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

March 23, 2006

the value-billing babysitter

Filed under: lawyer news or ethics,pre-06-2006 — David Giacalone @ 2:10 pm

Our “friends” Jack and Jackie Cliente have five kids, ages 3 through 13.

For the past few years, they have been quite pleased with their main

babysitter Reese Morrispoon, who is now a high school junior. Reese

is mature for her age and smart, and gets along well with all the Cliente

kids (with the exception of the eldest, Sadie, who has just discovered

boys and is often sulking). Reese has two younger siblings, who

occasionally assist Reese or perform babysitting chores that are less

taxing.

 

The Clientes pay Reese $6/hr., which is as much as any babysitter gets

in their community. The younger Morrispoons get $3 and $4 an hour,

because they have less experience and are given less reponsibility.

 

WitherspoonAsWoods reese

 

Jackie Cliente faxed me over the following letter that she received today

from Reese, asking how she should respond:

 

 

March 20, 2006

 

Mr. and Mrs. Cliente,

 

I’ve been very happy being your babysitter, but hope we could talk

about my fees. I really think you will love my ideas. A few days

ago, my parents came back from a conference they attended

called LaxThink. They got lots of ideas about how dad could charge

for his lawyer services and mom for her accounting services, to get

out of the “nasty rut of hourly billing” (because clients really hate

paying by the hour, they told me).

 

They learned that many clients feel a lot better when they pay more

money for services, because they feel they are getting more value.

Dad is a really sensitive guy (for a lawyer), and he explained to me

how important price sensitivity is when setting your fees. (Some guy

named Ron is the expert, he must be a baker or chef, because he

talks about prices for sweets, and ice cream and pop corn.)

 

ElefantC carolyn

 

Mom told me that they were really excited about the idea of

“differential billing”– charging more for doing some things things that

are harder or more valuable and useful to the client (like stuff my little

sibs probably couldn’t do, but I can). I went online to do some research

and a very nice attorney named Carolyn, who is a mother, and writes

kind of a gossip column about lawyers, says differential billing is “a

great suggestion.”

 

She gives credit to a man with a great name — Rees! — who talls about

it in a post at his website. Rees describes the concept as “Different

billing rates for the same lawyer, according to the task’s usefulness to

the client.”

rees reesM

tiny check To be honest, Rees might be a worrywort. He says his idea

is “Logistically a nightmare and beset with subjectivity.” But,

you know and trust me, and you love your children so much, that

I’m certain we can agree on “a billing system that matches fees

charged to worth delivered.”

Here are some of the things that I do or might do while babysitting that

I believe are especially valuable and useful for you as parents and for

your children. Next to each is my proposed “value-added fee.”

 

 

  • Get Chubby Cathy to bed with only 1 snack [$5]

 

  • Show 4th-grader Mikey a Memory Trickfor vocabulary and multiplication tables (invaluable for standardized tests) [$20]

 

  • Keep Mikey from staring at my chest [$12]

 

  • Secretly decode IM messages between Sadie and her girlfriends [$10]

 

  • Stop Sadie from sneaking out her window to meet boyfried Butch [$50]

 

  • Stop Butch from climbing into Sadie’s bedroom window [$70]

 

  • Mediate X-box sharing schedule [$10]

 

  • Keep my younger brother from eating all your cookies and ice cream [$6]

 

  • Stop Jack Jr. from beating Mikey to a pulp [$15]

 

  • Rescue baby Anny from swimming pool [$500]

There are, of course, lots of other very useful things that I

do that are lots more valuable than just watching tv and

putting the kids to bed on time. I think we could work

them out as they happen, comparing their value to

similar items in the list. As you know, I really love

your children, but you have raised them to be very asser-

tive and distrustful of authority figures. That makes my

job especially hard.

 

Please let me know if this Differential Billing idea is accept-

able to you, before our next babysitting night. Of course,

I would reduce my normal per-hour fee from $6 to $4 per hour,

if we adopt the value-added schedule.

 

Reese

XOX

Jackie is pretty upset by this turn of events. She thinks paying top-

notch hourly fees already compensates Reese for her extra experi-

ence and talents. She also thinks Reese’s younger siblings could

easily perform some of the “value-added” services, at least with a

bit of good supervision.

 

Jack Cliente is intrigued. He’s a master bricklayer, and is thinking

he might be able to charge a lot more money for some of the move-

ments that are needed in placing and setting a brick than for others —

with the total ending up a lot higher. He also pointed out to Jackie

that she might try this approach herself as a medical expert witness.

Right now, she gets paid by the hour for her time at court. But Jack

thinks there are some crucial moments in her testimony that can

make or break a case and might be worth a share of the damages

won — or, at least an enormous bonus.

LegallyBlondeG

legally billed?

“tinyredcheck” “Make a Killing with Value Billing

Jack, of course, figures that neither general contractors nor trial

lawyers are likely to agree to this kind of value billing. He wonders

if any legal clients would fall for it. As parents hiring a babysitter,

the Clientes say they are not about to agree to value-added premium

fees. Since other parents in town are not likely to fall for this ploy

either, they’re not worried about losing her to the competition. Still,

they wonder how to break this news to Reese without hurting her feel-

ings, and they want to let her know that they are a bit disappointed in

her for trying to profit greatly by playing on their love of their children.

They’re not (price) insensitive, but they aren’t fools, either.

