Legal Commentary

Blended Rates Are "On Their Way Out." Shocking.

By Patrick J. Lamb

In a headline I saw this morning, Law360 reports that blended rates "may be on their way out."  Finally.

One of two things is true about blended rates.  Either people do not understand how blended rates help prove the truth of P.T. Barnum's most famous quote that "there is a sucker born every minute," or people choose to believe that lawyers always listen to angels on their shoulder.

Maybe its just that my experiences are atypical, but when former partners of mine got a blended rate assignment, the opportunity they saw was to staff up with inexperienced lawyers who would help drive the partner's overall realization rate north of 100%.  Why was that important?  Because realization rates are a critical part of compensation.  So blended rates were great for the billing partner. And woe to those who messed up that realization rate. In fact, I still have a piece of my ass missing from having it chewed off by a partner who didn't care that the complexity of the case required more senior lawyers to be involved.  He was concerned about one thing only, and neither the client nor the outcome of the case were it.

Of course, it is possible that the people I observed and the stories I have heard over the years are the exceptions, and more often than not these cases were staffed without financial impact playing a role.  My thought is that view could not be more naive, but hey, I've been wrong before.

There is a way to check this.  Analyze the composite average hourly rate of the team and then the weighted average hourly rate of the team.  Compare it to non-blended rate matters.  Compare the total realization on the blended rate matter to average realization rates on other matters.  The numbers won't lie.

But for clients, think about this: if there is more work being done by inexperienced lawyers, how efficient do you think that work is.  And how effective?

Blended rates are a very bad idea from the client's standpoint.  They should be on their way out, and if they are, that is a good thing.

Full post as published by In Search of Perfect Client Service on June 18, 2010 (boomark / email).