Two reports released earlier this year indicate that law firm use of alternative fee structures have slowed this year.
http://lawfirmpricing.com/2019/05/31/2019-altman-weil-1/
https://biglawbusiness.com/law-firm-sites-talk-about-alternative-fees-but-use-appears-thin
Among the reasons specified are:
- The strength of the economy that in recent years has eased concerns of clients about legal fees (which, of course, could change dramatically if predictions of an upcoming recession turn out to be true).
- Corporate counsels are comfortable with the billable hour, as it is more predictable and with which many — being alumni of law firms— are more familiar.
- Corporate counsels are finding that insisting on discounts is a simpler and more effective way to reduce legal fees than experimenting with alternatives.
But, our experience over the last several years indicates that most in-house GCs and law department operations managers are focused on more fundamental aspects of law firm representation than the price, such as reporting protocols, staffing of matters, responsiveness, and overall strategy. Those factors tend to have a greater impact on the concept of “value” than the method of billing. Moreover, many in-house counsel and executives are using analytics to determine how many hours it should take—particularly with effective use of knowledge management — to complete certain tasks. As a result, they are beginning to realize that, in some instances, hourly billing may actually produce better results at a lower price than a flat fee or other alternative pricing structures.
The key here is not to focus on alternative pricing per se, but on the entire way that legal work is being handled today versus ten years ago. That’s where real change has occurred.