 

checkedBoxSN Any suggestions. dear readers?

p.s. A couple days ago, after being called “too old to

come to terms with anything other than billable hours,”

I explained on this page that: I’m not against alternatives

to hourly billing, but I am against those who use the mantra

of Value Billing as a ruse to charge clients more than they

would be charged under hourly billing. See, e.g., here and

here.

 

afterthought (9 PM, March 23): I hate to get serious or preachy after

having fun above, but it’s in my genes. A link today from our Referer Page

led me back to our post Valuable Debate on the Ethics of Value Billing, from

Jan. 2004. These ending thoughts seem worth repeating tonight:

A good rule of thumb for a fiduciary (or any service-

provider): if you’re embarrassed to tell your client/customer

how little you have to do to accomplish the task, when

compared to the fee, your fee is too high. That’s why many

informed consumers have rebelled against the customary

real estate agent percentage when selling a home. It’s also

why a lot of probate courts have questioned or put a dollar

limit on probate fees based on the overall value of the estate.

 

Two final points: As discussed in this post, the special

privileges that come with our professional license presume:

1) That since clients cannot adequately evaluate the

quality of the service, they must trust those they consult;

and 2) That the client’s trust presupposes that the practitioner’s

self-interest is overbalanced by devotion to serving both the

client’s interest and the public good.

checkedBoxS As agent of reality, and consumer advocate, I must often tell my

colleagues two things they don’t want to hear:

 

First, in general, attorney services are worth a whole lot less (add a lot

less value) now that consumers can read and write and technology makes

it possible to provide legal services far more quickly and efficiently (or through

self-help); and

 

Second, there are over one million attorneys in the USA and they are all looking

to make a buck.

 

These factors can’t be avoided by coming up with new ways to “sell” and “price”

the product or to push back market forces and the tide of history.

Put another way (in Value Billing and Lawyer Ethics): We’re 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 manipula-

tion) and, in the end, charged a fee that is reasonable for competent and diligent services.

. . . 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’sinterests, rather than one that merely uses modern selling

techniques and technology to articificially increase lawyer fees and profits and to stave off

the democratizing effects in the legal services marketplace of the digital revolution

 

swings gray

 

 

 

march wind
mother and baby
share a shawl

 

 

 

 

 

 

our kids on the swing
old enough to push each other
april evening

 

 

 

children’s playground

a mother reads

the parenting manual

 

 

 

matt morden

from A New Resonance 2: Emerging Voices (2001)

except: “march wind” Morden Haiku (March 17, 2006)

complaint billFN

 

4 Comments

  1. David

    I’m with you here, and thanks for the most amusing take on the situation.

    I remember vaguely getting inadvertently into an online ‘debate’ with Ron [Fulano] about value billing and being shouted down, like you courtesy of Mr Stein, as “someone who doesn’t get it”. OK, I thought, let’s ask my American clients (I’m a City of London solicitor) who are extremely sophisticated users of legal services. They unerringly took the Jackie Cliente approach to value billing and told me to stick with the hourly rate.

    I think value billing probably does have a place somewhere, but Ron and his cohorts insist that it is the *only* way. That is usually, in my experience, the sign of a weak mind.

    All the best
    Jolyon

    Comment by Jolyon — March 24, 2006 @ 1:43 am

  2. Thanks for a little moral support, Jolyon.   When folks with a financial interest insist something is “the only way,” I don’t think “weak mind,” I think “blinded by profit-motive” and maybe “weak conscience.”

    Comment by David Giacalone — March 24, 2006 @ 3:43 pm

  3. I endorsed a differential billing approach because I saw it as a way to bring rates down, not up. I remember back in my law firm days when a partner would scrutinize my documents and make a couple of stylistic changes and probably charge for 3 or 4 hours of partner review. That’s crazy; that kind of work shouldn’t be charged at $600 an hour, but $150 or $200 an hour because it’s comparable to what an associate does. The other example comes from bankruptcy cases. Purportedly, the bankruptcy lawyers who charge $600-$800 an hour do so to reflect their “value.” Well to me, value means resolving a 5 hour mess in a half hour. The bankruptcy lawyers bill tons of hours on bankruptcy cases, which suggests to me that they’re working on mundane aspects and charging top rates for strategy or expertise. I know that it would be confusing, not to mention subjective, to charge differential rates, but given that partners charge so much and often do routine work on cases that associates can handle, it seems to be a concept worth considering.

    It was a very funny post though.

    Comment by Carolyn Elefant — March 24, 2006 @ 4:05 pm

  4. I agree with most of what you say about value billing, David, but this sentence has me scratching my head: “It’s also why a lot of probate courts have questioned or put a dollar limit on probate fees based on the overall value of the estate.”

    -Which specific probate courts are you talking about? It’s my understanding that California limits fees (by statute) to a percentage of the estate. I know of no other jurisdiction that does so (although I don’t pay much attention to states other than Illinois, where I practice).

    -Linking fees to the value of an estate is a really bad idea, for the reasons indicated in the post I’ve cited above.

    -Isn’t it fair to say that, in setting statutory fees based on value of an estate, a court (or legislature) is just engaging in its own form of value billing? It seems to me that they assign a value to the typical services performed by an attorney in a typical probate case, regardless of whether more (or less?) service was required in any specific case. Isn’t this “one size fits all” approach to fees what you have railed against in other discussions?

    Comment by Joel S. — March 26, 2006 @ 12:27 am

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