Alternative Fees — A Revolution?
In a recent article from Law.com, an industry observer stated “[a]lternative fee arrangements are like teenage sex. There’s a lot more people talking about it than doing it—and those that are doing it don’t really know what they’re doing. . . .” While yes, that is a juicy, headline-attracting quote, I tend to agree with it wholeheartedly.
If you simply look at the typical business model of a law firm, you see that the business model is not congruent with alternative fee arrangements. Most traditional law firms (small or large) compensate attorneys on billable hours; measure achievement and advancement on billable hours; pay bonuses on billable hours; maintain minimum thresholds for billable hours; and base many other firm metrics on billable hours. Every aspect of the firm business model is grounded in the almighty billable hour. So, how can a firm turn on a dime and effectively implement alternative fee arrangements — they can’t.
Don’t get me wrong, there is certainly a place for the billable hour business model. The problem is, with the economic downturn, many firms have decided to jump on the alternative fee bandwagon. Unfortunately, when your entire business model is based on the billable hour, you can’t implement an alternative fee structure without a major business model change. If you are looking for a firm that embraces a more client-centric alternative fee structure, make sure the firm you select embraces a different business model as well. Otherwise, you might be experiencing exactly what the above observer predicts!