Last week I wrote about the fictitious client letter sent to the recently retained outside law firm, wherein the general counsel sets forth his expectations.  As noted in that post, the “letter” was brought to us by Bob Denney in one of his Legal Communiqués. ’s Legal Communique, wherein the law firm is admonished/warned about not meeting the client’s service expectations.

This week I will look at the general counsel’s fee and billing expectations, which include:

  • stick to the agreed-upon budget;
    • Ensure that the bills are “accurate, free of errors and inconsistencies and adhere to the agreed-upon formats and protocols”;
    • invoice regularly (thereby helping the client with its cash flow);
  • (If applicable) since our policy is to minimize hourly fees in favor of fixed fee or incentive fees, if you misjudge the time spent on our matter, that is your problem since we do not “pay for inefficiency by outside counsel”;
  • Besides these basic requirements/expectations, we expect your firm to build on our relationship by “delivering enhanced service.” Ways to do that include utilizing current technology, maintaining knowledge management systems (and presumably, if the letter were sent today, it would include legal project management), and keeping us up-to-date with law alerts, newsletters, CLE seminars, etc.; and
  • Periodically seek client feedback meetings regarding both the quality of the work product and the service provided.

Finally, our company has not retained your law firm simply because of its expertise. There are other firms and lawyers equally qualified to handle our legal needs. Your firm was retained because we believe that you will serve us well and meet and “perhaps you will even exceed our expectations.”

As noted previously this client letter was fictitious, but make no mistake, clients expect to be treated as outlined here, even if they do not expressly commit it to a letter. Without a doubt both Denney and I agree on that.


This year at the Legal Tech conference the keynote address was by Jim Calloway, a law practice management guru, who serves as director of the Oklahoma Bar Association’s Management Assistance Program.  The highlights of his much heralded address on the future of law practice is now a podcast that is worth listening to. It runs less than 15-minutes.

Here’s a brief synopsis of what it contains:

  • Supply and demand is catching up with lawyers.  There are too many lawyers*, new law schools being created (with ABA scrutiny being “less than rigorous”) since they are money-makers for universities, and, most importantly, there aren’t enough jobs.  According to the upcoming book Failing Law Schools by Brian Tamanaha law schools are producing 45,000 new graduates annually, while it is projected that there will only be 25,000 legal jobs available per year through 2018; and
  • Technology is changing everything from online non-lawyer documents to virtual law firms.

So, what are smart lawyers to do?  According to Calloway:

  1. Pay attention to what is going on in the industry.  There is a new normal, and lawyers need to be tuned-in to trends (and reality I might add);
  2. Focus on legal project management and legal process management to be more efficient, and generate legal products/documents from “A to Z” to be at the ready— so lawyer time is spent on what is unique to a matter, rather than the repeatable routine; and
  3. Recognize and utilize the digital world in your workflow.  Although the paperless office never did (or will) happen, adopt more computer files on your network and Internet to be accessible to everyone who needs them, and so they are available remotely.

Bottom line: the legal world is changing in many ways, including downward pressure on fees.  Unless lawyers are more efficient (via project and process management), develop better systems to work smarter and in less time, and accept alternative fee structures (e.g., fixed fees) that work for clients and for lawyers, the new normal ain’t going to work so good.

And that’s where marketing comes in.  If lawyers accept the new normal and adapt to it, including with systems, document assembly and greater efficiencies, and let clients/referral sources/prospects know about it, they will be more successful in landing all the work they can handle.


*Sharon Nelson, president-elect, Virginia State Bar interjects that 22% of law students think it’s “a bad idea to be in law school” in light of the climate for jobs.

While one recent survey says that “reducing spending (with outside law firms) is a top priority for corporate legal departments”, another says that regional firms may be in position to gain more work over BigLaw. Both surveys were reported by Law360, the newswire for business lawyers.

Last week Robert Half Legal’s 10th Future Law Office survey was released; and 25% of in-house counsel expect to reduce work with outside law firms. As Charles Volkert of Robert Half put it, there is “the increasing need for law offices to provide more value-added and cost effective legal services.”

Who is in a better position – taking into considering agility and less bureaucracy – than regional firms to do just that? That’s were the second survey by the Corporate Executive Board Co. and CT TyMetrix comes into play. Although only in summary form at this stage, and not due out until September, it does provide some valuable insight nonetheless.

