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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."
 As 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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