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Value Billing: Getting Paid for Knowing 'Where to Pound the Nail'

Hammer I have seen two posts recently on the topic of the value of one's work that I think are interesting in the context of the legal profession. Seth Godin argues here that there is a big difference between what people will pay for "hourly work" versus "linchpin work." He defines linchpin work as work performed by someone where there are no short term substitutes available.

Godin writes that when there are available substitutes, you can put a value on someone's time based on what the market is paying. "If there are six podiatrists in town, and all can heal your foot, the going rate is based on their time and effort, not on the lifetime use of your foot," he states. "On the other hand, if there are no short term substitutes, then you don't pay what the market will bear, instead you pay what someone is worth. Big difference."

Godin provides an example of a college professor of his who did engineering consulting and was asked to assist on a brand new office tower that had a brown stain coming through the drywall. The building's owners had exhausted all other possibilities and were a day away from tearing out all of the drywall at a cost of millions of dollars. The professor looked at the stains and said he thought he could "work out a solution, but it will cost you $45,000 if I succeed." The owners instantly agreed. Godin writes that the professor then wrote the name of a common hardware store chemical on a piece of paper and handed it to them:

"Here, this will work." And then he billed them $45,000. That's quite an hourly wage. It's also quite a bargain.

On the Texas Lawyer blog, Michael Maslanka makes a similar point with respect to hiring local counsel -- which he compares to professional golfers having an experienced "local caddy" at a tough golf course. Maslanka says that when he is explaining to a corporate client in New York why it needs another lawyer in state court in Texas, he relates a story of a woman with a squeaky floor:

She hired carpenter after carpenter, but no one could fix it. it was driving her crazy. One day, she hired a guy who came in, looked around carefully and pounded a nail into a section of the floor. It took 10 minutes. She asked how much, and he said, "$100." She retorted that he was only there 10 minutes and demanded a breakdown of the bill. He took out his pencil and wrote the following: Pounding in nail: $1; knowing where to pound nail: $99. It is all about knowing where to pound the nail.

So how can lawyers move toward getting paid for "linchpin work" versus hourly work? For knowing where to pound the nail versus doing the pounding?

Posted by Bruce Carton on June 24, 2010 at 01:59 PM | Permalink | Comments (5)

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