Today (28 December 2018), Lawyers Weekly in Australia published an article by Lachlan McKnight, CEO of LegalVision in which Lachlan comments on his ‘Observations on NewLaw in Australia in 2018‘. At the outset I should state that I don’t know Lachlan, and this post is no way directed at him, but is just a numbered-point muse on the interesting observations he makes in his article.
- ‘NewLaw’ (which is as meaningless a term as ‘Mid-tier’) is now an ‘industry’ – now that’s interesting.
- Agree with Lachlan’s comment in #1.
- While I agree with Lachlan’s comments in #2, I also believe the attitude here is changing within the more ProgressiveLaw firms. ProgressiveLaw firms realise that with greater risk (which fixed fees actually are), there should be a premium (much as there is with any insurance premium). EvolutionaryLaw firms go one step further and start to have a conversation about ‘value’ pricing.
- Three is an interesting comment: aren’t LegalVision in part owned by G&T – as an aside (re #3 above), didn’t Danny Gilbert recently state that he thinks that clients don’t want move away from the #BillableHour?. Nevertheless, I agree with a lot of what Lachlan says in #3 but would probably set the bar at $75 million (we still only have a population of 25 million and IBISWorld still only puts the WHOLE legal industry revenue in Australia at $20bn [NB: the top 30 law firms in Australia make over $50m a year – in an industry this small!]).
- I would totally disagree with Lachlan’s comments in 4 and in my opinion you only need to look at the stuff MinterEllison and KWM are doing (with whom I have no association) to see this point – to me – is misplaced. In fact I would go 180 and say many BigLaw firms are going through their Arthur Andersen/Accenture moment (the original ‘child eat parent’?).
- The biggest challenge NewLaw (and Mid-tier law if such a thing exists) has to #5 isn’t OldLaw, it’s the #Big4.
- Number 6 is a point I have tried raising several times this year – scale. Law (Old and New) see ‘scale’ as being bodies (in part because of time-based billing). If it ever was it not longer is and any law firm, new or old, that get’s the right answer to scale will have a point of difference and in such a competitive market this is crucial. The reality is that potentially the biggest winners here should be the so-called Mid-tier (who have a lot of the grey haired industry knowledge without, currently, the scale – but I fear they have missed the boat because of lack of investment).
- For #7, see my comment in #3 re G&T.
As always, would be interested in your views.
RWS_01's B[D]log 
Good comments Richard, though not sure I agree with #3 that fixed fees are more risky. Presumably you mean if you are charging based on an estimate of effort, it might take longer than expected. Firstly, if the law firm has really developed processes and systems there should be a lot less variability in effort anyway (and the labour component should be much smaller than it otherwise would be), and an accurate scope and project management should assist further. But also if the basis of the fee is really on value and outputs – and not a proxy for time – where is the extra risk? Hopefully by helping the client to see return on investment, not just cost, the firm can charge more than it could for straight hourly rates, as the value from successful delivery should greatly exceed the number of hours required to deliver it.
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Agree with you here Gene.
My point, such as there really is one, is that currently law firm processes and systems are such that we don’t really have the data to quantify the fixed fee and thus there is an element of risk associated with the fixed fee. It’s probably for this reason that some in-house GCs still prefer the hourly rate (as Danny Gilbert states).
As you point out though, appropriate process and systems (with data) should change this; but nonetheless cost certainty should not equate ‘cheap’.
Hope all is well in NZ.
R
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Thanks Richard, yes agree with all of that.
Hard to come up with a fixed fee when:
– you don’t know how much effort will be involved, and are still going to do the work exactly the same way you did when you were charging hourly rates*
– you probably also have no idea of what the value of the work is to the client either.
This recent article from Richard Burcher is pretty good I think: http://blog.legalmarketing.org/hourly-billing-and-ai-the-perfect-pricing-storm
* the way you do the job will actually be quite different to the last time you did it because you’ll make up a new process this time based on whatever documents last crossed your desk
All good down here thanks. Looking forward to 2019!
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Gene – have to say I find Richard Burcher a conundrum – there is no doubt he is a good cost assesser, but I questions his credentials and ability to price legal services.
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