The Business Of Law

Get the smelling salts, I’m writing a blog post on “process management”. Seriously, I came across an interesting piece over at the Legal Intelligencer by Gina Passarella this week, that talked about the idea that the legal profession could improve its business model by indulging in a little bit of project, and process management.

“Egads” you say…and as Gina points out “process management is the antithesis of the billable hour model”.

But I ask: Does it have to be?

Why couldn’t lawyers price their work, not by the billable hour (whose death knell, I have predicted), and instead look to outcomes. The model is quite simple, instead of being at the whim of the billable hour, lawyers would look at an overall legal project, estimate how difficult the project is, and then provide the client with a cost. If the project can be completed in less time, then the law firm adds to their profit. If it takes longer, then the firm knows that it needs to perfect its method of estimating.

Imagine if you went to your mechanic to have the brakes on your car fixed and you were given two options. First, you could have the master mechanic with thirty years of experience fixing your kind of car. Good news is that it will only take him one hour to fix the problem; bad news is he charges 800 dollars per hour.

Second choice would be the new guy, he’s just out of mechanic’s school, and basically has no idea what he’s doing. He’ll tinker around for about 5 hours before he figures out how to replace the brakes, but the good news is he only charges about 50 dollars per hour. Only other issue is that if you have the new guy do it, are you really sure it was done right (I mean after all we’re talking about brakes here—pretty important). So again your choices come down to:

1. Have it done right in one hour, but pay $800 for it, or
2. Have it done (maybe) right, in five hours, but pay $250

Kind of feels like a Cornelian dilemma to me.

Wouldn’t you rather the mechanic just tell you how much it will cost to fix your brakes? You agree to the price, and if the shop can figure out how to fix the brakes really efficiently, then everybody wins—you get your car back sooner, and the shop has more profit?

I’m no MBA (o.k. I am Babson class of 1996), but it seems to make sense to me.