f/k/a archives . . . real opinions & real haiku

April 8, 2005

“ethics aside”

Filed under: pre-06-2006 — David Giacalone @ 12:59 pm

Just as Prof. Yabut decried the abuse of ellipses, f/k/a‘s editor emeritus ethicalEsq is getting a little annoyed by the “ethics aside” approach of the gurus and evangelists of law firm branding, marketing and alternative or value pricing. They offer the easily-tempted lawyer a paradise of premium clients and fees, with increased profits, while never probing the ethical and fiduciary duties of the lawyer to insure that the client is fully informed, treated fairly (and without manipulation) and, in the end, charged a fee that is reasonable for competent and diligent services. Yesterday, AdamSmith Esq‘s Bruce MacEwan reminded his readers, in a post about marketing (pointed to by Lisa Stone), that

“a core conviction of mine is that — cultural considerations aside, admittedly a large “aside” — the business of law firms is not fundamentally different from the business of corporations.” (emphasis added)

honest Yes, law firms do have a different “culture” than business corporations, and much of that difference has to do with professional ethics. But, there appears to be little chance that Bruce will ever get to this “aside”. Earlier this year, he made it clear: “this blog, I will remind you again, is not about ethics, it’s about economics.” [As Church Lady used to say, “Isn’t that special?” — and convenient.]

turning over in bed–
move aside!
katydid

…………….. by Kobayashi Issa, translated by David G. Lanoue

Aside” means “Out of one’s thoughts or mind” and “Set out of the way; dispensed with.” (Am. Heritage Dictionary, 2000) I don’t think our ethical and fiduciary duties should be set aside when dealing with how we attract clients or set fees. See the Intro to the ABA Statement on Principles in Billing for Legal Services (1996) for some straight-talk and pointers on the issues. We covered some of the relevant issues earlier this week in LexThink about higher fees (er, value billing). Those who are advocates of “modern”
marketing and pricing methods for attorneys have a duty to put the ethical issues front and center. If they, and those who are so eager to follow them to higher profits, need a place to start, they might take a look at some of our prior posts — or read them again with our ethical duties in mind. For example:

brand Lex (branding to permit premium pricing and reduce price elasticity)

chronomentrophobia (hourly billing is not the problem)

value billing or venal bilking? (what is value billing? what should it be?)

fees and the lawyer-fiduciary

jackal sequel (image-making rather than quality as the basis for higher fees)

fee fie foe and fum (change values first)

It’s worth repeating what I said two days ago, after LexThink: “I am all for modernizing the law firm and the lawyer-client relationship — so long as it is a tool for better serving the client’s interests, rather than one that merely uses modern selling techniques and technology to artificially increase lawyer fees and profits and to stave off the democratizing effects in the legal services marketplace of the digital revolution.”

move aside
cloud and fog!
lotuses are blooming


baby sparrow
move aside!
Mr. Horse passe
s


honest – from The Haiku of Kobayashi ISSA, translated by David G. Lanoue

3 Comments

  1. David,

    I wish you would read my book in its entirety, Professional’s Guide to Value Pricing, Sixth Edition. It contains an entire chapter on the ethics of value pricing versus hourly billing, even quoting an encyclical from Pope John Paul II. I take the ethics and morality of pricing very seriously, you do as well. I applaud that characteristic. I teach Ethics for the California CPA Education Foundation, and currently writing a book on the topic.

    If you read the book, you’ll notice I advocate a 100% unconditional money back service guarantee, which I believe all professionals should offer to their customers. It’s the moral and right thing to do.

    You’re continued attachment to the billable hour can only be explained by your lack of understanding of the nature of Value Pricing, at least as I am proposing it. Please read the book before you take excerpts and try to claim I am basing the morality of value pricing on airlines or movie theater popcorn (you are confusing a pricing strategy with the concept of pricing up-front).

    The problem with these blogs is they are a mile wide and half-inch deep. Let’s commit some serious intellectual capital to this debate, something I have been doing for approximately 15 years. I also ran my own CPA firm without billable hours (or timesheets) and not one customer ever complained I was “venal billing.” In fact, I can make a strong case the billable hour is immoral and unethical, since it does not give the price to the customer before the work is performed. No one buys anything in a free market without knowing the price before they buy. Period.

    Read the book, please. Then let the debate continue.

    Regards,
    Ron Baker

    Comment by Ron Baker — April 19, 2005 @ 2:12 am

  2. Ron,
     
    Sorry, but I won’t buy your book [$149.00] before continuing this discussion, and it is not available from our public library system.  If you send me a copy of the book, I will read all the sections you suggest, and return it to you — or donate it to our County Law Library or the public library.  If you’d like to instead send me photocopies or an email of the relevant chapters, let’s arrange to do so.
     
