Transition Management Consulting, Inc.

Demystifying Lawyers and Law Firms

by Jackie Eder-Van Hook | Sep 01, 2009
In this article, Jackie Eder-Van Hook provides practical advice on the inner workings of law firms and describes how association executives and staff can maximize their experience and minimize their costs. Included is a checklist of questions you should ask your lawyer.

OUR CULTURAL VIEW OF LAWYERS IS DEEPLY INGRAINED. IT DATES BACK TO SHAKESPEARE’S HENRY VI, IN WHICH DICK THE BUTCHER SAYS, “THE FIRST THING WE DO, LET’S KILL ALL THE LAWYERS.”

Our response — laughter — seems natural given the highly personal and emotional experiences many of us have had with lawyers in the midst of divorces, business disputes and other disdainful events. During these conflicts, attorneys for each side typically battle to win the best outcome for their respective clients. We are therefore simultaneously intrigued and repulsed by lawyers.

As association executives, we consult lawyers to mitigate our organizations’ exposure to real and perceived risks, to protect our interests and to facilitate complex relationships. During my career, I’ve worked for five law firms, served as executive director for a number of associations and worked as a lobbyist. I’ve therefore worked with many lawyers and learned that clients can work most effectively with them by understanding how law firms are structured, how they bill, and what they expect from themselves and their clients.

UNDERSTANDING LAW FIRMS

At their core, law firms are aggregators of legal information. Finding the right firms with the right information — the right legal expertise — has historically been difficult. Clients had to rely on phone books or recommendations from trusted friends and advisors, and when they had multiple legal needs they typically hired larger firms that could handle them.

Today, Internet searching has made finding firms fast and comparing information easy, while listservs have made getting recommendations from colleagues facing similar issues almost instantaneous. With law firms of any size, it is helpful to understand the structure and chain of command. Typically, medium to large firms are structured hierarchically with a managing lawyer-partner, management team and lawyer-partners at the top, followed by senior associates, associates and other skilled, non-lawyer professionals, including lobbyists, for example, licensing agents, scientists, nurses, clerks and paralegals, all organized by industry or transactional type and segmented by practice groups.

In traditionally structured firms, clients contract with a lawyer — known as the “billing attorney” — who delegates the work to junior partners or associates. These junior attorneys are the firm’s profit centers. They work long hours in the hope that after about eight years they will become partners, although few actually do because the burnout rate is very high and they become disillusioned with law, eventually leaving the firm and even the legal profession.

UNDERSTANDING PARTNER COMPENSATION

Generally, firms compensate partners in one of two ways. Either they use a lockstep model, by which they average the firm’s overall annual profit or loss and set a standard rate of compensation for lawyers within the same “class,” such as partners and senior associates, or they use an “eat what you kill” model, by which compensation is based on the revenue each individual attorney brings into the firm.

While lawyers generally earn high salaries, they also tend to work long hours. A busy lawyer can work 80 hours per week in order to meet revenue projections or billable-hour requirements. A firm with a 2,000 annual billable-hour requirement requires a single attorney to perform billable client work 40 hours a week, 50 weeks a year, not including lunch, personal calls, meetings, networking, marketing, travel, conferences, etc.

Although the deepening recession is encouraging some firms to move away from billable hours and toward performance-based pay, it is a deeply ingrained system that’s sure to endure for at least the foreseeable future.

UNDERSTANDING YOUR BILL

Because most of us can’t imagine charging hourly fees of $180 to $600, the bill is one of the most contentious parts of the lawyer-client relationship. Clients unaccustomed to working with lawyers or uninformed about law firm economics are at a disadvantage when it comes to understanding and negotiating services or bills. Law firms use a variety of billing options, including hourly rates —with or without caps — retainers, consolidated billing, shared risk and contingency arrangements.

Typically, association work is billed on an hourly basis or applied against a monthly retainer. Retainers may offer an advantage to associations by capping the amount of monthly fees. The challenge, however, can be for the association to manage the contract so that it is getting a level of service that’s commensurate with the fee. Firms may also require an upfront refundable retainer for certain types of clients they deem riskier. The retainer size is a possible area for negotiation.

Previously, firms provided detailed accounts of time spent on the client’s behalf, which often caused disputes with clients who complained of feeling micromanaged. Today, bills therefore provide brief descriptions of what tasks were performed, who performed them and how much time or money was charged for them. If your bill seems excessive, use this as an opportunity to discuss your concerns with the lawyer managing your work and exercise your right for more detail by asking to see the pre-bill or timesheet. Lawyers generally work to make clients happy. However, clients must be realistic. Legal services are expensive and law firms are costly endeavors requiring sufficient cash flow to accommodate average account receivables of 60 to 150 days.

UNDERSTANDING YOUR ROLE AS CLIENT

Communicating clearly, honestly and effectively with your lawyer up front and throughout the engagement is essential. Consider writing a summary of your legal issues that includes your questions, your concerns and the realities you are facing, framing the issues and your questions so you understand what must be resolved to protect your interests and what would be nice to resolve. This serves two purposes: First, you’re clear about the critical legal issues, and second, you have important information from which you can negotiate strategically.

UNDERSTANDING EXPECTATIONS

With 1.1 million licensed lawyers in the United States, finding one that is right for your organization should be easy, so long as you know your rights within the relationship. You should expect, for instance, periodic and meaningful communications from your lawyer. Set up a communications strategy with your lawyer right from the beginning — before the clock starts ticking. Develop a habit of creating talking points before you talk with your lawyer.

The more organized you are, the better the likely outcome. You have every right to expect your lawyer and firm to be competent. Legal experience counts. You do not want the lawyers to be learning on the job at your expense. You may not need a senior partner to review standard contracts, but neither do you want a lawyer with limited practical experience.

In addition to their communication and experience, consider lawyers’ financial obligations. Lawyers have a fiduciary duty to clients and are therefore obligated to inform you about fees, conflicts of interest, scope of services and terms by which the work will be performed. If you aren’t sure, ask.

Also good to know: Although you should feel free to speak to your attorney candidly, make sure first that you understand your rights under attorney-client privilege.

Law firms want your business and are often willing to work with you on specific financial arrangements, particularly during an economic downturn. As is the case with any purchase you make, the more knowledgeable you are about the delivered services, the better the outcome. Treat lawyers with respect, but don’t follow them blindly. Lastly, remember that you as the client have an important role to play in ensuring the success of the engagement. Don’t abdicate your responsibility.

Get what you pay for and have fun seeing the world through legal eyes that are probably very different from your own.

Jackie Eder-Van Hook, President and Co-Founder of Transition Management Consulting Inc., specializes in providing interim executive management, transition consulting and executive search to associations in Chicago and nationwide. She may be reached at jeder-vanhook@TransitionCEO.com.