This post was written by Jim Hassett: "When I published the results of our national survey of alternative fees, one of the most discouraging sections concerned the lack of trust between in-house law departments and the firms that serve them.  Although the interviews were focused on alternative fees, the findings also have implications for hourly work.

If you made a list of the most common characteristics of successful lawyers, would you put trust near the top of the list?  Me neither.  An inherent predisposition to be suspicious is a barrier to agreeing on alternative fees and to making them work:...

...In the end, alternative fees will work best in long term relationships where there is an atmosphere of trust..."

Full text and active link are available by clicking on the author's name.

Source: Legal Business Development, 10 March 2010, reproduced with permission of the author.

This post was written by Jim Hassett: "...Lawyers use the term "risk collar" to refer to an hourly billing arrangement built around an estimated budget for a particular matter.  The client pays a bonus if work is completed under budget and/or gets a discount if the work goes over the budget.

Like a fee cap, this is really just a variation on hourly work, but unlike a fee cap it may align interests and offer incentives to both clients and law firms...

[Read some sample comments about using risk collars]

Here are two examples from different firms...

The actual discounts and bonuses vary widely.  See the complete report for a table with six examples of actual deals described by survey participants.

Read the full text of this interesting and informative post by clicking on the author's name.

Source: Legal Business Development, 3 March 2010 reproduced with permission of the author.

This post was written by Tom Kane: "According to a feature article in this month's InsideCounsel one consultant who helps clients structure alternative fee arrangements "estimates that only about 2% of total legal billings currently are being done on alternative basis - but he contends it's an increasing trend." That certainly isn't a surprise.

He goes on to say "I'd expect that almost 20% of all billings would be on alternative billing in eight to 10 years..." According to the article, 35% of respondents to Fulbright & Jaworski's Litigation Trends survey said that the down economy has pushed them "to increase their use of alternative fees."

Based on that, I guess I'm just surprised to hear that it's going to take close to a decade for alternative fees to get up to 20% of billings...

Continue reading this interesting post and reach the active link by clicking on the author's name.

Source: Legal Marketing Blog.com, 9 February 2010, reproduced with permission of the author

This post was written by Ray Millard: "The crux of the billable hour debate really seems to lie primarily in one very basic conundrum. That is: how else to accurately and sensibly value the output for a wide diversity of legal services, other than "by the hour," with anything like the same ease of applicability. It seems almost sacrilegious to ask the question .... but this by no means the first time that the dilemma has arisen about sensible metrics to measure performance in the production of diverse products or services.... 

...I wonder if the current wave of enthusiasm for alternative fee arrangements and value pricing (which I enthusiastically endorse and with which I join) is going to achieve what the Soviets could not, and come out with usable measures of value for all of the wide range of diverse services that law firms deliver to their clients, in ways that make economic sense for both buyer and seller and are easy to apply. Hopefully it will ...."

Full text is available by clicking on the author's name.

Source: Adventure of Strategy, 29 January 2010. Copyright 2010, Rob Millard, reproduced with permission of the author.

This post was written by Jim Hassett: "This week's post concludes our series on how law firms are using project management to improve performance on alternative fees, based on the results of our national survey of alternative fees.

Project management systems may reveal some hidden traps in the way lawyers deal with alternative fee projects:...

Project management also requires an understanding of the differences between clients, and the people skills to manage relationships:...

Managing client relationships begins with communication:..

Communication is particularly vital when it comes to change orders - formal agreements that the scope of a project has changed in a way that also changes the budget:...

It is also useful to continue communication even after a project has been completed:...

Clearly, the process of managing alternative fees is a large undertaking.  But it is also vitally important, and the benefits are obvious:...

As one participant succinctly summed it up, "If we teach our people to manage, we can make more money."

The full text and the active link are available by clicking on the author's name.

Source: Legal Business Development, 20 January 2010. Reproduced with permission of the author.

This post was written by Enrico Schaefer: "By now, virtually every lawyer has heard of the term "alternative billing." But did you know that alternative billing has become an irreversible trend among the largest law firms, including many of the AmLaw 100 firms? Jim Hassett of LegalBizDev.com just completed a survey of 37 of the AmLaw 100 firms regarding alternative billing.  You may be surprised at the results....

Play GAL Radio - Jim Hassett of LegalBizDev discusses Alternative Billing
- Greatest American Lawyer
- Read Transcript
- Publish this Show on Your Website

Full text and active links are available at the source site listed below.

Source: The Greatest American Lawyer, 15 December 2009

From the site: "In this edition of The Un-Billable Hour, host Attorney Rodney Dowell, Director of the Massachusetts Law Office Management Assistance Program, talks about value billing and using transparent pricing to become more competitive.    Rodney welcomes Attorney Jay Shepherd from the Shepherd Law Group, P.C , to discuss his thoughts on value billing and his passion for providing "open/transparent pricing" to deliver value to his clients.

