 By Audrey Rubin I heard from several readers of my last article, Taking on the Billable Hour. One noted professional, David van Zandt, the Dean of Northwestern University School of Law and a professor of “Practical Issues in Business Law,” pointed to the very real dilemma that many corporate law departments, i.e., clients, are not really clamoring for project based fees. Without General Counsel demand, he posited, law firms may not have sufficient incentive to modify their billings. I hear that observation time and time again from my law firm clients. How can this be so? The Association of Corporate Counsel has developed an entire doctrine called The Value Challenge. Right at the top of its list of 40 Practical Ideas for corporate law departments is setting flat fees for segments of matters. For all of the harping on changing the system over to alternative fees, do the clients really not want the change? Some commentators have suggested that corporate counsel are in the driver’s seat. Aware of the inherent waste and lack of efficiency with hourly fees, clients are supposedly pushing for project or value based billing. (Altman Weil has an article on this called Tying Outside Legal Costs to Value.) But others claim that GCs just don’t know how to evaluate success or budget to a flat fee. There is further admission that law firms don’t want to invest the time or energy to construct different pricing models. One has to wonder whether the firms’ refrain that GCs are not really interested in departing from the billable hour is based in part on myth – are the firms’ simply finding excuses not to change their ways? Are they waiting for other firms to go first? Law firms that understand business margins understand that better pricing means more profits. One also has to wonder why corporate counsel claim to want alternative fees but then don’t demand or agree to them. Are the GCs also reluctant to change their ways? Are they giving lip service to what they hear is a trend, but still waiting for others in the corporate crowd to go first? Those who wait “for the next guy” will not have the opportunity to set the rates where they want them. They will have passed up the opportunity to grab market share before others. The fact is, implementing flat fees, project fees, or success fees is not that hard or expensive. It can be done with existing data and systems. It can be done in small segments. But, alas, for both in-house and outside lawyers, alternative pricing does represent change – the lawyer’s nemesis. About the author: Audrey Rubin is the president of Rubin Solutions, Ltd. Rubin Solutions specializes in implementing profitability improvement methods at firms. “We will – without a doubt – make you more profitable.” Page: 1 of 1 pages for this article
|
|
|---|