    Here are a few clarifications that I think you and my readers should know:
     
    1)  The first two sentences of my piece “value billing or venal bilking” say a lot about my focus as contrasted to yours.  I say:

    I’ve been trying to figure out how “value billing” by lawyers could/should work in the context of the average client — a client who is not highly sophisticated or experienced in dealing with attorneys and their fees.  
     
    Alternatives to the hourly fee can indeed be ethical and should be encouraged — because they are a spur to creating the efficiency, innovation, and competition that lead to better client service and lower fees, not in order to lull the client into paying higher fees.  

        In contrast, your consistent focus appears to be on the more sophisticated and wealthy client (corporate or personal) and your goal is to use value billing to increase fees.  Your entire notion that “you are what you charge” is a call to increase fees. One example is your booklet “Burying the Billable Hour;” another is your book with Paul Dunn, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services, where you say: “You will never get paid more than you think you are worth. And if you do not think you are worth more than your hourly rate, why would your customers?” [at 216]
     
    Because many of the lawyers who appear most attracted to your brand of value billing are dealing with less-sophisticated clients (at least when it comes to their dealing with lawyers and valuing their services), I believe the lawyers need to be giving more thought to ethical and fiduciary duties before falling under the spell of a billing format that promises them higher fees and greater profits.
     
    2)  I do not include you in the category of those who totally ignore ethics when they discuss vale billing, but I do think you have distorted ethics in the context of lawyers and their clients.  You say above “Please read the book before you take excerpts and try to claim I am basing the morality of value pricing on airlines or movie theater popcorn (you are confusing a pricing strategy with the concept of pricing up-front).”  I don’t think I have misquoted you or taken you out of context.  The passage that I have quoted on movie theater popcorn (217 of Firm of the Future) is in a section captioned “Value Pricing and Ethics.”   After encouraging fair dealing between business and buyer, and stressing that beyond fairness “capitalist acts between consenting adults are allowed,” you state:

     “Value pricing and ethics are not mutually exclusive; they coexist in the marketplace everywhere else-from airlines having different fares for different passengers and designer ice cream manufacturers charging a premium price to movie theater popcorn and hardcover books being priced at a premium.  It is time for this form of pricing to be adopted with respect to professional services everywhere, and the firms of the future are leading the way.”  (emphasis added)

    This clear linkage of value/premium pricing and ethics comes just two paragraphs after encouraging fees above a firm’s hourly rate and assuring your readers that there is no ethical bar to their feeling “comfortable” with your premium pricing strategies. 
     
    3) While I applaud your advocacy of a “100% unconditional money back service guarantee,”  that does not cure the problem — lawyers should agree to, charge, and collect reasonable fees, not put the client in the position of having to decide whether to request a refund. 
     
    4)  You refer to my “continued attachment to the billable hour,” but any reader of my pieces on the billable hour or value billing know that (a) I have frequently advocated using alternative billing [see my opening above], while (b) defending the ethical use of billable hours (see chronomentrophobia).   I continue to believe, however, that clients want alternative billing methods in order to have lower overall fees, not because they believe their lawyer is worth more than his or her hourly fee.
     
    In my own mediation practice, I billed on an hourly basis for the actual mediation sessions (which, in my opinion, could not and should not be fairly estimated in advance — except to give a likely range), but used a flat fee for drafting the resultant memorandum of understanding.   I do not believe it would have been fair or reasonable to ask potential mediation clients “what is it worth to you to avoid the ugliness of adversarial divorce” and then to charge them accordingly.   I had skills to offer them to help them get through a very tough time in their lives and I charged them a modest hourly fee [$90] for my efforts. 
     
    For over a quarter century, I’ve advocated giving the informed consumer as wide an array of choices as possible in the marketplace.  That includes choice of pricing mechanism.  I believe hourly billing can be done in an ethical manner, as can forms of alternative billing, such as value pricing.  However, I do not see your particular version of value-billing-as-premium-billing to be a client-friendly alternative to the problems that can arise with hourly billing.  A basic premise for lawyer ethics is putting the client’s interests first, not the lawyer’s financial interests — and that should include changes in billing methods.  Your basic premise that the client will feel better by paying more may appeal to a lot of professionals, but I’m not persuaded that it serves the client’s interests.
     
     
    5) I’ll let readers of this site decide whether your condemnation of “these weblogs” as “a mile wide and half-inch deep” should apply to the commentary found here. 
     
    Please keep in touch.
     
    David

    Comment by David Giacalone — April 19, 2005 @ 2:11 pm

  3. Well, what a debate. I agree that certain selling techniques are necessare in todays market to be successful in pricing. However I use the following to make ethical decisions. Is it good for the client? Is it good for my company? Is it good for me? If I get a yes to all, then I proceed. If not, I start over. Thanks for the info. Pierce

    Comment by Pierce English - Sales Training — August 31, 2008 @ 10:17 pm

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