Some illogic in requests for discounts on standard billing rates

A law firm partner whose client asks for more hours of individual service than the partner wants to provide has no reason to discount hourly billing rates; indeed, has reason to raise them. The same argument regarding the fully-booked partner applies to the fully-booked associate – unless you really can squeeze blood from an over-worked turnip.

Odd, too, are the requests by even well-known, trophy clients for rate discounts, because those clients are more likely than less prominent companies to encounter up legal issues that are challenging, novel and that deserve the best thinking of the best lawyers. World-class talent doesn’t work for discounted, third-world wages.

Sheer volume of work offered by a law department has more plausibility as the basis for its seeking discounts, since more of the work might be delegated, better systems developed, and marketing costs lowered. The flaw in that logic may be that variety and challenge decline with if the large flows are of similar work (See my post of Sept. 16, 2006 on commodity work.).

I have fulminated against discounts before (See my post of May 26, 2006 on discounts not changing the cost-plus paradigm.), but haven’t articulated the illogic of some discount requests. If a partner has plenty of full-rate work, offers specialty services pitched at difficult legal problems, and doesn’t relish commoditized services, to grant discounts makes little sense.

Discounts boil down to reducing the firm’s profit margin (See my post of July 25, 2005 on Allen & Overy’s disclosure of its operating margins.). If other clients don’t rock the firm’s profit boat, if they are willing to pay standard hourly rates, it’s understandable why busy law firms hold the line on discounts (See my post of Oct. 29, 2006 on inducements to grant billing discounts.).

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