then you can have a rough approximation of the experience and the type of advice you’re getting. You know, if it’s a hundred and fifty bucks an hour for a first year associate versus six hundred bucks an hour for a wizened grey-beard litigator who is absolutely great, then the hourly rate does reflect the qualitatively difference as well. It’s also easy. You just add up the time and multiply it.

Ed: Well, in terms of value, there’s clearly a difference between the, as you say, wizened grey beard, and the new associate. But in terms of value for the client, does a client really care? I mean, the value to the client is whether they had their objective achieved, isn’t it?

Jeff: That is absolutely right. And that’s why there’s such a disconnect, I think, with particularly corporate clients and law firms these days. If you think of the law firm model, the economic model is based upon total revenue brought in the door. And that’s a function of hourly rate times the number of hours that you actually bill for and can collect for. That has absolutely no relationship, whatsoever, to the value that the corporate client places on the services. Just as you say, Ed, we want the objective achieved, and we want it achieved in the fastest possible way and in the lowest possible cost. So, we’ve got this disconnect or a divergence of interest here, from a law firm model, versus what the corporate model wants to pay for. The difficulty is trying to figure out how to reconcile that lack of convergence, if you will.

Ed: Well, I guess that leads me to a couple of questions. One is you’re talking about the corporate world. And is this where our new thinking is limited to, as opposed to the individual person or what I call the family kind of matter, and the second question is if in fact there is this disconnect, why are we still using it, and why is it that so many clients still prefer what we might today call the old way of using the hourly billing.

Jeff: Sure.

Ed: That’s a multiple list of questions, I know. But I wanted to make sure I at least got them out on the table for you.

Jeff: Let me take the last one first. I think there are a whole lot of reasons for that. Basically I think it’s lack of creativity and complacency, especially in a corporate world. It’s just trying to come up with a new way to do it is hard. It’s just frankly difficult. And there’s also not necessarily a margin in coming up with a new way. You might be able to decrease your costs. But you’re taking some risk, especially if you’re not using the premiere firm that you may have wanted to use. It takes a creative mind, and it takes someone who’s looking forward. Now you’ve got to remember that lawyers are all mired in the past. I mean it’s an entire profession based upon things that have happened five years ago, and things that are going to happen five years from now. It’s very seldom focused on today. I think there’s a complacency with the way things were done, and a lack of creativity to change it. It’s also risky to change it.

With respect to your first question, the one about whether this is really just corporate or what do you do about the family person that needs assistance? I think quite frankly legal services have gotten too expensive in this country. Look at the rise of things like Nolo Press and Willmaker, software packages, that essentially permit people to do a lot of what would have been done by a lawyer on their own. Let’s face it, most legal work, about eighty percent of it, in any context, whether it’s your personal stuff, or whether it’s in a corporate world, is commodity type of practice. It’s really that only twenty percent are high value, high risk, bet the company, go to jail, lose your house matters. Those are the things that you really need the specialized service for. I think, in general, legal services have been priced out of the market for the general consumer. You also then have the pure personal injury type work where contingencies are the rule and the norm. That just reflects the fact that people are not going to go pay to hire a lawyer to get them money, but they’re willing to give the lawyer a share of the funds if they recover. It’s kind of like a lottery. But you know they don’t really have skin in the game themselves.

Ed: What I find particularly interesting since many of our readers of this material will be individual practitioners or small firm practitioners who are dealing in the family context, I think it’s important for them to understand that there are alternatives that even they can use.

Jeff: Absolutely.

Ed: The contingency fee that you mentioned in the personal injury case, I think, is a classic example of value billing.

Jeff: Yes

Ed: You don’t get paid unless you produce a result.

Jeff: That’s right. I personally don’t like contingent fees as one of the alternatives to an hourly rate because I think it’s too much of a zero sum game. You know, I think on the one hand, the lawyer has too much at risk because the recovery is zero. And on the other hand, I think the firm gets enriched if they win. I think there are other alternatives that can be used that better align the desperate interest of both parties and really gets to the point where what you’re trying to do is make the law firm profitable while at the same time achieving whatever the client’s interest is and that’s what we try to focus on.

Ed: There’s a great segue then into this question which is: What are the alternatives to this hourly system of billing, if not contingency?

