Sunday, July 22, 2012

Sunday Essay - Keddies and the importance of values

Quite a bit of my professional work has involved advice to professional services[Shakespeare-420x0[8].jpg] firms on ways to improve professional and business performance. In that advice, the nature of billing practices has been one common theme. Firms have to capture value for time, yet time based billing can create a real incentive for overcharging.

Keddies was a major Australian law firm specialising in personal injury matters. Back in July 2008 (Corporatisation, Keddies and professional ethics) I reported briefly on growing allegations about overcharging by Keddies. In October 2008 (Keddies case threatens legal billing practices) I reported that Keddies had been forced to retrench staff, while the whole legal billing system in Australia was now under review. Then in November 2010 (Keddies, Slater & Gordon & the law.) I noted the sale of Keddies to Slater & Gordon for a very large sum. I wondered at the time about the wisdom of the purchase. 

Since then, the matter has dragged on and on through multiple court cases, leading to the actual or potential bankruptcy of former Keddies partners and a fairly unsavoury unveiling of the practices involved in what John Grisham wrote about as ambulance chasing.

Law firm under fire over billing practisesNow ABC Radio National's Background Briefing has provided a full update on the saga. You will find audio and transcript here.

I will write a fuller professional update on another blog. For the moment, I just want to make a brief personal comment.

In the ABC report, a former Keddies partner was quoted as saying, in effect, that you had to spend money to make money. Paraphrasing, you could charge x and get the client y. But if you invested more time and resources, you could get the client more. The problem was that the extra costs involved meant that the proportion of the additional payment going to the client fell. The client was still better off, in some cases significantly so, but the ratio between charges to the client and the final cash to the client looked bad.

I have some sympathy with that viewpoint. Keddies problem and now the problem for the whole profession is that the real examples of overcharging, and they do seem to have been very real, mean that you can't tell the difference between overcharging and the case where extra effort gets the client more, but at a price. The bills might look very similar.

A few years back I went to some staff functions put on by lawyers Turner Freeman. Turner Freeman has practices in related areas including especially dust diseases cases. In this case I was there in my handbag role. I may have been there as handbag, but it didn't stop me listening with my professional hat on.

Law is a competitive business. Lawyers like to win. To the extreme gunslingers, winning including charging for winning is the very stuff of life. You can see this in shows like Boston Legal. The thing that struck me at the Turner Freeman functions was the important role played by values in constraining what was done.

In talking about values, I am not talking about formal codes of conduct, but about values as felt operational realities that had meaning, that affected what was done. Essentially, we can't do that because....

In the Keddies case, the game seems to have become everything. Values fell away. Winning and charging for winning became central.

Values can't be imposed: they have to be created, learned and internalised; they have to be constantly refreshed. The single most important test of values is whether or not a person will be rewarded for acting consistent with them even when it is against the firm's immediate interests.

As a management consultant, this is remarkably easy to detect. You only have to listen to staff.         


Anonymous said...

Jim, I'd second your comments in general. Like you, I have had years (perhaps far too many) contemplating time-based billing systems involved in law firms large and small.

But I won't comment further given possibly your own continuing consultancy role in this area, and the attachment of your present comments to the Keddies saga.

It is a sorry mess, with many losers, and not just financial ones.


Evan said...

I very much agree.

Kiddies argument I think has validity - not sure how it applies to photocopying though.

Jim Belshaw said...

Hi both. Agree with you last point in particular kvd. Quite, Evan!