The Enemy of Efficiency: Diminishing Marginal Returns
By: Mark E. Best, Esq.
Clients want, expect, and are entitled to efficient handling of their cases. The block-billing model of the past, which allowed for full-day time entries on “research” or “document review,” gave way to standard tenth-of-an-hour billing increments with verbose time entries designed to help clients determine whether they were getting their money’s worth. And even this model is now showing its age, having to compete with fixed and alternative fee agreements designed to give more certainty to future litigation costs. No matter the billing method, when the client is writing out that check, she wants to know she isn’t paying for unnecessary work.
Most defense firms create efficiencies using common methods like new technology (e.g., paperless work flow; video conferencing; electronic document review software), appropriately tiered staffing (e.g., delegation of simple tasks to clerks, paralegals and secretaries), and assessment of cases for early resolution through motion practice or settlement. At Kuchler Polk Weiner, LLC, we take efficiency efforts one step further—out of the physical office and into our collective mindset. One way we do this is by focusing on the archenemy of efficiency—the law of diminishing marginal returns (“DMR”).
This economic principle states that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output. Put more simply, you can continually add more of a given resource to creation of a product but, at some point, it will become inefficient to do so. The practice of law is not immune from the law of DMR. There comes a point in every project or case when spending additional hours working on it yields an ever-decreasing return for the client—potentially even a negative return, which occurs when additional work input results only in increased costs to the client, without any benefit whatsoever. So what does this look like in the real world?
In the first three hours an attorney spends constructing a brief, she may formulate an outline, read the latest case-on-point, and identify the key supporting exhibits. That work is very productive and highly valuable to the client. In the last hour of brief preparation, however, he may read and re-read the draft, ultimately deciding only to change the word “Firstly” to “First.” Some would (rightly) argue that the last hour was quality-control work necessary to ensure top quality. From an economic perspective, however, the last hour created “diminished” value for the client relative to the first three hours. And yet, the client is charged for the last hour at full price.
We cannot fight the law of diminishing marginal returns, but we can maintain a higher level of efficiency by being mindful of it. An efficient attorney should consider the following questions at each stage of work-product preparation:
- What is absolutely essential to this work product, and what is not?
- Have any essential parts of the work product already been created, such that I need not reinvent the wheel?
- Have I reached the point in the creative process where I am merely fine-tuning?
- Is the fine-tuning still creating good value for the client?
The goal of this mindfulness exercise is to create an automatic internal alarm system, pinpointing the moment when the return on investment of time begins to diminish. Once the alarm bells go off, there should be a shift in mindset to “wrapping things up” and moving on to other, more productive tasks. The benefit to the client’s bottom line does not go unnoticed and (bonus!) we tend to avoid those headaches that come from staring at the same words on the computer screen for hour after hour.