What Should Legal Services Cost? A 3-Step ApproachMetropreneurial Legal Insights — By Bill Nolan on April 17, 2014 at 8:00 am
In the last 10 years, there has been an enormous amount of dialogue on the cost of legal services. What does it all mean, and how do you sort through it all so that your company can spend the greatest proportion of your resources on your mission rather than legal services?
First, there are a lot of absolutes out there in this discussion:
Thou shalt not pay lawyers by the billable hour.
Thou shalt use a particular firm or type of firm for all needs.
Thou shalt NOT use a particular firm or type of firm for any of your needs.
There are people who are remarkably committed to one or more of these or other absolutes. The only absolute in purchasing legal services should be: There are no absolutes. It is a business decision like any other. Hard and fast rules inhibit your ability to be nimble and make the best decisions for the particular situation.
I think this three-step process is a good way to look at your legal purchases:
1. What do you need for this project?
2. How do you ensure you get what you need, no more and no less?
3. What will it cost?
When you accurately determine need and how you can get exactly what you need, then assessing cost should be relatively easy.
This is the hardest question, and therefore the easiest to get wrong. I have written about how businesses tend to underestimate their needs when it comes to getting a little up front advice that can avoid larger problems later. And it is natural to do this because it minimizes short-term costs, but in the long-term, it is a very expensive mistake. In other words, it increases your need from what it would have been because, for example, it creates the expensive need to defend a lawsuit.
Of course it is an expensive mistake on the other side to purchase more than you need. In my area of employment law, after 25 years I am pretty sure I know some things that less experienced and/or less practice-focused lawyers do not, but I readily acknowledge there are some needs in my area that lots of lawyers could meet. Employment at will policy? Sure I have a good one, but so do lots of lawyers. Some legal needs really are simpler than others, and it is expensive to make mountains out of molehills.
So how does a businessperson who is not an experienced consumer determine what he or she needs? The best way is to have a lawyer you trust to help you make those determinations. A lawyer who will tell you, among other things, when you need somebody else.
There is a good story that circulates in the discussion circles on legal costs about a lawyer who prepared a brilliant real estate lease for a client. The client got the bill for the work and was outraged at the high cost. The client called the lawyer about the bill, and the lawyer pointed out – quite correctly – the creative and cutting edge nature of the work he had done. I don’t dispute that, the client said, but I just needed a simple lease. This client got much more than needed.
Your need/get analysis might include some steps like this:
- ■ If you need something fairly straightforward, you can probably get it from a variety of different lawyers.
- ■ If you need speed and convenience, you can probably get that from a lawyer or firm you are already working with.
- ■ If you need more specialized expertise, then you get it from a shorter list of lawyers. In my practice, you can’t dabble in employee benefits law, and I don’t. If I get an employee benefits question from a client, I go to one of the small handful of colleagues who has that niche expertise so the client can get what they need.
- ■ If you need to protect yourself within your organization, you get that from a “CYA lawyer” – somebody your boss will not question your choosing if things go wrong. For example, it is sometimes thought that firms of a certain size and reputation are needed for cases of a certain size and sophistication. If you lose, at least, the boss can’t question your choice of THAT firm.
Cost is really the easiest of the three steps once you have taken the first two steps. It’s a number. It can be estimated, quoted, budgeted, etc. Don’t make the mistake of making a decision based on one part of that total number such as the hourly rate. It is a simple question with a simple answer: What will it cost?
Need. Get. Cost. Thinking in these simple terms, project by project, with the guidance of a lawyer you trust to help you define “need” and “get,” will enable you to cost-effectively purchase legal services.