Book Review: Law Firm Fees & Compensation

Review by Michael Brychel, Senior Legal Auditor at Stuart Maue.  Headquartered in St. Louis, Missouri, Stuart Maue provides legal fee auditing, legal cost management, bankruptcy fee examination and cost consulting services for its clients.   Michael can be reached at 314-291-3030 or mobile at 314-494-1102 and mbrychel@smmj.com

In his new book, Law Firm Fees & Compensation: Value & Growth Dynamics, Edward Poll is determined to force lawyers to act like the business owners and operators they are.   In the most practical terms, this means that “Failure to communicate often means failure to get paid.”  This book outlines the ways this warning translates into law firm management, both internally and with clients. 

Considerations, tips and warnings

The book is fundamentally a series of bullet points; a useful checklist of the many factors that comprise the business of the practice of law. Because it strives to be comprehensive in scope, it lacks the depth to provide an overarching methodology.  But detailing an expansive process is not Poll’s goal here.  He is primarily raising consciousness: identifying issues and highlighting likely pitfalls.  

So while the book is more a collection of ideas, tips and warnings than an expose’ of a broad methodology, each section stands on its own as a useful point of consideration.   [Unlike Poll’s earlier and more focused Collecting Your Fee: Getting Paid from Intake to Invoice, a more linear navigation of much of the same terrain as Value & Growth Dynamics.]

From engagement and billing, through collections, to internal compensation.

Value & Growth Dynamics covers a lot of ground.    The chapters on engagement letters and budgets (sections 2 & 3) lay the foundation for the professional relationship with the client.  These sections encourage counsel to clearly define the parameters and scope of the engagement as well as the parties’ mutual obligations in order to head off conflict.

The sections on Pricing Services by Value Billing, Alternative Pricing Methods, and Fixed or Flat Fees (sections 5, 6 & 7) identify the competing variables that come into play when choosing from the menu of billing alternatives.  These chapters encourage lawyers to define not merely how they bill, but what they are billing for, including redefining services and corresponding charges, charging for ancillary services, or even limiting (“unbundling”) services.  Poll outlines alternatives to hourly billing and even suggests how to combine them.   The merits of Fixed and Flat Fee billing, the lead alternatives to hourly billing, receive deserved extra attention.

Several sections deal with special issues or more technical aspects of billing that follow once the appropriate fee arrangement is determined.  These include a quick and clear summary of the triggers and timing of moving funds between client trust and firm accounts (section 4) an outline for dealing with unearned and refundable fees (section 8), and the malpractice and compensation considerations for contract lawyers (section 9).   Appropriate charges, invoicing, payment, and collections are each addressed briefly. (sections 10 & 11)

Poll even discusses internal compensation for partners (section 12) and associates (section 13).  He compares the merits of the team/lockstep method to the eat-what-you-kill method for partner compensation.  He provides a good understanding of the value associates provide in light of the cost to hire, train, and develop them.

Poll’s concluding chapter, “The Fees Dynamic in Action” is a recapitulation of his main thesis.  It again strives to alter the old attorney mindset and to make us understand that even clients understand that a law practice is a business subject to ‘convergence’ (the trend of clients to use fewer law firms for all legal work) and commoditization (legal work as a targeted product rather than a service).

A new perspective

This book is strongest in its theoretical insights on the long term consequences of firm management practices.   It is a tool to force lawyers to reconsider the business activities they currently perform merely by habit or out of necessity.   For the lawyer that truly wishes to improve his customer service – not merely his bottom line (and perhaps even at the expense of his short term bottom line) – this is a useful overview.  As such this book succeeds best as a quick theoretical examination of fees and compensation, not so much as a practical guide to be revisited regularly.   What it lacks in detailed analysis, it provides as a mechanism to force self-examination and thoughtful consideration of running a successful law practice.

To observe that this book reads like a CLE presentation is not a criticism here.  A good CLE stimulates thought and invites change rather than merely spoons out boilerplate.  This book’s strength is that it provides a list of action items and identifies the variables to consider.  It then compliments the reader by allowing us to draw our own conclusions.

While Value & Growth Dynamics contains frequent insight, it suffers slightly from schizophrenia between business practice guide, marketing advice, and internal administrative guide.  In attempting to be all three, or at least to represent the convergence of these areas, it shortchanges each.   For example, in focusing on marketing, Poll too eagerly dismisses some legitimate concerns.   In one instance, he identifies three excuses why lawyers avoid providing clients with a budget.  But in failing to provide a rebuttal to the excuses, he implies incorrectly that they are illegitimate.  This shortcoming is not a major issue.

 “Law firms ARE businesses – get over it.”

Does this article help “Get the work; Do the work; Get paid”?   It does.   What Poll does not explicitly state is that if you follow some of the suggestions he’s outlined, you may generate lower profits, at least in the short term.  The unavoidable conclusion however is that what you may lose in the short term you will gain back in the long run by solidifying relationships and preventing conflicts.  

For the attorney who wants to continue to believe that the practice of law is something more, something higher, than operating a business, the author’s lessons may not resonate.   For those who accept the premise that “law firms ARE businesses – get over it” this book will be an effective jump start to incorporating that perspective into useful practice.