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April 26, 2007

"How Much Money Has The Client Spent So Far?"

What Each Timekeeper On A Project Should Know.

Knowing what the client is paying your firm informs and affects the strategy of a big project--indeed, the business strategy of the entire company if the stakes are high enough--and, importantly, the thoughts, instincts and habits of your people who work on it.

Suppose you have a great business client you want to keep, and you want to expand that work. Initially, you start off doing "day-to-day" work for it: a mixed bag of projects for a Fortune 500 company or a substantial start-up. Steady, fun and interesting stuff--but nothing fancy or high pressure. Planning. Monitoring or applying new environmental regs. A lease. Compliance items. Employment issues. Putting out fires. Spot projects for in-house counsel. Nothing too contentious. The monthly bills are rarely more than, say, $8000 to $15,000.

The client seems to like your firm--and, importantly, you like the client. You want more. But suddenly, the general counsel presents your firm with an intense litigation project or regulatory dispute which will consume a good senior litigator and 2 or 3 associates off-and-on for 18 to 24 months. This results in monthly bills suddenly ballooning to $40,000, $80,000 or more.

In this situation, I think that every lawyer working on that highly active project (1) should know what the client is spending ($) and (2) be given a written report in cumulative totals every time the invoice goes out. It especially should be given to the involved associates for this or any other active litigation or intense transactional work or deals you are billing hourly. We've written that younger lawyers are not truly partnering with a client, and giving great service, unless they watch costs. See "WAC?" Rule 8, Think Like The Client--Help Control Costs". So they need to know about the money the client is spending and see that on paper. Knowing what the client is spending informs and affects the strategy of that project--indeed, the business strategy of the entire company if the stakes are high enough--and, importantly, the thoughts, instincts and habits of your people who work on it.

Note: I know that not everyone would agree with me on this one, and there are exceptions to everything. When I was an associate and later a partner in a larger firm, associates were given written reports only of their hours and those of all other "competing" timekeepers. Actually, I liked that system. We had time-honored professional, proprietary and Machiavellian reasons for keeping non-partners in the dark about money.

Posted by JD Hull at April 26, 2007 07:41 PM

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