Jeff: Sure. And there are lots of them. I mean there’s the contingent one that we talked about. There are partial contingencies. There are fixed fees. There are project fees. You could use volume-based discounts. That seems to be the most popular, at least in the corporate world. There are caps or in other words a “not to exceed” number. There’s some shared risk. If you go over ten percent of the budget, as an example, the firm eats that first ten percent. And then above a ten percent overage, the parties both share some of that overage in some way. And the flip side on the other side, if you’re ten percent under, the firm gets a bonus. Things like that. So there are lots of alternatives to this system. I don’t personally like most of the ones that most people talk about. I don’t like caps because then the firm has no incentive to continue to do work, and oftentimes additional work is needed. That’s the problem with fixed fees also. And caps are really just fixed fees in disguise. If you have a cap, you know what you’re going to spend, it’s going to be the maximum amount that was proposed. Even these ones that have kind of this risk shifting or sharing of overage, that kind of thing, those are good. Those are helpful. We have moved to a performance-based billing model, where we’re really trying to align our interests or the firm’s interest and encourage them to reduce the cost of their providing legal services. Let them focus on making money by reducing their costs as opposed to billing us for more hours.

Ed: So, with all of these alternatives, how do they square with the current rules of professional conduct, such as the ABA Model Rule 1.5 which require that the fees be reasonable? If a lawyer or a law firm can get a bonus, is the fee then still reasonable? In an answer just a moment ago, you talked about your concern that a firm might be enriched, is the way I think you emphasized it.

Jeff: Right.

Ed: Is that bad if they got the result?

Jeff: The answer to that is it depends. My personal feeling is giving a law firm thirty to thirty-five to forty percent of a recovery is not reasonable. At least in the litigation context, there are some studies out there that say juries are a lot smarter than people think they are. They know that a plaintiff’s lawyer is taking about a third away. So what they do is they gross up the award that they want to give to the plaintiff. What that’s doing is just a massive wealth shift. In order to compensate the plaintiffs for the value that a jury thinks it should receive, they just add a third on top of it, so that the lawyer gets paid. What they’re interested in is making sure the plaintiff gets compensated. That’s an incredible cost on society. There are some studies out there today that say that the mass tort industry and the personal injury industry in the United States puts a tax on the economy of up to two percent of the GDP. That’s a total of defense costs and recoveries and plaintiff costs. But that’s an incredible amount of money.

Ed: It is. But would those cases be handled if the benefit were not out there? For example, in your mass torts cases, there’s an incredible amount of investment that has to be made to get the case to trial, first of all, and then to get the jury to see the wisdom of it.

Jeff: Sure, I agree with that. There certainly is. Unfortunately though most cases never go to trial. It’s essentially a form of legalized extortion. You look at a company like Haliburton that thought that its activities had not harmed individuals that had brought some asbestos cases against them. They lost, I think the number was about two-thirds of their market cap overnight, after a couple of jury verdicts against them. These were cases where, as I understand it, there was only a fear of prospective injury, not an actual manifestation of harm. That’s a pretty amazing vignette I think in this system. You know it’s just classic debate that goes on in the United States of the difference between the English rule where the loser pays and our system where you’ve got a contingent based litigation. I’m not sure which is the right one. I personally favor the English rule because I think people should, if they’ve got good cases, they should bring them and they’re going to get compensated for them. Their legal fees are going to be paid. The flip-side is contingent fee arrangements do permit plaintiffs who cannot afford litigation to litigate. That’s fine. Maybe the answer there is to impose some reasonableness in the pleading requirements. Maybe the courts are at to blame here in part permitting cases to go forward without even a modicum of satisfaction of proof in the complaint itself.

Ed: Well, Jeff, many lawyers believe that corporate counsel are merely trying to lower the legal costs, and that there’s really no benefit to the lawyer. Can you describe some of the benefits to the lawyers as well as to the corporate world.

Jeff: Sure. I hear that all the time because we do most of our work on an alternative fee basis here at FMC Technologies. People are always saying, “Well Jeff, you’re just looking for a discount.” That’s not true. We actually want to pay firms a higher effective hourly rate. We just don’t want to buy as many hours and we want it somewhat conditioned upon their performance. Performance is a factor of many different things, communication, satisfaction of our business objectives, use of technology, their overall knowledge. There’s some subjective criteria in there as well as simply winning. My feeling is first we’re helping to improve the firm’s performance and they should embrace that. If they live in a world that favors and rewards continuous improvement, they should embrace this. Second, just from a pure economics standpoint, if we’re willing to pay more per hour, but for fewer hours, what we’re doing is increasing their margin on those hours and giving them hours they can sell to somebody else. We’re freeing up their inventory to sell to somebody else.

