Earlier in February, I sat in on a webinar provided by Altman Weil on Alternative Fee Arrangements (AFA). I had planned on getting a bunch of work done while I listened to the same ideas I’ve heard numerous times before. Fortunately, I didn’t get much work done since the program had some excellent content.

Two Stats

A recent review of large firm web sites (the AmLaw 100 per my notes) noted that only 23% mentioned AFAs. Compare that to 87% of the program attendees reporting that clients have asked about AFA options in the last 6 months. (Personally I was quite surprised this number wasn’t 100%.) The moral of this story is clear: Let clients know you are willing and (hopefully) able to address their requests for alternative fees on your web site.

One of the anecdotal stories shared was of a client asking one of their panel firms to share their AFA options with them. The firm dutifully provided an extensive list of options they would be willing and able to provide. Contrary to what you might predict, the client was not happy. She wanted to know why the firm, if it had all these abilities, had not offered them up sooner. I suppose this takes us back to our prior moral: Don’t wait for clients to ask. Instead proactively offer them AFAs.

The “Painful” Stat

A November 2009 survey shows that in-house counsel were being directed to reduce their budgets by 11.5% – on average. The presenters commented this number is probably higher now. 60% of these budgets go to pay law firms. The impact here is also obvious. However, the smart firms will see the opportunity here.

First – you need to know the pain. Imagine you are the GC and your job is dependent on you cutting the budget. Your choices are, 1) cut law firm fees, or 2) fire someone who has worked with you for 12 years. So this is real pain. The GC can only squeeze so much out of outside counsel and still protect the company. And the GC does not want to look a friend and colleague in the eyes and terminate them. This high level of pain presents an opportunity. The GC needs help and a law firm is in the best position to help them. So become a trusted-advisor in a whole new way. In partnership with the GC, help them respond to the needs and demands of the client – the company. Of course AFAs will play a prominent role in this effort.

The economic downturn presents numerous opportunities. Firms and in-house counsel are now willing to embrace ideas and approaches they would have never considered in the past. Law firms and their clients both want and need AFAs and are apparently ready to embrace them (per our stats above).

So as Ron Baker says, it’s time we “Just do it.”