TIME-SHEET PADDING is not the real problem facing firms, legal practice management consultant Ashley Balls of PMF Management Services says, but rather the ‘institutionalised’ writing off of time.
According to PMF Management Services’ records, most New Zealand firms routinely discount work, and are running at a rate of around 60-75 per cent of time recovered. “When you ask partners what is the task they like least of all, they say billing,” points out Balls. “Lawyers are serially underselling themselves. Maybe this is because they set too high a price, which is not actually attainable in the market place.”
Balls spoke in response to recent articles published in issues 30, 31 and 32 of NZLawyer respectively entitled, “Firms’ budgets create billing fraud”, “Padding out the time sheet”, and “Time sheet padding refuted”.
Balls believes the heart of the billing problem lies in New Zealand being the only common law jurisdiction that does not require a formal set of terms of engagement when a client and a lawyer meet. “Ninety per cent of complaints to the law society are about costs, so there is clearly an issue of effective communication here,” he says.
Whether underselling themselves or overcharging, some management consultants believe lawyers should be more open about pricing. Australian professional services management consultancy Julian Midwinter & Associates recommends that law firms should have straightforward discussions about price with all stakeholders, identifying which clients will pay more for exactly what services, and what pricing parameters will stimulate clients to migrate to other providers, because “overlooking consumer intelligence may result in under-pricing of around five per cent”. A recent article entitled “Price optimisation”, published by Julian Midwinter & Associates, states, “Pricing is fiendishly difficult. Lawyers and other expert professionals don’t much like talking about it, but service pricing can vary widely. Because of the ego, status, and power with which charge rates are imbued, it can even be difficult to get realistic information”.