Ed: One of the critical elements of alternative billing, as I understand it, is that the lawyer’s got to move away from his or her attempt to be perfect.

Jeff: Right.

Ed: The mode of leaving no stone unturned that we learned in law school is no longer applicable, but this also suggests that the client’s going to absorb a certain amount of risk. How can that risk be defined in advance of the engagement? As a skeptic, do you really believe that the lawyer will be immune from a malpractice suit if the result hoped for by the client doesn’t actually occur?

Jeff: You know, that’s a great question because that’s what you hear often as the defense of why we have to do work this way. I mean, first the rules of professional conduct require us as members of the bar to zealously represent the client. Many a billable hour has been spent in the name of zealous representation of the client. That’s on the one side. The flip side is we’ve got to do this, otherwise we’ll get sued for malpractice. I think the answer to that is that the client does have to absorb a certain amount of risk, and they have to understand that. At least in my world, I look at myself as the head of the FMC Technologies law firm. Lawyers that work for us on the outside, they’re the headcount that I can’t afford to have on the inside.

When we engage them, an outside lawyer versus one of my inside counsel, they’re the same. I just pay them in a different way. One I pay in a paycheck, and the other I pay against an invoice. But as far as I’m concerned, they’re members of my legal team. That legal team, along with the internal client, sits down and decides what the strategy is going to be for the case, what our objectives are, or if it’s not a case, in the transaction, whatever the legal matter may be. What our objectives are and what resources we’re going to put on it and understanding what the deltas are. You know that we could spend another thousand hours, but it’s only going to increase the probability of success by five percent. That’s a risk we’re willing to take. You’ve got to have that conversation. Frankly if you have that conversation, and if you make sure that the in-house lawyers along with the firm lawyers, along with the internal client, are all sitting at the table, and deciding what approach to take, frankly you’re all dirty if something goes wrong. You know, you’re all part of that decision making process and we’re not going to sue for malpractice in that kind of a circumstance.

Ed: Well you say you’re not going to sue and I hear you and I believe you going in.

Jeff: Right.

Ed: But now we’re at the other end of the tunnel

Jeff: Right

Ed: And you’re really ticked off. You’re pissed, as they say...

Jeff: Yep

Ed: That the result came down, the judge did this or the other side did that, and who are you going to look to? The lawyer on the outside, ‘cause you can’t sue yourself.

Jeff: Yes. You know that’s a legitimate fear and a legitimate concern. I can’t speak for others, I can only speak for the way we’ve handled this kind of a situation. We had a piece of litigation that went bad, the judge made some outrageous determinations during trial, we lost about a $3.5 million verdict. Instead of firing the law firm, and hiring somebody else for the appeal, we rode the same horse, through the appeal. And we prevailed on appeal and had it reversed. Our feeling is we’re loyal to our lawyers and people that work with us. I think a lot of this comes down to client expectations and understanding how to manage those expectations. I describe most legal work, particularly in litigation, as being like a weather person.

Ed: Oh my goodness.

Jeff: When the client asks are we going to win? Or are we going to lose? Whatever the question is, you know they’ll push you for a percentage. I mean most lawyers want to say it’s more likely than not. Who knows what that means. Or you’ve got a good case to an outside lawyer, that may mean a twenty-five percent probability of success. To the client they may be hearing a seventy-five percent probability of success. So unlike most lawyers, we actually give people probability. We say, you know, if they want to hear it, we’ll use a decision tree and we’ll say you have a sixty-two point five seven eight probability of success in this matter, or a probability of getting this number or losing that much. We will actually go through that exercise. The only thing I know about that exercise is that I will always be wrong. You know it’s never exactly what we predicted. But that’s exactly what the weather person does. When the weather person says there’s a five percent chance that it’s a thunder storm, ninety-five percent probability that it’s going to be a beautiful day. If you’re standing in a downpour, you’re pissed at the weatherperson. But the fact is the weatherperson was right, you’re in the five percent zone. And that’s the way you have to deal with this with the client.

