As we've seen, whether it's inflated salaries in the talent wars, or hikes in insurance premiums, whatever happens to law firms gets passed on to clients. The medium of that pass-through is always the same — through hourly rates. So this lesson, as we examine the downturn, focuses on hourly rates and asks the fundamental question: What are they based on?

For as long as there have been hourly rates, they have been based on the seniority and not the task. Law firms have tariffs for this — for a 5 year associate we'll charge X, for a junior partner we'll charge Y, and so on.

There are notable exceptions, of course, but typically, if you look at an invoice from any law firm, it will list the fee earners, from the top down, each with the rate and the number of hours. Yes, there will be a narrative, but the rates tend to apply without variation to all the tasks described. To the law firm, all tasks performed by a particular 5-year associate go out at the same rate, regardless of context, relevance, milestones or goals.