Cost of Billing Time

Our thanks to Peter Lawson of Hedgehogfx in Australia for allowing us to share this tool he put together for determining the cost of driving “time” through a professional firm.

Ron Baker and I usually use a figure of about 7 to 10 percent of timeline revenue, but Peter challenged us on this and produced the tool which he feels more accurately represents the true costs – about 30 percent.


Above is an embedded version. Click link to download.

Great Moments in Value Pricing History

I am honored to be lampooned with Ron Baker in the new series of videos from Damn Good Hush Puppies. These two were premiered at the VeraSage event in Las Vegas which was sponsored by the AICPA and Sage.

Part 1 – Ron Baker

Part 2 – Ed Kless


New Podcast: Jay Shepherd on His Pivot and Managing the Timeless Firm

jshepherd-web-color-sm-crop-300x242With me this time on the VeraSage Podcast is the erudite Jay Shepherd. Jay speaks about his pivot from being a practicing attorney to author, consultant and speaker. We also chat about his role in the upcoming VeraSage Event in Las Vegas in June. (For good measure, we both take some swipes of the New York Yankees and their fans as we mark the beginning of baseball season here in North America.)

Atticus Webinar on Value Pricing in Law Firms

Last Thursday I had the pleasure of doing a Webinar for Atticus, with VeraSage Practicing Fellows Mark Chinn and Christopher Marston, along with Lonny Balbi, a family lawyer in Calgary, Canada.

The call was moderated by Steve Riley.

The program runs one hour and you can find the link here.

On Subscription Pricing and Being a Firm of the Future

On April 4th, Ron Baker and I did a webinar for Sage Partners entitled Subscription Pricing on the Journey to Becoming a Firm of the Future.

If you were unable to attend or would like to review what was shared, you can view a recording of the session. This webcast is part of the new Sage Transformation Journey Webcast Series. In these sessions, myself and other members of the Sage Partner Advantage team present relevant and timely information on how to develop the business practice of selling subscription pricing and improving the customer experience.

Thank you to those of you who attended the April 4 webcast session. If you were unable to attend or would like to review what was shared, you can view a recording of the session.

If you would like to learn more about becoming a Firm of the Future, please register for the full two-day Firm of the Future Symposium. The next symposium is being held April 24-25 in Southern California!

In addition to the Irvine dates we also have upcoming Symposia in  Vancouver, May 23-24 and Boston July 17-18.

Click here to download the agenda for this event.

Sage partners can register for any of these events today at Once you login, select Academies & Workshops an then Mid-Market ERP.

If you are not a Sage partner and would like to attend, please contact me or

Book Review: The Wiki Man

Regular followers of VeraSage will already know we are huge fans of Rory Sutherland, Vice-Chairman, Ogilvy Group, in the UK, where he’s been working since 1988.

We’ve been showing his Zeitgeist talk all over the USA, Australia, and Canada. It is simply one of the most profound talks we’ve seen in at least a decade.

Rory was the president of IPA in the UK, where he made it his platform to spread behavioral economics into advertising agencies.

He is a devotee of Austrian economics; Ludwig von Mises is his hero.

Rory has published an eBook, The Wiki Man, I believe only available on Amazon Kindle.


It’s not really a book. It’s a long interview, then a collection of articles he’s written over the years. But what a short and sweet read it is.

It’s difficult to write a review of his book, since, like his Zeitgeist talk, he moves a mile a minute, tossing out an incredible range of erudite thoughts, topics, and funny lines.

The best I can do is to arrange some of his more cogent thoughts into categories.

On Economics

How did Rory get so deep into economics?

I got interested in economics just because I was ill for a few days and ended up reading a few books—one very good one by Steven Landsburg called Armchair Economist. It’s a really, really good read.

I also credit Landsburg for providing me with an incredible education in price theory, and this book is on my Top 100 Best Business Books of all time.

He goes on to discuss the concept of “Satisfice,” from the economist Herbert Simon.

“Satisfice” is the combination of suffice and satisfy.

I don’t think you can really understand brands without understanding satisficing.

[It’s] killer blow for market research—when you are put in a group of people and you’re researched, you behave like a maximiser because we want to be seen as one. Everybody says they obviously want to find the best television they can within their price bracket.

Most people, in most fields of consumption, NOT maximisers at all.

The vast bulk of the money in any market at any time is in the hands of satisficers. Self-image being a more stubborn force than self-interest.

Before the iPod most important thing with any sound system was of course sound quality. Then the iPod, and sound quality isn’t all that great.

[But it] satisfices, that’s the point.

