Tuesday, August 28, 2012

Susannah Tredwell on Law Library Cost Recovery

Susannah Tredwell has a great new post up on Slaw.ca on The Future of Cost Recovery.

Unfortunately, I think there's a more fundamental question at play: whether clients are accepting of cost recovery and the extra disbursements entailed on their legal bills; or, if they are now demanding these costs be included; covered by firms as a 'cost of doing business'.

First let's face the facts: clients want to pay the least amount possible for a professional standard of service. They want to keep their legal bills reasonable, and no higher than is absolutely needed.

Do clients see value in legal research? That answer will vary, but one thing I'm sure of: that answer is completely unconnected to the how they respond to extra expenses added onto the end of their invoice. That particular client response is always going to be poor at best.

Anything a client can pinpoint on an invoice that's outside of the hourly rate or the flat fee negotiated is going to be received negatively. It's a natural reaction to say, "strike that off my invoice".  Think about buying a car and how much we all hate those extra fees that get nailed on at the end. Drives us insane right?

So when it comes to law firm's cost recovery for legal research tools, I'm now thinking we need a big shift in direction. Even me.  I used to think that we needed to get these costs onto client bills to showcase the value of our services, and for internal marketing -- demonstrating to lawyers the resources we were managing, showing the value of our services, and to help everyone recognize the (sometimes huge) costs involved.  Unfortunately, this is a battle that isn't going away. And whether we directly cost recover or not isn't going to change things.

So now my opinion has been altered: The last thing Librarians should want connected to "legal research services" is the negative response of clients. Getting these disbursements on the bills isn't showing value of these tools, or our services. It's only getting lawyers to psychologically connect "research costs" with negative client responses. Nobody wins in this scenario.

I also think in most circumstances that firms need to reconsider charging disbursements altogether. It's a huge negative drag in the client relationship. Why? Clients want cost certainty -- not another line item tacked on at the end of the invoice. Most firms would be wise to bury these costs in their fixed fees, hourly rates, AFAs... whatever billing model they use. Because regardless of how the firm charges for its services, clients will always hate the taxes tacked on at the end of the invoice, and they will always hate disbursements.

Only one of those extra costs has an alternative course.


Blogger Antigone said...

Thanks, Steve.

I think the most important thing is to ensure that client aren't surprised by disbursements. (Whether that's done by making them part of the hourly rate or by including information about potential charges in the retainer letter is up to the individual law firm.)

From my limited experience as a consumer of legal services, I really appreciated being told that there were likely to be extra costs and how much they were likely to be. Even if the lawyer couldn't give me a dollar figure, knowing that there was the possibility of additional charges made the bill much more palatable when I received it. (The completely unexpected $10 charge for photocopying my will annoyed me and it wouldn't have if the lawyer had been upfront about it.)

2:37 PM  

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