Legal Commentary

Hours Based Bonus + Bad Economy = Warning To Clients (Watch Your Wallet)

By Patrick J. Lamb

In a Friday post, Above The Law reveals that Arent Fox utilizes an hours-based bonus system.  If an associate does not exceed 1950 billable hours, no bonus.  And then in hundred hour increments, associates can receive ever increasing "productivity bonuses."  Arent Fox is not alone in using this system.

Consider, for a moment, the incentives and interests created by this system.  An associate is constantly thinking about how many hours they have ("gee, I need 12 more hours this month to stay on my bonus target").  Where, dear clients, do the associates go to "find" those hours.  But look at the firm's perspective.  What is the cost of that "extra" hour?  The associate's salary and benefits are already paid for.  Ditto the office and secretary.  All that has to be paid out of that hour is the portion of the bonus attributable to it.  And that is a hundred dollars max.  The point is that those "extra" hours are the most profitable hours for the firm.  Well isn't that a great incentive to effectively police abuse of billing abuses.

So this is my advice to clients, or at least clients concerned about how much they pay in legal fees.  Ask your firms if they pay bonuses based on hours.  If they do, find another firm.  Find a firm that doesn't reward the creative discovery of more hours.  Or better yet, find a firm that rewards the creative discovery of ways to reduce hours without sacrificing quality.  We're out there.

Full post as published by In Search of Perfect Client Service on January 16, 2009 (boomark / email).