Ed: There there’s no recourse. But when you’re looking at the lawyer, all of a sudden the lawyer is naked. There is recourse and that’s by way of the malpractice action.

Jeff: You know we’ve never been asked to give a representation or a warranty that we would not sue for malpractice. It’d be an interesting question. I’m not sure how we’d handle it. We base our relationships on trust quite frankly. And the personal relationship with the counsel. We’re very loyal to the few number of firms that we work with. That’s just part of the bargain for exchange. I know my job is on the line if we lose. That’s the way I look at the world. It’s my decision and my responsibility ultimately if something goes wrong. It’s not the firm’s in my view.

Ed: Jeff, let me switch our focus slightly. If one of the principal ingredients of alternative billing is that fees are paid by value, not by time, who sets the value? If the client sets the value, how does the client get educated to understand what the value of his service is? For that matter, how does a lawyer get educated to understand what the value of the service is?

Jeff: Right. Oftentimes it’s hard to focus on this in value, I think. People tend to think of the world, when they’re talking about value billing, more in the world of litigation I think than anything else. Writing a will, as an example, or giving tax advice, is actually one of the best ones where you can state the value, if it saves this much money in taxes. There’s a pretty clear value there. On the other hand, in litigation, I think what you’ve got to basically say to folks, you’re going to sit down and you say it’s not just money, it’s what are your objectives in this case? Is it winning by this much? Is it only losing by that much? Is it getting an injunction? Is it getting your patent enforced? Is it making sure that your patent is not declared invalid? What precisely is it that you’re looking for? That’s what we try to focus on, that’s the element of success. It’s not so, we don’t focus on value as much as we focus on what is the objective. Once we know what the objective is, then you can tell the firm, hey this is my objective, this is the situation, how much is it going to cost? Give me your best guess on how much it’s going to cost. Break it down into the components of a case, or the components of a transaction, and give me a budget by phase by phase on what it’s going to cost to get there. If the number is too high, then the client has got to make a decision as to whether or not, wow, it’s going to cost me that much, to achieve this result. That either is or isn’t worth it to me. And the client’s got to make that decision. And, so I think all of this comes down to a true communication and a true exchange of what things actually can cost. It doesn’t do a client any good at all for a firm to come in and lowball a matter, to say I can do this for twenty thousand dollars, or I can do this for a hundred thousand dollars, if it ends up costing two hundred and fifty thousand dollars. Now, if it ends up costing two hundred and fifty thousand dollars, and there are reasons for it, and the client has been involved in why that has happened throughout, that’s okay. The client’s going to be sitting there saying is this still worth it to me or not? They’ll decide to pull the plug or they’ll decide on some alternative course.

Ed: So, what you’re suggesting, if I’m hearing you correctly, is that one of the key elements here is to create a budget of events and then a budget of money as to what it’s going to cost.

Jeff: Absolutely.

Ed: And, that budget in terms of events and benchmarks and so forth, that’s clear to understand. In terms of the budget for money, though, what number are we using? Are we going back to the hourly rate and then coming up with the number?

Jeff: In our system, that’s exactly what we do, Ed. We’ve come to the conclusion that, for better or worse, we’re stuck with the billable hour. It’s a good surrogate for time efforts expended in a matter. And so we still use the billable hour. But what we do is we try to put part of that compensation always at risk and then you get that amount back, plus a bonus, based upon, and plus a variable bonus, based upon efficiency and success. So in other words, if you tell me a matter’s going to cost a million dollars, you achieve success for five hundred thousand, as opposed to a million, in terms of what your billed amount was, we would have paid you four hundred thousand; we would have withheld a hundred thousand; that would be in the at-isk bucket. If success were achieved, you’d get that hundred thousand back, and depending upon when you achieved success, another hundred thousand as a success bonus, and then there’d be an efficiency bonus on top of that for bringing the matter in fifty percent below expected costs.

Ed: So in other words, if we’re using the million dollar example, you’re saying that you would pay only fifty percent, and then...

Jeff: No, actually what we normally pay is eighty cents on the dollar.

Ed: Okay.

Jeff: We put twenty percent at risk. Depending upon when success is achieved, the at-risk bucket is growing. Then, if success is not achieved, you’ll lose what’s in the bucket. If success is achieved, you get what’s in the bucket, plus a success bonus, plus an efficiency bonus, or an efficiency penalty. You know if you over-land you might take a ding on your bonus because you overran the total budget on the case.

