Tuesday, 3 April 2012

In pursuit of "happiness"....

In 1972, King Wangchuck of Bhutan made a commitment to building an economy which would best serve his country's Buddhist values. He commissioned the Centre for Bhutan Studies to develop a survey to assess the country's general well being.  Gross Domestic Product (GDP) was replaced with the concept of Gross Domestic Happiness (GDH).

Beyond what was seen by some as a totally left-of-field metric, we now have second generation GNH and the first ever global happiness survey was launched in 2006 to measure 'happiness' as a socioeconomic development metric. The survey was undertaken by the International Institute of Management and assessed:

> economic wellness
> environmental wellness
> physical wellness
> mental wellness
> workplace wellness
> social wellness
> political wellness

For those who want to know more please click on results here.

"OK, so what has this got to do with legal services?"

In legal services, the only universal metric is the much (and deservedly) maligned 'hourly rate'.  This, in my opinion, is a totally flawed metric.  

This blog is the first of what I hope will be a (sporadic and non sequential)  series looking at how other metrics from other fields may be applied to legal services.

So what's wrong with the 'hourly rate'.  Firstly, it doesn't even accurately indicate potential cost (which is actually the net result of a triumvirate of inputs which create the 'volume of cost'). So, you can set the rate but not the number of hours or the level of resource utilised. 

Secondly, and more importantly, the hourly rate doesn't measure 'value'.  What does taking legal advice contribute to the balance sheet in terms of income realised or liabilities protected against?  'Value' will always be, after all, greater than 'cost' by a good number of multiples.

So, what can measuring 'happiness' do to help assess 'value' in legal services.  Perhaps 'happiness' is too much of a stretch, after all legal services are, at best, a necessary evil.

But how about 'satisfaction'?  Is making sure a client is genuinely satisfied something that should be measured and can have a 'value'?  In short yes.  I have direct knowledge of  a service which is measured, against other things, against an agreed benchmark satisfaction value.  Hit the benchmark, great.  Fail to meet it and their are financial consequences for the supplier.  Exceed, and there is a premium payable.  

Why is this important?  Let's imagine that there are two identical cars in a show room.  One is priced at £20,000 more than the other simply because it took longer to build.  Hands up who would pay that premium for the input effort, regardless of the resulting product (they are identical, remember)? No one, right.

Now let's imagine one comes with a client care package that promises roadside assistance, servicing and replacement cars in emergencies.  The value here is protection for the customer, piece of mind and enhanced service delivery.  If the premium was right, you'd pay for this?  Probably.

Yet legal services still, in the main, based on the input effort.   

The question taking GNH as an example is, should lawyers be remunerated on how long something takes or how happy they make their clients?  I'll let you decide.


  1. In a product environment it is possible to understand your input costs and price on a purely cost+ basis. This is what lawyers think they are doing with hourly rates.

    Instead, it is a services business model, more akin to the insurance market that should be used. A fixed cost for a service + the associated risk that comes with it.

    A new world for acutaries to enter into...

  2. Behaviour follows belief. The worst thing about an hourly rate is what it does to the attitude of the lawyers.

    They believe all they have to offer is their time and that logging hours on a timesheet is more important than delivering results.

    As our one hour is indistinguishable from our competitor, we become a commodity. New entrants to the market can offer lower hourly rates because their overheads are lower, but what does internal overhead have to do with how much value you provide your clients?

    So said Ron Baker from Verasage. An organisation determined to get rid of hourly billing.