There is a lot of material floating in the legal press about the sustainability of the hourly rate and lawyers fees generally.
Essentially lawyers fees continue to rise against a background where many businesses are reducing their rates. Consider this in the Law Society Gazette:
"Two out of three in-house counsel would pay higher fees for high-value work if they were charged less for routine matters, according to research published this week.
The Commerce & Industry (C&I) Group and accountants BDO Stoy Hayward found that, as hourly rates continue to increase, in-house counsel are under greater pressure to cut the costs of legal services.
The research showed a growing dissatisfaction with the hourly billing model, with one major corporate complaining that firms often billed for time that required no legal expertise – such as chasing people for information. Some 94% of all respondents complained that hourly billing provided no certainty over final costs and 82% that it gave no incentive for firms to be quick and efficient.
Two-thirds of respondents had already tried alternative billing models, with 47% favouring a menu-style approach that mixed capped, conditional and fixed fees. The majority were also keen to see value and fees more closely aligned, although defining value remained problematic.
Deepak Malhotra, chairman of the C&I Group fees focus group and general counsel at InBev, said: ‘Value is about meeting the needs and expectations of customers – of in-house counsel. But it is a two-way process and we should recognise that billing and its correlation to value is just one aspect. Often value and fees are linked to the quality of instructions. When the needs of in-house counsel and private practice are closely aligned, there is a better platform to build mutual value. We need to understand what value means to one another before we can measure it.’
Richard Tapp, company secretary and director of legal services at Carillion, told the report: ‘Law firms find it difficult to contemplate charging less than they would on hourly rates, and they find it difficult to explore the corollary of that, which is that sometimes they would be able to charge more.’
One respondent was concerned that law firms ‘focus purely on chargeable hours and not on providing the service the client wants at an economical rate.’ Another said: ‘Law firms are disconnected from the commercial realities. Almost all commercial organisations are required to make year-on-year cost savings – apart from law firms, apparently.’
The C&I group and BDO are now aiming to bring together in-house counsel and law firms ‘to work together to produce a practical toolkit which can help shape a different and mutually beneficial dialogue on fees’."
My views -It is very nice to keep your head in the sand and many of us have an inherent fear of change but clients are looking for differing ways to seek value and ultimately they will get it. This is a challenge for all lawyers. The real danger is someone is going to come out of the blue with a new business model and whittle down fees. How should lawyers respond?