This latter project involves evaluating rate structures, and rate variations in what some firms charge clients, as well as other billing “red flags.” According to surveyors, the final report will “give corporate counsel insight on ways they can save money, including using regional firms.”

Most regional firms already know that, as I’m sure do many in-house counsel. So, why wait. Let them know that your small to mid-sized regional firm can help them start saving money now.

During Jackson Lewis’ annual corporate counsel conference, as reported in The National Law Journal and on’s Small Firm Business, alternative fees are “putting down deep roots.”

This got my attention, because although there has been much written about the subject including on this blog, it hasn’t seemed that alternative fees were catching on all that quickly. Percentages of law firm fees, other than the billable hour, have ranged from as low as 2% to as much as 20% over the next ten years.

Accordingly, the panel on “The Death of the Billable Hour?” at the Jackson Lewis conference struck me as particularly interesting based on the report that “many companies and law firms now report that as much as 40 percent of their work is billed on alternate billing arrangement that include flat fees, phased billing and contingencies.” That comment was attributed to Michael Roster, chair of the Association of Corporate Counsel’s Value Challenge. If anyone should be getting accurate percentages, it seems to me that would be the ACC.

So, if that percentage is attributable NOW to value billing, what can we really expect in ten years? And, if it is only going to increase, there are two points I’d like to make:

  1. Don’t get left behind. Make sure your business development efforts include offering value billing asap; and
  2. Start looking into project management trainings also asap, so that your firm is managing its matters efficiently enough to ensure that alternative fees will actually work in your firm. For more on that, take a look at my post of last week on what my colleague Jim Hassett over at LegalBizDev is doing and written on project management.

Evan Chesler, presiding partner at Cravath, Swaine & Moore shocked a lot of people within the legal community with his recent opinion piece on advocating the death of the billable hour.

Basically, he states that the billable hour “makes no sense.” Making more money by dragging out a matter (or in his analogy, making more money by getting “bogged down a land war in Asia”) is “frankly nuts.” Pretty strong words from a firm that doesn’t really have to worry about clients questioning their bills, I wouldn’t expect.

Even though tons of folks (too many people to mention here) in blogosphere, including yours truly, have long advocated doing away with the billable hour, Chesler’s comments, one could argue, clearly takes the debate to a higher level. Not many would expect such a position from a BigLaw firm of Cravath’s stature. Now maybe the concept of alternative fees, although not new, will take on a bit more momentum.

Although there have been many different suggestions for alternative fee arrangements (see Continue Reading below for a few of my posts on the topic), I found a couple of ideas from a named partner in a 10-lawyer Philadelphia area firm worth considering.  Gary Lentz of Bochetto & Lentz wrote an article published in The Legal Intelligencer and on Small Firm Business suggesting a couple of approaches that could attract new clients and enhance fee opportunities  in this down economy.

The following two variations on the same theme are worth consideration by firms of all sizes:

  • Multi-phased Fee Agreements
    • Phase I – an initial flat fee to evaluate the case, develop strategy, negotiate and “prompt resolution” (with a potential for a bonus) and drafting complaint, if necessary;
    • Phase II – a mix hourly, fixed fee and/or contingency, if necessary to file and pursue the matter in court.
  • Blended Contingency Fee Agreements – an initial flat fee to cover the evaluation of the case and drafting the complaint, followed with a contingency fee based on outcome of the matter.

Take a look. They may just work for your firm, particularly with clients who are encountering their own uncertainties in the current economy.

Continue Reading Now Is The Time To Consider Alternative Fees

At the Legal Marketing Association annual meeting last month in LA, the chairperson and the general counsel of the Association of Corporate Counsel, along with two other members on their panel, let law firm marketers know how they felt about the increasing rates and associated legal costs of outside counsel.

According to a post by Mark Beese on his Leadership for Lawyers blog entitled “We’re Not Going to Take It,” the ACC reps laid out the realities in-house counsel are facing, specifically:

  • Pressure to contain and predict legal costs,
  • Frustration with double-digit rate increases,
  • Off-the-scale associate salaries (and corresponding hourly rates); and
  • Perceived unwillingness by law firms:
    • to discuss alternative fee arrangements, and
    • create lower cost methods for commodity work.

So, what’s my point? Talk to the in-house counsel you know about your fee structures, and willingness to discuss alternatives to the traditional hourly rate. There’s a lot of work out there for medium-sized and smaller law firms because of their lower fee structure and flexibility. 

