If you want some examples of how it's being done by other firms and clients, take a look at the ACC Value Challenge pages (http://www.acc.com/valuechallenge), which offer open resources detailing successful practices, tools for you to use in getting the conversation started and progressing, and metrics that can help you define and target success.
It is not the responsibility of clients to re-invent their firms, but it is the client's responsibility to demand more from their firms than a rate increase letter, and reward only those firms that learn to profit from doing their work by delivering improved value.
In consultation with clients, firms need to learn how to profit from efficiency: better staffing, process, pricing and lowered cost of service, rather than profiting solely from raising rates and hourly billing requirements. In today's world, firms make more money by either doing something so distinctive that there is no alternative service provider to be found, discovering something new and inventing it, or figuring out how to serve customers better for less money; 99.5 percent of firms will never be able to leverage the first two options, and firms that are left to the third have to understand that they won't make more money by telling clients that the firm is raising its rates for the same old inefficient service.
The value of what a law firm offers is not just the sum of the hours they spent doing it—it must be based on its value to the client, rather than just its value to the individual lawyers who did the work. And rates alone are not an accurate indicator, nor should they be the lead negotiating tactic for clients trying to assess a firm's continuing value.
Indeed, neither high nor low rates accurately reward firms for what it is that they do best and most efficiently. That kind of pricing must be based on value.
If those of you in law firm leadership truly feel that you should be paid more for what you do, then talk to your clients about the distinctive value of what you offer, or the market value of what it is that they need to have done. Don't talk to them about the high cost of an hour of your time, as if every hour you spend has the same increased value to a client. And remember when you talk to them: clients aren't chasing "cheap" service; they want value and cost control.
A word to clients about their role in perpetrating this annual nonsense
Clients: Why are you expending even one erg of energy responding to rate increase requests—positively or negatively? Why do you need to send missives to your outside firms reminding them that you won't entertain any hourly rate increases, if your actual goal is to get your firms to focus on lowering all-in cost while improving the efficiency of their service delivery? You're perpetuating dysfunctional behaviors by continuing to entertain this conversation.
Please spend your time and energy this year researching, scoping and negotiating the all-in cost or price ceilings you will set to reflect the value of each matter in your portfolio. These prices should be based on what the work is worth to you as the client (rather than to the firm); if your firms are not well-positioned to provide the work as you value it, remember that there are many possible and more plausible suppliers in today's market, all of whom deploy quality workers or lawyers. Define what you value in a more tangible way so that your firms can provide exactly what you expect them to deliver, on-time and on-budget, and in accordance with an agreed-upon scope of work, result goals, metrics, and project management plans.
If you do that, you will be on the road to a place where you don't need to care about hours or rates, even if the firms that you wish to retain continue to rely on them internally—you'll get the predictability of budget and quality services you want, without the shell game negotiations. And you'll relegate the issue of the proper rates for hourly segments of a lawyer's time to the more modest role it should play—as an internal unit of measurement of the productivity of a lawyer by the law firm in its accounting practices.
So clients, what would you rather do with your time spent with outside counsel this holiday season? Lock antlers over rate increases with the guarantee that regardless of whether you "win" or "lose," you'll have no control over the all-in cost of your services for 2013? Or think about fixing what's so obviously broken?
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