Chicken Or Egg? Will The Switch To Alternative Fee Deals Come From Clients Or From Law Firms?

If you have at all followed the issue of billable hours v. alternative fees, there has been this assumption that unless and until clients – particularly the “Fortune 500” types of clients upon which big firms depend – demand the switch to other methods of billing, the billable hour will remain triumphant. Indeed, that was the point of my very first post on this blog when I wrote about the now-famous Slate article condemning the billable hour.

That assumption is again front and center in a recent blog post by Mark Beese in his Leadership for Lawyers blog. In his post, he reports on the recent national conference of the Legal Marketing Association in which representatives of the Association of Corporate Counsel (ACC) said, as paraphrased by Beese, “we’re not going to take it anymore” (Beese even has the video of the classic Twisted Sister song of that title on his post). What aren’t corporate counsels going to take anymore?

• Uncontained and unpredictable legal costs;
• Double-digit percentage increases in hourly rates;
• Off-the-scale increases in associate pay; and
• Law firms’ unwillingness to discuss alternatives to the billable hour.
  

Supposedly, the ACC has established a committee that will come up with best practices on how to contain outside legal fees and teach the same to General Counsels.

Is this the beginning of the end for the billable hour? Will this ACC committee start the corporate client revolution toward alternative fees? Perhaps.

But not likely, according to Ron Baker at the VeraSage Institute in this post. Writing about the same ACC presentation at the same conference, Baker summarizes it this way:

Ho hum. I’ve heard this all before, ad nauseaum . . .
Allow me to do something I rarely do, make a prediction: This ACC committee will amount to nothing. Not because its goals aren’t correct—they are. Not because law firms need a push into alternative pricing paradigms—they do.
But because the impetus for change must come from law firms, not their clients. I know this sounds counterintuitive, but I firmly believe it’s true . . .

Baker’s point is very counterintuitive. I would urge everyone to read his post fully (and the link in his post to an earlier article he wrote) to follow his reasoning.

Who’s right? Will alternative fee arrangements become the norm because clients demand them, or because more firms will offer them? Only time will tell. But I suspect that if alternative fees are going to become the norm in the legal world, the answer is: both. It will be because there was both a greater demand for alternatives to the billable hour and more firms like mine will decide to switch to alternative fee structures.