LexThink participants, I noticed that quite a few of them mention the conceptdifference between value, price, and cost” and another says “read Ron Baker’swritings on value billing ”I am all for modernizing the law firm and the lawyer-client relationship — so longas it is a tool for better serving the client’s interests, rather than one that merely usesmodern selling techniques and technology to articificially increase lawyer fees andprofits and to stave off the democratizing effects in the legal services marketplaceof the digital revolution.
I continue to believe that the “value billing” mantra and the constant drum beatagainst hourly billing can be contrary to client intersts, if they are not accompaniedby a renewed commitment by each lawyer to the fiduciary and professional obligationsLexThink participants might want to consider the following discussion from my
piece on value billing, before becoming advocates of Ron Baker’s theory of value pricingby professionals:of value billing, to help assuage my concern over the use of branding and valuepricing to achieve “premium pricing” of lawyer fees. Matt suggested last monththat I read The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services by Paul Dunn & Ronald J. Baker. Matt said that the book “sets out their vision of value pricing and serves as much of the model for my new firm.” I couldn’t find thebook at my local Library (and won’t pay $40+ to buy one). However, I did use theAmazon.com “Search in the Book” feature to check out “value pricing” or “value billing”and ethics. The results were not the least bit calming for me on whether value billingwill result in reasonable fees or merely produce “premium fees”.
- For example (at p. 217) The book asserts there is no ethical contradiction from using value billing. But, it quotes from an NYSBA report, which says an agreed upon price is fair “subject to market realities and the attorney’s professional obligations”. Of course, the whole issue is what the lawyer’s obligations are when reaching the fee agreement [disclosure of relevant facts, offering a fee that is reasonable, taking into account the client’s sophistication, etc.].
- The book also says value pricing is ethically okay because businesses do it
all the time — using airlines charging different fliers different prices for thesame seat, movie theatres’ price for popcorn, and premium ice cream makers,as examples. My reaction: None of those sellers have fiducial duties; nonepromises to put the customers’ interests first (except when that will incease profits); none sell a product whose qualities the buyer is unable to judge. As I wrote back to Matt, “If movie theater popcorn is the touchstone for the ethics of value billing, I rest my case.”Note: On April 23, 2004, Matt Homann had a post titled “Primer on Value Billing,” inwhich he calls Ron Baker “an absolutely amazing visionary.” [Reminds me of the namepartner at my first law firm, who advised me that the word “amazing” could be used inplace of any expletive.] In the post, Matt points to a 2001 Baker piece, and says “I guaranteethat you it will give you incredible insights into pricing your services.” In the piece,“Burying the Billable Hour,” Baker highlights the following pricing strategy from HarryBeckwith as central to his theory of value billing:“Like money, price talks. It changes perceptions.Price changes the actual experience of using the service:A high price actually improves the experience. Watchwhat your price says. Push price higher. Higher pricesdon’t just talk, they tempt.”Let’s think long and hard before that principle becomes the core of lawyer pricingin the new millennium.afterthoughts: See , e.g., “Value Billing and Lawyer Ethics“(Jan. 28, 2004); “broadening the billable hours debate” (Aug. 18, 2007)
the bill collector
with shoes on steps inside
to the hearth
stillness–
in the depths of the lake
billowing clouds
translated by David G. Lanoue
April 6, 2005
LexThink about higher fees (er, value billing)
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