Lawyers and Value

A reader writes in: “…the challenge is that a lot of lawyers get bogged down in areas of no real commercial importance (to either side) and so fail to frame the negotiation correctly to drive value!”

It’s a point that’s often made – but why is that the case? Lawyers are well educated, outwardly smart people by any conventional measure. Why do they find it hard to identify sources of business value?

The root cause is billing by the hour. If you have always worked in a culture which bills by the hour, then time spent correlates to value and you have no need to identify other sources of value, or other things that affect value.

You will also have no interest in process because process means greater efficiency, greater efficiency means less hours, and less hours means less revenue.

That culture affects not only the business that the lawyer works in (the law firm), but also, inevitably, this affects their view of every other business (or deal) that they touch.

Here's a thought experiment.

Imagine you are running a law firm that bills by the hour. For the sake of the experiment, the amount of work coming in through the door remains constant.

What’s the easiest way to increase your revenues?

Answer: divide your lawyers into more productive and less productive, and then fire the more productive ones. The remaining work gets allocated to the less productive ones, they take longer to do the same work, and bingo, you earn more revenues.

No normal business works (or can work) like that.