Over the last year or two, it has been interesting to watch as the dialogue on alternative fee arrangements has moved from a push coming from innovative in-house counsel looking to draw law firms into the discussion, to now law firms championing the discussion as a marketing tool.
During a recent Canadian Bar Association webinar firms were being advised to “be known as taking steps forward to alternative fees and process management.” That signaled that if firms didn’t get it before, this is now officially a client development opportunity. If they aren’t already doing it, they are going to be losing ground more than ever before.
News flash: it doesn’t have to mean reduced profits. As Tyler Langdon of Cognition LLP pointed out, external counsel’s perspective should be that advancing alternatives to the billable hour will: “strengthen relationships, increase market share, improve business opportunities and actually enhance profit.” For the client, it should translate into budget predictability; value added service; and a roster of lawyers who understand the business — all things in-house want.
A story in this issue’s news section (see page 8 of digital edition) explores the thoughts and ideas put forward by three law firms — Borden Ladner Gervais, Gowlings, and Cognition — during that webinar, about the state of the billable hour.
The session began with a fairly thorough overview of what all the fee arrangement terms mean and where they can be applied best — one of the better ones I’ve seen thus far. It also emphasized the importance of properly scoping work ahead of time — this puts the ball both in the court of in-house and external to have a good, “mutual understanding of the mandate.” It’s an area where parties with good intentions to try new arrangements have failed miserably in the past. Expectations are everything and they need to be managed well throughout the process.
The discussions around terms and fee arrangements should not be underestimated — a couple of senior in-house lawyers have told me while they have heard all the buzzwords around AFAs and been to several seminars, they often leave still unclear as to how the different fee structures really work. These are in-house lawyers with significant experience — if they aren’t being sold, there’s a big problem.
What I find interesting is when I think back to some conversations I’ve had with in-house counsel in small departments — of under three lawyers — they have already been doing this kind of thing for years with overseas, regional, or alternative providers. By necessity they sought out alternative delivery models to get the work done, often in start-up situations.
It seems the larger and mid-size departments are the ones with the most work to do in this areas and where the firms have the most to gain.
Langdon’s advice for the firms was to be proactive and “start with clients you trust” and come from an agreed perspective of fairness where “nobody gets beat.” There’s going to be an interesting period where both parties let down their guard a little to allow the new dynamic take hold. He refers to this as the need to “pull hard and pull together” — I think that’s the piece that’s probably been missing all along.