12/6/11

The End of Traditional Billing (with no question mark)

Recently I came to the conclusion that the proper way to make a bold statement without having to truly defend it is by adding a question mark to the end of it. That way you can say you are only implying a possible outcome and not actually making a statement. This blog post, in contrast, is a statement.
When people talk about alternative fee arrangements (AFAs) there is a tendency to focus on the fact that lawyers are slow to actually adopt them. In Texas we refer to this as all hat, no cattle. The implication of this thinking is that that AFAs are not embedded in the legal market and therefore things have not changed. In my experience, the real question should be focused on whether traditional law firm billing practices still exist.
In my presentations and various meetings with lawyers, I always enjoy the moment when one lawyer invariable says, “I don’t do AFAs.” My response usually starts with, “Oh – so your clients are fine with your rate?” Or, “Do your clients ask for budgets?” These and other questions lead to a discussion which quickly changes tenor. We immediately start talking about how things have fundamentally changed. But for some very specific exceptions, the old days of naming your rate and billing your time are gone.
So instead of focusing on how many clients are using fixed fees, I believe the conversation needs to be redirected to what is the current pricing dynamic between clients and lawyers?
What has really changed is that buyers are now embracing a more informed and empowered role. Some might call this a Buyers’ Market, but I think that over-states and over-simplifies the case. Instead I think of it as an emergence of a competitive pricing market - one where participants now engage in real price negotiating activities.
My claim is that traditional billing is dead. Some people don’t know it yet and continue to act as if it still exists. But the change is already here. Of course exceptions will always exist, but the new rule is competitive pricing.
The real question is when will people figure this out?
(Had to end with a question mark.)

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1 comments:

Anonymous said...

Our firm uses a three-tier rate structure, and not a traditional, across-the-board, hourly rate. It allows for flexibility depending on the complexity of the work, and the level of expertise required.

 

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