Alternative Fees (Part 25): Experts predict the future
Near the end of my recent webcast on “Alternative fees: How to implement sustainable programs for the long run,” I asked four senior partners at AmLaw 100 firms to speculate about the future.
Some said that alternative billing will grow substantially, and that their firms are investing heavily to prepare for this transition. Others stressed that no one knows what the future will hold, and that different firms have different views and strategies. But all four agreed that it is prudent to be prepared for change, even if it does not come quickly.
Several panelists noted that the transition to non-hourly billing still seems radical not just to lawyers but also to clients, and even to some of the general counsel who write RFPs asking law firms for creative billing solutions. As explained in Part 13 of this series, many general counsel want to talk about alternative fee arrangements, but at the end of the day what they really want is a deeper discount on hourly rates.
Bryan Ives of Alston & Bird noted that there’s been “a lot of rhetoric.” While he’s had many discussions about alternative fees, to date only a relatively small percentage have actually led to implementing alternative billing arrangements. Similarly, Lisa Damon of Seyfarth said that her “pet peeve” is that she often has discussions in which GCs are enthusiastic about alternative arrangements, but a few days later gets a spreadsheet back from them asking for lower hourly rates
According to Steve Jenkins at Haynes & Boone, whenever he meets with in-house counsel these days, they want to talk about predictability, efficiency, and alternative fees. True, the topic also came up in prior recessions, and at that time it did not lead to major changes in the way law firms operate. However, this particular recession seems broader, deeper, and more global than in the past, and the dialogue over alternative fees seems much more serious, in part because of the ACC Value Challenge.
In Jenkins’ view, the current economy and marketplace are likely to lead to a paradigm shift, which “probably will happen.” If there is a paradigm shift, law firms will be forced to change in many ways to lower costs and increase efficiency. Haynes & Boone is preparing for that future. If the paradigm does not change, they believe the firm will still benefit by being able to offer clients lower cost service and improved efficiency.
Kerry Notestine of Littler said that it takes a lot of effort from both clients and firms to see if alternative fees work, but it’s worth the effort. He believes that the clients and firms that are on the leading edge of this movement will succeed in the legal marketplace, and many of their competitors will not.
According to Lisa Damon, Seyfarth strongly believes that the world is changing. “Firms are learning to work and think differently, and that’s good for clients. There is less rework, more efficiency, and better training, which will benefit everyone regardless of how it is priced.” In short, “It’s a better way to do business, and I don’t think we’ll go back.”
Several panelists noted that you “can’t put the genie back in the bottle,” which is a sentiment I’ve also repeatedly heard in my ongoing survey of alternative fees at the AmLaw 100. There is nothing easy about switching from hourly billing to fixed or contingent arrangements. But once clients see how it works, they will never go back.
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