‘Do fixed fees need to be cheaper than hourly rates?’

Earlier this week Corporate Counsel published an article (“What GC Thought Leaders Experiment Is About (Hint: Not Cost)“) by Firoz Dattu and Dan Currell of AdvanceLaw in which they comment on a recent open-letter by 25 GCs [‘GC Thought Leaders Experiment’], which rightly has received a certain amount of industry attention.

Despite indicating that cost is not the primary issue in the project, Data and Currell stated:

“Here are three of the questions we are excited about—and these are just the beginning:

[First]…

[Second]…

Third, flat fees. A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper. You now know that we think this is a half-question (and not the interesting half). The whole question is: do alternative fees work better, all things considered?”

Let’s look at that third question again with highlights by me:

“A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper.”

Actually, that’s a very, very long way from the natural question.

But then we get…:

“The whole question is: do alternative fees work better, all things considered?”

And while that question may seem a lot closer to the answer we seek, it is still – well – the wrong question.

Flat fees, or other alternatives to the billable hour, should not be about whether they are cheaper. In many cases they are more expensive.

Nor, per se, are they about whether they work better (and by that i am unfairly reading “easier”). In some cases they are far more complicated and getting them to work is a real art of communication (that is, if you have scoped the matter and given appropriate thought to LPM, etc).

But, crucially, what alternatives to the billable hour should be about is simple: ‘Do they offer better value?’; To the client? And to the lawyer?

And if they don’t, the simple truth is this: maybe you shouldn’t be using them.

rws_01

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