capital. He speaks to Angela Priestley
When it comes to challenging what has been the default billing mechanism for law firms for decades, a little patience goes a long way.
Such is the attitude of Ron Baker, an American pricing strategist who has spent years travelling the globe in a bid to destroy what he considers is the number one enemy of the knowledge worker - the billable hour.
Baker does not present as a patient man, and the language he uses to describe the "lousy" job law firms have done in communicating the value of their services carries a strong sense of frustration. But Baker's determination to continue his one-man battle against some of the globe's most influential legal service providers, despite the fact he does not believe that timesheets will disappear in his lifetime, is an indication of just how long he's willing to continue to challenge time-based billing practices.
The Baker agenda
Such a challenge exists in Baker's belief that time-based billing is a flawed means for measuring the value of intellectual capital. Measuring the input a lawyer puts into a job is like "plugging a ruler into an oven to measure the temperature", he says, and the worth of ideas cannot simply be determined by the time it takes to develop them.
"Everyone is focussing on inputs, activities, efforts, hours, rather than outputs and results," says Baker. "As long as we're chasing the wrong rabbit, we're chasing the wrong rabbit."
Baker has been in Australia presenting his ideas of just what the right "rabbit" professionals should be chasing actually looks like - value-based pricing. The trip follows up on similar ones he made in February this year and again in August last year, which have seen him present his ideas to law firms, clients, law societies, the judiciary and young lawyers.
So with all these visits, has he noticed much change? "There's more talk than change, but talk precedes change," he says. "I think there's a perfect storm brewing down here in Australia."
Such a storm appears to be particularly brewing in the judiciary, says Baker, who pinpoints Western Australian Chief Justice Wayne Martin as a recent example of a member of the judiciary speaking out against time-based billing. Baker also notes an increased interest from clients to push for pricing certainty from their law firms.
Still, some law firm leaders have argued previously in Lawyers Weekly that clients do not completely want, nor are they ready for, alternative pricing mechanisms. Baker is adamant clients want fixed pricing - as that's how they purchase everything else - but they just don't necessarily know it yet. "Law firms have done a lousy job communicating the value [of estimates] and they may have couched it in terms of 'we'll give you this wide range', and they consider that to be an alternative," says Baker. "They [clients] may consider blended rates alternative, they may consider rates with caps to be alternative billing. None of that is alternative pricing, that's all the billable hour in drag."
"What the clients want is a fixed price for a fixed scope of work. Give it to them."
And while law firms are moving to better improve their estimating processes, Baker says that's not good enough. "Qantas doesn't give you a range of airfares dependant on how long it's going to take you to get from Melbourne to Sydney, they give you a price."
The valued solutions
It's all very well to slam billable hours, but it's another thing to present some real and effective alternatives.
Baker claims he can offer these through his theories of value-based pricing. He's written a number of books describing just what this means, but ultimately such pricing methods are built on the premise that customers of legal services should pay a pre-determined price for such services.
From there, Baker urges law firms to learn to better communicate the value of their intellectual capital, and get creative around how they can enhance its delivery.
"That takes thought, it takes creativity, it takes intellectual capital and it takes some risk taking," says Baker.
It's through innovation that Baker believes law firms can seek ways to enhance the legal purchasing experience. He urges law firms to get creative around tailoring their services to meet the needs of clients, thereby increasing the perceived value. He points to tangible and intangible forms of value that lawyers could bring - like quick turnaround times, access to specific talent, unlimited access etc. "It's about asking, what does success look like?" says Baker. "Professionals do a really bad job of determining their value, and ascertaining what it is that clients are actually buying."
Pricing managers are needed in law firms to examine what value really means, says Baker - a position that cannot merely be left to "good lawyers" to fill.
... much more work to do
Although Baker cannot foresee the abolition of the billable hour within his lifetime, he does believe that with enough support - especially from young lawyers - progress will be made, even if such progress carries a bleak undertone: "Progress happens funeral by funeral," Baker says. "These people die off, or retire, and then there's a new wave of lawyers."
But there will be obstacles, Baker concedes, given that young lawyers are building their careers in the same culture of timesheets that burdened their superiors and may consequently see time as the only means to measuring their worth.
What's really needed is a revolution: "I tell them [young lawyers] that they are knowledge workers and that they should revolt against their law firms for tracking time," he says. "The only place time should be tracked is in prison."
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