Should you buy Pat Lamb’s new book on alternative fees?

In my opinion, any lawyer who wants to understand the nitty gritty details of how non-hourly fees really work, from pricing to project management, should buy Pat Lamb’s new book Alternative Fee Arrangements: Value Fees and the Changing Legal Market.

To put this into context, people who work with me often remark that I am cost-conscious.  (All right, they say I’m cheap.)  And while I often recommend books (for example, see my Amazon list of the top marketing and sales books for lawyers), I am quite confident that this is the first time I have recommended an 81-page book that costs 295£ (about $445 US).

The reason I am suggesting that you consider spending freely here is that if you bid on and work on alternative fees matters, the information in this volume can help you save many times its price.

Where else could you find an alternative fee pioneer’s answers to such frequently asked questions as, “If I use a fixed fee or portfolio fee, how do I make sure that work quality doesn’t suffer?” or “I’ve quoted a fixed fee and have been hired.  Now what do I do to ensure this is a profitable engagement?”

This book is the only place I know of where you can find lists of the factors several law firms use to set fixed prices.  It’s not the simple formula many lawyers are looking for, but the advice is very practical and immediate.  My favorite pricing factor was number 13 on Valorem’s list:

Client personality – is the contact person of the client high maintenance, low maintenance, or something in-between?  Clients who are indecisive, who endlessly debate minor points, or who endlessly shift strategies consume lawyers and add to the cost of doing business (p. 41).

The chapters on pricing, tools of change (from early case assessment to project management), FAQs for buyers and sellers, and “collateral benefits and damage” all provide nuggets of advice from the trenches that I had not heard before.  To be honest, in several places I was surprised by Pat’s commitment to transparency and his willingness to share his own hard earned lessons.

The book even includes a sample process map Valorem developed, outlining “all of the steps typically taken or that could be taken in a case to state or federal court.”  There’s been an enormous amount of talk about how Six Sigma, Lean, and other approaches can be used to simplify and streamline work processes, but very few detailed law firm examples have been published.  I liked Pat’s sample so much that I got his permission to reproduce it in my own new book, The Legal Project Management Quick Reference Guide: Tools and Templates to Increase Efficiency.

True, if you’re like me, you’ll find a few things to disagree about.  My list starts with Pat’s emphasis on the phrase “value fees” in the title.  I know ACC loves that term, and am sure that Ron Baker will disagree violently with what I am about to say, but I think the phrase “value fees” puts too much emphasis on the client side of the table.  What buyers want to pay is extremely important to price setting.  But the cost to sellers matters, too – it takes two to tango.  And the most extreme versions of value pricing can lead to odd situations, as suggested by Pat’s anecdote about a conversation with the head of one law firm who “once told me of charging two clients two different amounts for what was essentially the same work because the work had different value to each client” (p. 31).

Will this book answer every question you have about alternative fees?  Of course not.  Pat would be the first to tell you that he is still learning how to implement alternative fees.  And I’m guessing there are at least a few tips he could have offered that he held back. 

Maybe I like this book so much because there is nothing theoretical about it.  There’s been an awful lot written about alternative fees by people who have had very little personal experience with winning and losing their own money on alternative fee matters.  Pat is a man who has put food on his table by implementing alternative fees; some months there was more food than others.  If you buy this book you will benefit from what he has learned.  It may not be the best book that will ever be written about alternative fees, but it is clearly the best so far.

Full disclosure: Pat has written very nice things about my book too.

To see a comment on this post by Susan Hackett, Senior Vice President and General Counsel of the Association of Corporate Counsel, click here.

Comments

[Susan Hackett]

I love Pat's new book, too. I've been honored to work with him on programs and in promoting these issues for years, and I can say with no reservation that he's not only been out in front of this issue as a missionary, but also as an active practitioner. Even if you don't plan to immediately whole-scale change how you do things and what you'll define as success in your practice, you'll see the incremental ideas, the scalable theories, that make his book a resource for both in-house and outside counsel. Now all I have to figure out is how to get Pat to post it free on the ACC Value Challenge website! :-) (just kidding: if you want to talk "value," this book is worth a lot more than the money you'll pay to get your copy!)

[Ron Baker]

Well, I will violently disagree, but not over the word value, but rather the word fee. Fee conjures up negative emotions in clients (who likes to pay a "fee") whereas price is a benign word we are all used to. Plus, pricing takes place before the work is started, whereas "billing" takes place in arrears.

Value is totally in the eyes of the customer, which is why I prefer this word. But when discussing price with the client, I prefer "fixed price," or "open price" as Jay Shepherd suggests.

Costs do matter to sellers, but costs are driven by value and price, not the other way around. This is why you need theory to understand economics, not just practical examples. A coat isn't worth eight times more than a hat because manufacturers incur eight times more cost in producing the coat over the hat.

Manufacturers will invest eight time more cost in producing a coat over a hat because customers are willing to pay for it. Price, of course, has to recover costs, but it will only do so if customers value the product or service at more than the price they are paying. Hence, we simply have to focus on customer value. Any other approach would mean that no business would ever go bankrupt, since all they would have to do is put their prices above their costs. This is not the real world we live in.

The example of two customers being charged different prices for the same work is specious. This happens now, even with the billable hour. If prices are set to customer value, then there is no "identical work." It's why airlines can charge radically different prices for the same flight. The flight may go to the same destination, but those seats are valued differently based on a variety of factors--when you bought your ticket, flight times, ability to change reservation, etc.

Far from being an "odd situation" price discrimination is ubiquitous in the marketplace, and there are thousands of examples of it every where you care to look. Of course, you have to understand economic theory to grasp this.

I can't speak for others who write on Value Pricing, but I will say that I ran my CPA firm for 15 years based upon these principles, including no timesheets, and my former partner continues to do so. We put our financial neck on the line every day with this model, and it is incredibly rewarding, not only to me, but to the customers I am privileged to serve.