Business of Law

Should Law Firms Get More Money for Simply Showing Up? Reasons to Nix Rate-Increase Letters

Those December BigLaw rate-increase letters dispatched to corporate clients are as unwelcome as holiday fruitcake, according to the former general counsel of the Association of Corporate Counsel.

Writing for Corporate Counsel, former ACC official Susan Hackett outlines five reasons why law firms should not send out those December letters. Here are her first three reasons:

1) You’re late. Companies have already set 2013 budgets. “Sheesh, guys, I know this is when the conversation arises in your firms’ business cycle, but haven’t you learned anything yet about your clients’ business cycles?” Hackett writes.

2) You have competition. “It’s the law department itself, which is hiring more in-house staff to replace you and your services,” Hackett says, “or the law firm someplace far away that you’ve never considered to be competition that’s in your league, or the non-law firm service providers who are delivering services you used to provide.”

3) The need to retain highly paid associates and partners, and to pay a rent increase, are not acceptable justifications. “Are you really going to argue that there just aren’t enough competent lawyers out there who’d like a job at half of what top firms pay their associates?” Hackett writes. “Or that clients who work on corporate campuses located in suburbs, where it’s cheaper to work, should be thrilled to house you in the penthouse suite while they sit on stackable chairs in windowless conference rooms? Are they supposed to feel bad that your associates—who often make more in base pay than much more senior in-house lawyers who hire them to do their lower-value work—need more perks to compensate them for the long hours you’re requiring them to bill to their client? … You have no right to increased profitability for simply showing up.”

Hackett says law firms need to profit from efficiency rather than relying solely on rate increases and increased billable hour requirements. She advises them to refer to the ACC Value Challenge for information on successful practices.

Hat tip to the Wall Street Journal Law Blog.

Related article: “Are You Raising Your Billing Rate in 2013?”

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