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An impossible dream: to put a dollar value on every matter concluded for a law department

A law firm consultant, Patrick McKenna, reasonably pushes law firms “to communicate to your client what’s being achieved as a direct result of retaining you.” But he recommends a bridge too far, in Law Practice, Vol. 33, Jan./Feb. 2007 at 14, with his conclusion: “At the end of every matter and to truly satisfy clients, your job involves identifying a specific value outcome for each legal service you deliver.”

Would that were possible! If law firms could accurately state the dollar value of the services they render, there would be no need to bill. The firm could invoice for a percentage. Competitive bid processes would wither into mathematical comparisons of percentages to be charged. Law departments would barely need to evaluate law firm performances; the benefit obtained minus the fees paid (plus some recognition of timeliness and desk-side manner) would tell the tale of the tape.

But it is not possible. In many instances, law firms simply cannot say what the cash value is of the advice or services they rendered. Even where revenue or cost streams might be estimated it doesn’t follow that the firm can quantify its contribution. To draft, negotiate, and close a lease that results in payments of $3 million over 15 years (if even that stream of income or expense can be quantified to that degree) is not worth $3 million.

Even less plausible is to identify a specific value outcome for other kinds of tasks, such as to submit a letter of protest to a zoning board, or to file an 8K, or to advise on the default risk under a sales agreement of a possible action. Worse, what is the cash value of a possible risk avoided or mitigated?

What’s possible and desirable is to try to calibrate the cost of legal services to the law department’s value obtained, and as a law department to juggle always the fees paid a law firm against the worth of the results the firm delivers. Easy to say; very hard to do.