Dead Cold Fish!

That’s how I think lawyers (and other professionals) who price their services by the hour would market sushi.

Talk about focusing the customer on things they don’t value! What could be worse than quoting hourly rates with a comma in them? An article in the Wall Street Journal Online, “Lawyers Gear Up Grand New Fees,” discusses how some of the country’s top lawyers have crossed the $1,000 per hour mark.

For the attorneys, I suppose this is as significant as Roger Bannister breaking the four minute mile—a milestone to be applauded, since it shattered the mental barrier that said it couldn’t be done.

What’s truly frustrating about this is the implicit assumption that hours equate to value. It’s Karl Marx’s Labor Theory of Value, but it’s the elephant in the room that no one dare mention. Mike Dillon, general counsel of Sun Microsystems Inc. even says:

Considering a major-league baseball player can make the equivalent of $15,000 per hour, $1,000 for very seasoned lawyers who can solve complex problems doesn’t seem to be inappropriate.

What an absurd comparison. Baseball players get paid what they do because of the value they create, not the hours they spend playing the game. They also receive a fixed salary, so the team owners assume an element of risk that the player won’t create as much value as they are paid. All profits come from risk. Professionals who price by the hour shift 100% of the risk to customers, which is why their profits are capped, and write-downs and write-offs exceed write-ups.

The article quotes Stephen Susman on his $1,100 hourly rate:

“It represents an opportunity cost when I am working by the hour,” says Mr. Susman, who last year raised his hourly fee to $1,100. He did it in part, he says, “to discourage anyone hiring me on that basis.”

But opportunity cost has nothing to do with value provided to any one customer. Mr. Susman, I have a better idea: stop quoting hourly rates altogether and have a discussion about the value you are creating for your customer, then price accordingly. That way, no one will have to think about your Twilight Zone hourly rate.

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