Ed: Now, who sets these bonuses? It’s clear that the eighty percent figure is established up front.

Jeff: Yes.

Ed: The bonus bucket entries or withdrawals, are they subjective or are there some standards that are set up so that the lawyer has some objective criterium?

Jeff: Let’s just put it in a litigation context, for us anyway. We use a system, we call it ACES. It stands for the Alliance Council Engagement System, subject to a pending business process patent. You give us a budget, five phases in a case, you give us a target for each one of the phases; during a phase we pay eighty cents on the dollar and then, depending upon when success is achieved, you get what’s in the bucket plus a bonus. And the bonus depends upon the phase. If you achieved success in the first phase, you get what’s in the bucket plus a hundred percent. If you’re in the second phase of the case, it’s what’s in the bucket plus seventy-five, and so on. The lowest bonus is twenty-five percent. I mean we have to incent people to play in this world. The interesting part about our system is that if in any phase you get to the point where you’re going to go above your target for that phase, we don’t want you to stop work. You know we want the firm to continue to do work. But say you’re in discovery and say you know I really need to take that one more deposition, but I’m going to be above my target. We say take the deposition. But if you go above the target, now the ratio of case switches and now we pay you twenty cents on the dollar and eighty cents goes in the bucket. What that does is it forces the law firm to make tactical decisions in the interest of the case. In other words, they are only going to do those things that are going to materially contribute to success. Now their success bucket is growing. And so if they think that it’s going to work, they’re willing to put that eighty cents in the success bucket. Then depending upon what phase they’re in, they get money back, plus a bonus. Then depending upon how efficient they were in the overall case budget, they might get an efficiency bonus, or there might be an efficiency penalty. This aligns their interests in maximizing profit and our interest in achieving success as early as possible.

Ed: I was going to ask you about the concept of beauty in the eye of the beholder. If beauty in this case, value, is in the eyes of the client, then how do you reconcile differences of opinion from value?

Jeff: Great question. In the litigation context, you don’t, at least in our world, because we do this quantitatively.

Ed: So there’s some objective criteria set out?

Jeff: There’s some objective criteria, right. Now in every other situation we use a different form of ACES; it’s called ACES long term or ACES LT. Think of that as a report card system. This works for transactions, it works for just straight hourly billing, fixed fee, works for anything. What we do is we say, “Okay, here’s the project, or here’s our deal.” We’ve come to a deal on either hourly or fixed fee, whatever that may be. You give us a bill, we pay you eighty cents on the dollar. Twenty percent goes at risk. Periodically, or at the end of the engagement, either one, we give you a report card. The report card is based on five different factors. They are subjective. I won’t kid you, they are subjective. Each of those factors are weighted equally. Depending upon how you do on your report card, you get between zero and two hundred percent of the amount withheld. The firm realizes anywhere from eighty percent to a hundred and twenty percent of its total amount billed. What that forces us to do as the client is to give meaningful feedback to the firm about what our expectations are and whether they’re meeting them. The criteria we use are things like communication, teamwork, innovation, satisfaction of our business objective, and knowledge. Those are our basic criteria. Those happen to be the same five core values FMC has as a company. When we think about what our core values are, it’s those five things. What we’ve done now is we’ve said, here’s what those five things mean to us in buying legal services. If you do stellar performance, you’re going to get your bill plus another twenty percent.

Ed: Jeff, your concepts are mind boggling in the legal profession and I think right on in the business world. I’m not sure how many corporations though, even in the business world, honor the core values that you describe. But taking it to our issue at hand more directly, it seems to me that underlying this whole discussion is the need for the attorney to understand what the client really wants as outlined in your five criteria.

Jeff: Absolutely

Ed: And then, secondly, to create a budget and time line of costs and events. And it’s something that at least when I went to school and even today’s law student, we’re not taught how to do this. How do lawyers intuitively know how to do this, based on your experience? And if they don’t know it, how do they get the skill?

Jeff: Yes, and they don’t know it. You’re absolutely right. I know that you’re an MBA. I got my MBA the hard way, by running an investment banking and privatization firm for about five years. Ran it right into the ground. You know lawyers are not taught to be business people. It’s a fundamental error in our legal education system. You take kids that are liberal arts majors. You put them in law school. I don’t know what they learn in law school these days, but they sure as heck don’t learn the business of law and they don’t really learn how to counsel clients.