If large firms aren’t yet fearful as to how serious corporate counsel are about finding solutions to these pressure points, they will be soon enough. And just think how you can help them along by picking up more of their corporate work in the meantime.

The billable hour has been criticized by many people in the legal industry, including me. But, from a business development standpoint, I’m not against the billable hour per se as much as I’m in favor of using alternative fees (fixed, blended rates, etc) to increase a law firm’s marketing advantage. That’s not entirely true; I am also against the hourly billing system because clients generally hate it. But I digress.

A story by Leigh Jones that appeared in the New York Lawyer Monday claiming the death of the billable hour (free registration required), may have just given 170-lawyer Ford & Harrison the marketing coup of the year. It has eliminated the associate billable hour requirement for first years in their firm. That will:

  • Please new associates (and aid recruiting),
  • Probably make clients happy (for reasons that aren’t spelled out. Certainly the work will have to be picked up by more expensive associates), and
  • Annoy competitors (for obvious reasons).

However, the jury is still out as to whether other firms will follow, or even if Ford & Harrison will continue the program after trying it for awhile. Although the firm has not discarded the billable hour system, by removing the requirement for first years, they may have allowed the camel’s nose to get under the tent. We’ll see.

Nonetheless, it is a gutsy move.

The results of a survey by Bruce MacEwen at Adam Smith, Esq. leads him to conclude that based on responses by 63% of respondents (there were only 87) “the billable hour will remain intact for all practical purposes.” The responses to the question “Will the billable hour ever lose its dominance?” are:
*Yes, but only for commodity work – 31%
*Yes, pretty much across the board – 29%
*Only for clients who absolutely positively insist – 32%
*Over my dead body – 8%
I have a slightly different slant. For years Bill Cobb of WCCI-Cobb Consulting, a consultant for more than 25 years to law firms on strategic and value-added issues, has used an interesting graph to depict the risk factor and legal expertise need based on the variables of the “volume of legal work available” (X axis) vs. “relative value added” (Y) by lawyers. What is especially interesting about the chart is that (based on ABA figures a few years back), commodity work was 60% of volume of legal work available.
If that is still the case (with technology it is likely a higher percentage today), based on Bruce’s survey results above, it can be argued that 60% of the respondents believe that hourly billing will lose its dominance for the majority of legal work available to lawyers.

Continue Reading Is Billable Hour Here to Stay?

Over the years, ABA surveys have indicate that legal fees only get ranked between number 5 to 7 on the lists of top concerns by clients. This fact often escapes lawyers because clients DO COMPLAIN about the cost of legal services. However, when one looks deeper, often what one uncovers is that clients are really complaining about the services provided, the lack of attention to their matter, the failure to communicate adequately, unpleasant surprises, overworking a file, and the likes. Basically, clients are complaining about the service and value received.
Copywriter and direct marketer Bob Bly at blog took issue with a statement by the author of a new book when he said “All things being equal, customers will buy on price.” Bob particularly challenged the phrase “all things being equal,” since things are rarely that simple. I completely agree, not just because it is impossible to place legal services on equal footing, but because in my experience in talking to firms’ clients, price just isn’t the determining factor in using one law firm over another.
So what is the answer? Do better than the competition on the quality of your services, and on bringing real value to clients’ matters. Don’t compete on price. Furthermore, if you are cheaper, you may not be as good in the eyes of potential clients.

In earlier posts I have talked about hourly billing and how it is bad for clients and lawyers, and how small firms can take advantage of alternative fee arrangements (here and here).
Ran across an interesting slant on the billable hour issue on The Greatest American Lawyer blog. The premise is that the hourly billing system is based on trust, and I must say that I hadn’t focused on that angle before, even though it is so obvious. From the client’s perspective, that is exactly what is going on, as in

“You can’t tell me how much my legal issue will cost me, but you will charge me by the hour (billing periodically) until the task is completed at some unknown point in the future, hopefully with a favorable result.”

That’s about it, right? There is a whole lot of trust wrapped up in that statement I would say. I really believe trust is warranted in the majority of cases. However, how much better would the client feel if they KNEW what their legal matter would cost them, or at least a range. Having been on both sides, I can tell you how I felt when I was the client subject to hourly billing, and I didn’t like it.
How do you think you would feel? Maybe it is time to consider alternative billing for your clients.