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    Wisconsin Lawyer
    November 01, 1999

    Wisconsin Lawyer November 1999: The Economics of Practicing Law: A 1998 Snapshot 2

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    Vol. 72, No. 11, November 1999

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    The Economics of Practicing Law
    A 1998 Snapshot

    Uncollectibles Decrease

    The ratio of uncollectible accounts took a dramatic dive since the survey six years ago: down from an average of 15 percent in 1992 to 8 percent in 1998. Why the plunge? The survey itself reveals no clues, but Wilber offers some theories. One is that the economic times have changed. "Six years ago was when the recession hit," he says, "and it was pretty slow in the legal profession. But now, because of the demands on their time, I think more lawyers are forced to be more selective in what work they're taking. And they're doing work for clients who are more likely to pay the bills."

    Bear in mind, too, Wilber notes, that it's totally up to people in the firm to decide when to write off old, uncollected accounts. "I know firms that carry accounts receivable for years," he says, "even though they know they'll never collect them. Others are very disciplined about writing them off after a certain period. So what we're looking at (in the survey) is a snapshot. It could change from one year to the next very easily, depending on who is cleaning up their old accounts and writing them off."

    MachineAs a lawyers' management consultant, Wilber would like to believe that two other factors are pushing uncollectibles down. "I'm hoping that one reason is that firms have gotten more selective about what matters they're taking in," he says. "The best time to assure you're going to get paid for a matter is when you take the case. You can spot a lot of potential problems in getting paid during case intake. If you exercise the discipline there, it's more likely you'll get paid at the other end."

    Second, Wilber hopes uncollectibles have fallen because firms have gotten better at collecting accounts receivable. That means putting the task in the hands of someone in the office other than attorneys. "Our experience is that lawyers don't want to do it," Wilber notes. "They think it interferes with the attorney/client relationship, which it could. And it's just not something they want to do. To get around those kinds of human inclinations, we suggest to firms, if they're large enough to have an office administrator, that they turn the collections over to that person. They need to train the person and be sure the form letters and so on are appropriate and legal. But once the system is in place, it gets the lawyers out of that business."

    Finally, one more bit of advice from Wilber about pursuing uncollectibles: Draw the line at suing the client. "It's the quickest way to get a malpractice claim filed against you," he says. Pursue this route only as a last resort when trying to collect a sizable sum of money, he adds. And the decision to sue should never be up to only one partner. Says Wilber, "It should be discussed among some larger group in the firm" - either all partners in a smaller firm, or executive committee members in a larger firm.

    What Attorneys Make

    Survey respondents' gross personal income for 1998 averaged $130,805, with a median of $100,000. Figure 6 shows that nearly one-third of respondents said they grossed less than $75,000, while 29 percent fell into the $75,000 to $124,999 bracket, and 40 percent made $125,000 or more. Again, the fact that more than half of the respondents had been in practice for 20 or more years may have boosted the average income. Comparisons to 1992 figures are not useful, because that survey did not focus exclusively on private practitioners.

    Sole practitioners' average gross personal income was $108,000 compared to $67,308 for law firm associates and $153,618 for partners. Women's average income was about half that of men's ($72,339 versus $141,979). Why so much lower? One factor that may enter in is that fewer women have been in the legal profession as long as men. Few age 60-plus women attorneys with 35 years' experience are out there to pull up women's average income, while that demographic is much more common among male attorneys.

    Other factors also may come into play, suggests Madison attorney Linda Balisle. She notes that fewer women go into civil litigation, which can bring in huge contingent fees and thus higher pay. "And that fits into a second reason," Balisle says, "which is that women have responsibility for families in a way that a lot of men still don't. Because of those responsibilities, women can't be on the road as much. They can't have as much of an up-and-down life as a lot of high-roller, contingent-fee litigators do."

    The billable hour system may be another factor, Balisle says. The survey found that women tend to bill fewer hours than men (averages of 1,266 and 1,469, respectively). "I've observed that a lot of women, once they have kids, get a lot more efficient in their work," Balisle notes. "You get more done in less time, but that means you bill less. In a law firm's finances, that penalizes you. So part of this is just the structure of the way we pay people."

    Family responsibilities also influence women's incomes in another way. "More women hang out their own shingles," Balisle says. "And lawyers who are solos make less than partners in law firms. Many women do not feel they fit into traditional, large law firms. Linda Roberson (her partner) and I do a lot less administrative work with our firm than we did in a big firm."

    Time and money - that's a balancing act all lawyers struggle to manage. Stevens says that one overriding impression the survey results left with him is that the time demands of the legal profession continue to intensify, even with effort-saving technology. "We have technology in most of our offices so we can accumulate facts quicker, and we can communicate those facts to others quicker," Stevens points out. "But when it comes to analyzing a problem and communicating that to a client, I don't think we have many ingenious ways to save a lot of time doing that. As I went over this survey, it struck me that giving solid legal judgment and advice to clients takes time. It takes time to communicate ideas to people, to gain their confidence. And I think that's the real challenge facing our profession."

    Dianne Molvig operates Access Information Service, a Madison research, writing, and editing service. She is a frequent contributor to area publications.


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