This opinion article has been penned by Lawcadia Co-Founder and Chief Marketing Officer, Sacha Kirk, who is passionate about transformative change in the legal industry and seeking practical alternatives to the billable hour.
Successful transformative change starts with the client or the buyer at the centre of the legal services industry, with market dynamics responding to their demands and requirements, and in turn influencing the ways that products and services are provided.
In the corporate and commercial legal market, the client is typically looking for expertise and advise along with predictability, responsiveness, and essentially delivering what is required in a way that is timely, accurate and professional. At an emotional level, clients are also seeking assurance, trust, empowerment. These client needs, both functional and emotional, must be at the heart of any successful innovation, solution, or even new ways of working.
When considering an alternative paradigm and future for the legal industry, it must focus on the client, whose attention is on outcomes and solving business problems, not on the billable hours, hence the proposition of matter-based fees, fees for an agreed scope of work.
Certainly, price has a role to play in this paradigm, but as a fee for the agreed deliverable, not the sum of the time taken to complete it multiplied by the discounted billable rate of the allocated resources.
Fixed fee pricing and value pricing have some relevance to this topic and can certainly be utilised as a fee option provided to clients, however fee estimates, capped fees and many other variations may also be applicable and, as always, should always be client-oriented.
As the client values the outcome and completion of the legal matter, how the law firm delivers this should not be the focus, that is up to the law firm to manage. Emphasis can instead be placed on what the law firm requires to deliver excellent outcomes, such as the quality of instructions, scoping of the matter, the sharing of expectations around deliverables and budgets, and building a long term strategic business relationship. In this, you will notice that the attention is focused prior to the legal work commencing as opposed to the current tradition of attention after the legal work has been completed.
Change is uncomfortable and can generate fear, anxiety and frustration, especially in an industry that strives for the ‘right’ answers and is steeped in the history of tradition.
If clients do not ask for, demand or mandate change, law firms will be reluctant to proactively pioneer new ways of working unless the risk can be managed.
In the traditional law firm environment, change must also be ‘sold’ and presented to managing partners to highlight the impact on the bottom line or to demonstrate the revenue-generating possibilities. Client feedback, demands and requirements will always play a powerful at influencing the ‘pitch’ for change as there is an inherent reward in retaining or increasing revenue from the client.
It is important to note that not all law firms are the same and I know many forward-thinking and innovative firms trying new things, seeking systematic change, and transforming the ways that they add value for their clients.
There are clear benefits for both the client and their law firm in working together to focus on matter-based fees, scoping of work and delivering excellent outcomes. From the client’s perspective, it provides predictability, transparency and a structured approach to managing business requirements. Law firms can improve their relationship with their client, develop better understanding of their business and needs, improve service delivery and client satisfaction, and importantly, reduce their write-offs.
Data and information can also be shared to improve the performance of both parties with rich insights used to support constructive and healthy long term strategic relationships.
Successful law firms focus on retaining their existing clients, garnering more work from them and also attracting new clients. Meeting the inherent and underlying needs of their clients through focusing on matter outcomes, scoping of work and good budget management are all key aspects for delivering a sustainable advantage and in turn, delivering profit to the law firm.
Naturally, each law firm will need to carefully consider how they structure and orient their own processes and systems to support this new paradigm.
Strong project management capability is certainly necessary as are systems that support alternative pricing structures.
It may be that time estimates and rates will be utilised to prepare the client-oriented fee structures, especially in the short term. However, law firms will be incentivised to explore, strategise and implement new systems and processes to support and improve their practice and service delivery.
Law firms are not immune to market dynamics and the demands of their clients. Whilst law firms may not yet have the ideal or ultimate systems and structures to efficiently respond to a demand for matter-based fees, they are making progress and it is expected that firms will continue to invest, and certainly need to invest in this area, as clients express their need for it.
Interested in understanding how matter-based fees can be applied? Read our recent article 6 Success Factors for Matter-Based Fees
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