One of the issues that arose during the recent Walker Clark Sustainable Profitability Symposium in Miami on 18 April 2015 was how law firms can lose money on what should be profitable client relationships by providing too many services "off the clock." This phenomenon usually arises when a partner repeatedly provides advice as a "professional courtesy" or as a "client relations" activity, rather than charging a fee.
Such professional courtesies are a bright spot, in my opinion, of our profession. They can demonstrate a sincere commitment to meet a client's needs, or to assist a colleague in another law firm, that states, more persuasively than marketing slogans, that the firm is truly willing to place quality above financial gain in appropriate circumstances.
The problems arise when some clients, and especially other law firms that might refer work, keep coming back for more advice. What might start out as a simple question can mutate into a series of e-mail questions and advice that can consume dozens of hours of lawyer time, that otherwise could have been spent on billed work.
How should a firm respond to the "just one more question" e-mail that comes from a client or a friendly law firm?
There are two methods that appear to work well, but, like any tools, they must be used carefully.
- Treat the time spent in providing such "professional courtesies" as marketing costs. Some law firms have a special billing code for these services, which allows them to calculate the true value of their marketing and client relations investment in a client or a strategic relationship with another law firm. Recording this time can help keep partners focused on the return on the investment of their time. It is not surprising, therefore, that some law firms discover lawyers learn from this data that they are spending a substantial amount of their time providing professional courtesies -- actually otherwise billable legal advice -- with little or no realistic expectation of their advice developing into new work. At the same time, recording this time actually can encourage partners to spend more time with profitable client relations and productive strategic relationships with other firms, because that time is less likely to be perceived as wasted. When providing such professional courtesies, be sure to remind the client, in a friendly way, that you are making an exception (if you actually are) to your firm's billing policy, in view of your relationship.
- Send them a bill. Some partners have a policy of sending a "no charge" statement for their time after the second "professional courtesy" concerning the same subject. Sometimes clients, especially, are not aware of the full amount of the time that might be required to answer what appears to them to be a simple question. The "no charge" bill reminds clients and lawyers at other law firms alike, in a friendly, businesslike way, that the e-mail, telephone call, or other service that you delivered has value. The recipient will be less likely to be surprised if, in response to the third or fourth request, you advise that you will need to open a matter and bill a fee for future work, even if it is only a heavily discounted fee.
There is an old Chinese proverb that, "When you handle the master carpenter's tools, chances are that you'll cut yourself."
Like all highly effective tools, these must be used with caution. These tactics require a good knowledge on your part of the person at the other end of the communication. Obviously, you do not want to jeopardize a long-standing productive relationship over a few hours of free legal advice. (However, many of relationships that take advantage of your good nature in this way usually are not productive ones.)
Some cients might appear to be outraged that you would send even a "no charge" bill for significant amounts of unengaged legal advice, or that you would suggest that your "professional courtesies" are not infinite. If they if they do, consider whether that is the type of client that you firrm really wants to keep. Pouring more money, in the form of free services, into a marginally profitable client seldom, if ever, makes the client profitable.