On Behavioral Economics

It’s not mass hysteria that really frightens me, it’s mass rationality. Spend just as much time working on how you can reduce consumer transaction costs as you do trying to reduce manufacturing costs.

Maybe you only need the hard sell because your product isn’t easy to buy. All airport car parks should have a number of parking spaces, which are three times more expensive than any others.

We do not stand a chance of selling them—or of seeing them happen. And the reason for this is simple: these are all behaviour changing ideas, not attitude shifting ideas. And the job of an agency is now just to do the attitude stuff…

[It’s a] dangerous assumption that behavioral change is the product of attitudinal change: in reality it happens more often the other way.

On Advertising Agency Value

…agencies have so overplayed the “brand” justification for their activities that they have sometimes disqualified themselves from adding value to clients anywhere else.

[The] job of anyone in marketing is to turn human understanding into business advantage or social advantage, okay? That’s the only job.

I think there are really only two types of people in advertising agencies. Good people and crap people. It’s more important to have good people than to obsess about what they. Incidentally our business of charging by the hour makes it difficult to hire except by specialism, which is a problem.

As one creative (Chris Wilkins?) remarked to a planner: “You and I both drink from the same well of inspiration. The difference is that you get to piss in it first.”

Incidentally, one way to get your own bloody clients to do it is to get their competitors to do it; they’re bloody lazy most of these organisations, and they only actually do anything when their competitor does it.

How true is this last line!

On Brands

[The] best way to build a brand is to set out to build a brand. I really don’t believe this. I think if you set out to build a great business, you’ll stand a fair chance of building a great brand. I am not equally confident that someone aspiring to build a great brand will build a great business.

Great brands are often built obliquely, a by-product of something (ideals, vision, focus) and not a product of anything.

Andy Warhol’s beautiful insightful comment: “What I like about Coke is that the President of the United States can’t get a better Coke than the bum on the street.” Do you think the Prime Minister drinks the same wine as the local wino?

Great brands are like great pubs. One of the requirements is that they cross a demographic divide. Who is the typical Google user?

Ordinary people do not demand rigorous sequential logic from their friends; do they want it from their brands?

I suggest it is by far the more valuable economic role that brands play: not to be a promise of ultimate superiority but a cast iron assurance of pretty dependable non-shitness.

Jack Welch said, “Shareholder value is an outcome—it’s not a strategy.” Maybe greed isn’t bad for business. It’s certainly bad for brands.

On Advertising

We too often forget the power of advertising to alienate. Our first reaction is often to find a reason to reject it.

To decide that young people are the only audience which matters, we lose the largest and richest swathe of the population. Remove anything that enabled a recipient to go: “obviously not for me.”

On Wine

Wine does defy logic in one sense—in nearly everything else we buy we value consistency. If one in three bottles of whisky we bought, or one in three pints of beer we bought in the pub were total shit, we would never go to that pub again, and yet one in three glasses of wine we try are just rubbish, and yet we persist in trying to drink wine, and I genuinely don’t quite know why it is.

On Second Homes

[A] second home is not a necessary investment. [Who] really wants these encumbrances now they are no longer rising in value? Do you want to spend your precious fortnight’ holiday practising the Italian for “My septic tank appears to have exploded.”

On Efficiency vs. Effectiveness

Rory has the same disdain for the mindless pursuit of efficiency at the expense of effectiveness that we do.

The most dangerous technology is the spreadsheet. Metrics or values invariably override any conflicting human judgment.

“The Arithmocracy,” a powerful left-brained administrative caste which attaches importance only to things which can be expressed in numerical terms or on a chart. Holocaust and the Soviet famine were both the product of meticulous government officials in dutiful pursuit of numerical targets.

We have an economic system that is much better at delivering efficiency than it is at inspiring affection.

We have probably spent quite long enough trying to make this industry leaner and more efficient. We should try to make it jammier instead.

How, in their endless, dogged pursuit of a false efficiency, organisations can be rendered slightly useless. And stupid. (Remember that the word “dogged” is derived from the word “dog” meaning “energetic and stupid”).

[A] belief in false efficiency is very simple; it comes from the belief that improvement comes from the elimination of apparent waste. [The] problem with this approach. It fails to pay any tribute to luck.

If you look at all the really important breakthroughs made in any field, what you will find is that the unplanned, unintended or fortuitous connection plays just as great a role as the planned, the processed and the organised.

A Perfect Mess details how a messy desk and the accidental juxtaposition of two apparently unrelated papers led to a Nobel prize.