Special thanks to our sponsor, AbacusLaw

Podcast: Play in new window | Download (Duration: 29:41 -- 21.2MB)

The active links are available at the source site listed below.

Source: Legal Talk Network, 16 December 2009

Posted By Patrick J. Lamb: "I just returned from a breakfast at which Stephen Dubner, one of the authors of Freakonomics and the sequel, Superfreakonomics, made some remarks.  He told the story about the work he and his co-author did studying the hand hygiene habits of doctors at a hospital.  Doctors self-reported washing their hands 71% of the time.  By studied observation, the true frequency was 9%.  Committees were formed, edicts were issue, all to no avail.  Keep in mind, this was an effort to convince the highest educated cohort in a hospital to do that which all of them acknowledged they needed to do.  The a carrot was used.  Doctors would be observed and each time they washed their hands, this observation group would give them a Starbucks gift card.  Still no real improvement.  Anyway, Dubner went on at length about the various steps the hospital took to try to get the doctors to do that which they know they should do.

I won't reveal what ultimately caused the doctors to change their behavior, but Dubner's conclusion is that changing human behavior is incredibly difficult.

What does this have to do with alternative fees?  Everything...

Continue reading this interesting post at Patrick's blog site:

Source: In Search of Perfect Client Service,  6 December 2009 

Posted by Ron Friedmann: "Legal professionals debate if the 'new normal' will differ from the 'old normal'. Aric Press' American Lawyer editorial, The Change Agenda: Can You Hear the Ice Melting? shifts the question from 'if' to 'how'. The answer to 'how?' is 'process'. 

Press writes that even when demand picks up, the changes so far are 'likely irreversible'. There are 'plenty of disparate events that support the observation that this change business is more than just a sideshow'. He focuses on two: 1. alternative fee arrangements (AFA) and 2. legal process outsourcing (LPO).

According to the editorial, one-half of the 20 'A-List' firms are on record as doing AFA for marquee clients. And a survey AmLaw conducted to quantify the change found that one-quarter of large firms have outsourced work to LPOs.

In my view, the ascension of AFA and LPO mark the beginning of a deeper shift: lawyer as artist or craftsman to lawyer as manager and engineer. As Press says, 'this year it became clear that LPO is really about the "P." It's not whether the work is done in Bangalore or Bangor or on Broad Street; it's how the work is done".

I agree that that process is key. In my 2003 post When Clients Come Knocking, I wrote "paying attention to the process [of law practice] seems at least as important as evaluating the 'outputs' such as results and costs.... One could even imagine formally analyzing the processes to determine best practices across firms. It seems likely that the firms using better processes will produce better results at a lower cost."

While LPO has the word process in it, AFA has the idea of process in it. In my recent post Alternative Fee Arrangements (AFA) are Not as Hard as You Think, I suggested that process is one of three AFA pillars (with tech and staffing the other two).

A related signal of process importance is a surge in legal project management. PM is just the beginning. In support of process, lawyers will need data, metrics, analysis, and structure. So expect to see far more business and financial analysts working side-by-side with lawyers to collect data, analyze them, and create rational, tested processes."

The active links are available at the source site listed below.

Source: Strategic Legal Technology, 6 December 2009

Posted by Ron Friedmann: "Last week I spoke at the Ark Group Conference on Alternative Fee Arrangements (AFA). I gave a short presentation called Unbundling Repetitive Aspects of Large Matters, my effort at de-mystifying and simplifying alternative fees. 

Inside and outside counsel would find AFA easier if, instead of thinking about entire matters, they thought about the components of big matters. By big matters I mean single large matters such as major litigation or an M&A deal or "portfolio" matters such as real estate transactions, sales contracts, or managing NDAs.

These big matters typically include high volume, repetitive elements that can be treated as fairly discrete activities and therefore costed and priced separately. Here are some examples of common "discrete activities:"

[See source site listed below to view the chart]

The key to achieve reasonable alternate fees for both clients and firms is to unbundle these and other high volume tasks and treat them as discrete activities. Doing so can lower the cost and improve the predictability. All that's needed is to apply the appropriate selection of process, technology and human resources:

• Process
• Workflow analysis
• Metrics and QC
• Data analytics (EDD)
• Knowledge management
• Business intelligence
• Project management
• Technology
• Document assembly
• Conceptual review tools
• Repositories
• Contract management
• Human Resources
• Paralegals
• Contract lawyers
• Outsourced lawyers (onsite, onshore, offshore, multi-shore)

By unbundling - that is, separating matters into discrete "chunks of work" - and then applying the tools above, tracking costs and effort, and monitoring and repeating the process to refine estimates, clients and lawyers likely will find that they reduce cost and, as important, make cost more predictable. That in turn should make AFA much easier.

Am I missing something, or is AFA easier than meets the eye?"

Source: Strategic Legal Technology, 15 November 2009