Ed: You know the fact of their not knowing the business of law has allowed me, in 1995, to actually get a registered trademark on that phrase.

Jeff: Is that right?

Ed: The Business of Law is my trademark.

Jeff: That’s a fantastic trademark. And it’s just right on because I think the reason I formed my own firm was because I thought I didn’t want to be a lawyer. I thought I was fed up with being a lawyer. What I learned was I didn’t hate the practice of law, I hated the business of law as it was being practiced at law firms. What brought me back to in-house practice after this little five-year experiment was the fact that at my core I’m a lawyer. I worry about our profession and I worry about the failing of lawyers in law firms to understand that they are in a business and to understand that it is a customer service business, and understand what customer service means.

Ed: Absolutely. Well, after all of this and the experience that you’ve had thus far, Jeff, what do you see as the future of alternative billing systems? Saying it another way, what do you see as the future of the relationship between lawyers and clients? Are we going to be more or less adversarial to one another?

Jeff: That’s such a great question because I think it goes to the fundamental problem in our profession today. Right now, law firms don’t have a great incentive to change. If they can sell all of their hours essentially in an inelastic market that says go ahead and bill me as many hours as you can and I’m going to continue to pay it, there’s no incentive to change to some other form. And there’s no incentive really for them to reduce their costs as a way of increasing their profitability. Corporate counsel are getting increasingly angry about this and corporate clients are getting increasingly angry about it. Eventually we’re going to get to a situation a lot like the medical profession where we’ll have some form of managed care; we’re not going to like it very much. I don’t know what that form will be. Maybe it’s increased auditing of bills; maybe it’s people coming in saying the value of that service is not a hundred thousand dollars, it’s seventy-five thousand dollars; maybe there’ll be a whole cottage industry that will develop. In fact, I think it’s already there that does that kind of review work. That will make it even more adversarial, as you’re saying, Ed. And that’s not the way this profession ought to go. We’re counselors. We’re supposed to be solving business problems. We’re supposed to be partners with our businesses, regardless of whether you’re in-house or at a firm. Somehow, some way, we’ve got to find a way to change this relationship where we are compensating our firms fairly and making them profitable. I mean we do not want our firms to be unprofitable, but we also don’t want the firms to be doing the work that we don’t need done and that doesn’t go to our business objectives.

So in my view, you need more in-house counsel that have the nerve, guts, time, hutzpa, creativity, whatever it is that you call it, to start challenging this. And you need firms that more and more say you know there’s got to be a different way. My favorite firm in America on this issue is a little firm out in Seattle, Washington called the Summit Law Firm. They’re all refugees from the big firms. Ralph Palumbo created the firm because he felt there was a different way to provide legal services. Every time any lawyer at Summit sends out a bill it’s hourly and it comes down to the bottom line, and it says “total amount of this bill,” and there’s a number there. There’s another line that says, “client adjustment,” and that line is blank. And then there’s a final line that says, “total amount due.” As a client, I have a right to do whatever I want to a Summit bill. I can give them a bonus, I can write it down to zero. Now that’s true value billing because you’re empowering the client to do whatever they want to their bill. If you call Ralph, and if you ask him how many people, write it down to zero he’ll kind of laugh. He’ll say “one or two.” He says some people like you Jeff, pay us bonuses. But, by and large, most people pay exactly the amount of the bill. The reason they do it is they believe and understand that the bill is reasonable because they have the right to change it. And so therefore they don’t need to. It’s a fascinating and amazing marketing ploy and also a partnering relationship because he’s empowering his clients to say what really was the value of these services?

Ed: That’s a great way to end our conversation. Jeff, thanks very much for joining us today.

Jeff: My pleasure, Ed.

Edward Poll, J.D., M.B.A., CMC, is a coach to lawyers and certified management consultant who shows attorneys and law firms how to be more profitable. Ed's latest book is Collecting Your Fee: Getting Paid From Intake to Invoice (ABA 2003); he is also the author of Attorney & Law Firm Guide to The Business of Law, 2d ed. (ABA 2002) and Secrets of the Business of Law: Successful Practices for Increasing Your Profits. To make suggestions or comments about this article, call (800) 837-5880 or send an e-mail to edpoll@lawbiz.com. You can also order a free e-zine or visit Ed on the web at www.lawbiz.com.