Are we trying too hard to mimic our clients obsession with efficiency (not effectiveness, which is something different) when we should be making the case for chance? Is payment by the hour making us too focused? Too dogged when we should be “catted”?

Henry Ford’s reaction to a consultant who questioned why he paid $50,000 a year to someone who spent most of his time with his feet on his desk. “Because a few years ago that man came up with something that saved me $2,000,000,” he replied. “And when he had that idea his feet were exactly where they are now.”

Be sure to watch Rory’s Zeitgeist talk, and read this book. As he says, it’s a great book for the loo.

Follow him on Twitter @rorysutherland, where his bio reads: “Fat bloke at Ogilvy, IPA; The Wiki Man.

Bernie Lietz and Jason Blumer Talk Some VP Trash

At the I C Opportunities Conference in Chicago earlier this month, friends of the VeraSage Institute Bernie Lietz and Jason Blumer chatted a bit about how to differentiate their firms and the conversation led to a brief but fascinating exchange about Value Pricing.


David Vilensky on The Benefits of Fixed Pricing

David Vilensky, managing director, Bowen Buchbinder Vilensky, in Perth, Australia, is one our Trailblazer law firms.

David recently wrote this article
for the February 2012 edition of the Law Society of Western Australia’s publication, Brief.

It’s fantastic because David articulates how work changes once a firm is no longer obsessed with tracking time.

The benefits of this are very difficult for firms to grasp who continue to track time, and they are very difficult for those who teach this to describe—you simply have to experience it first hand.

Yet these benefits are enormous, probably outweighing the gain in profitability firms will achieve with pricing for value rather than time.

The late Paul O’Byrne used to say that when his firm got rid of timesheets they became obsessed with customer value, leading to more knowledge sharing and collaboration among the team, and a less stressful quality of work life.

David’s article is further evidence of these effects.

Congratulations to David and the entire team at BBV.


As the keeper of the @VeraSage Twitter handle I get all the follow notifications sent to me. I was quite amused yesterday when I received this one.


Special thanks to fellow Senior Fellow Michelle Golden for the idea for the title of this post.

Holland & Knight’s Lobby Division Trashes Timesheets

Nearly ten articles have been published on Holland & Knight’s Lobby Division saying bye-bye to the billable hour.

Actually, they are saying bye-bye to timesheets, as most of the revenue from H&K’s lobbying group was already on a fixed-price basis.

The first article was in Politico on December 13th. It quoted Rich Gold, head of H&K’s public policy and regulation group:

I think if you look out 10 years, this will be a very large trend…and we could either lead or follow.

Our favorite line from this article is from Ivan Adler, a headhunter with the McCormick Group:

This has the potential to be a real game breaker in law firm recruiting because it opens up a new vein of talented folks who have previously shunned law firms like a fruitcake at a Christmas buffet because of the billable hour.

Another telling fact from the article is:

Several former aides-turned-lobbyists said they opted for consulting firms and lobby shops over law firms for two reasons: Nonlawyers are treated like second-class citizens at firms, and they didn’t want to have to keep track of their time.

One of the issues that must be addressed when moving away from timesheets is how will the firm allocate revenue per person going forward if there are no timesheets.

Another article, dated December 14th, from The Washington Post explains how H&K will account for revenue:

Now, instead of billing hours to a matter, Holland & Knight will allocate upfront a portion of the monthly or yearly retainer to each individual working on the matter, based on estimates of how much they’ve charged in the past.

Ed Kless and I were privileged to be involved with H&K’s transition, working with Rich, Friedrich Blase, and several other partners from the PPRG group.

The group innovated the “Client Value Share” KPI. Since the price to the customer is already fixed, this KPI is a way to allocate, prospectively, that value amongst the team members who will work on the matter.

The beauty of this KPI is it forces the team to collaborate, upfront, on who will handle what, and decide what the value contribution will be from each person.

Someone may bring incredible value to the engagement but have relatively low billable hours. The CVS KPI will now account for that discrepancy.

And since the CVS is decided upfront, there will be less conflict regarding write-downs and allocations that are a normal part of the timesheet culture.

If someone on the team doesn’t pull her weight, the CVS can be adjusted, and reasonable people should be able to agree on that process.

This is a momentous change within the culture of H&K, and we applaud the vision, leadership, and courage of Rich, Friedrich, and the other partners, who understand what an enormous competitive advantage this will bring to the firm’s ability to attract top talent, while providing a better level of service to its customers.

It is one more data point that the naysayers, who believe it’s not possible for a law firm to eliminate timesheets, will have to contend with.