Posted by Bo Yancey: "For years, there has been much talk, and decidedly less action, on "alternatives to the billable hour." GC's say they want this, and firms say they are willing to provide these options, but neither side tends to "walk the walk" in a way that matches up with their stated intentions. We think there are a couple of key reasons for this:
1. On the GC side...
2. On the law firm side...
The result of the above two issues is that the billable hour continues to dominate, despite its' being a disincentive to efficiency on the firm side, and an inexact way of predicting legal expenses for clients.
In these less-than-robust economic times, both sides should take a harder look at the pricing models that exist currently for legal services. The most obvious issue, implicit in both of the above-stated problems, is one of trust, which is borne out of relationships and experience. As we all know, trust is a key component in the long-term success of any client/law firm engagement, and especially on one using a pricing model other than the billable hour.
On the law firm side...
On the client side...
There are many tools available to law firms (such as Redwood Analytics' Matter Planning Tool) to help firms price out blended or hourly rates, with multiple scenarios and sensitivities. These are a key piece, from the firm side, of understanding how leverage and pricing affect profitability. However, it is the back-and-forth between the client and firm that ultimately has the biggest impact on alternative pricing arrangements. Firms must understand and respect clients' priorities and their relative importance regarding legal services, and clients need visibility into firms' bottom line as well. This give-and-take, and both sides' commitment to long term success of the relationship, will be what make alternative arrangements succeed. Given rate pressures, clients' general dissatisfaction with legal services, and a more challenging economic environment, firms would do well to begin to engage their clients in these conversations, if they haven't already done so."
Full text and active links are available at the source site listed below.
Source: More Partner Income.com, 18 November 2008
