In a Law Firm Leaders survey conducted by the Association of Corporate Counsel and The American Lawyer, one of the more interesting findings was that 93% of law firms reported being willing to discuss flat or other alternative fee arrangements in 2010. However, in responding to the same survey question, only 61% of general counsel at companies with revenues of $1 billion or less and 69% at companies with revenues greater than $1 billion reported finding firms willing to entertain non-traditional billing arrangements.
Which makes it sound like there is not much meeting of the minds out there about where non-traditional billing is going. Clients aren’t perceiving firms to be as willing to discuss non-traditional billing as firms say they are.
Yet some of the other statistics reported from the survey shed additional light. The vast majority of legal work continues to be done on a billable-hour basis, with nearly half of respondents from corporations with annual revenues over $1 billion saying that their companies still base 95% or more of their legal spending on the billable hour. On the other hand, 91% of firms leaders said their firm used a flat fee for entire matters in 2010, up from 82% in 2009, and nearly 93% used a flat fee for some or all stages of matters last year, up from 78%.
So in spite of what looks like a disconnect between what clients perceive about firms and those firms’ actual interest in alternative billing, in fact clients are still relying on the billable hour as their major gauge of legal value. And law firms are, perhaps slowly but nonetheless, ratcheting up their offerings of fixed fee services. Maybe the two will eventually meet in a common perception.
This mismatch of perception and reality harkens back to a similar one reported a few years ago about the difference between what GCs expect from their outside counsel in terms of opportunities for giving feedback and what law firms do to provide that feedback. Over 80% of GCs said they expected to be asked by their counsel about their satisfaction with the legal services performed, while only 20% of law firms said they routinely solicited comments from their clients.
That disconnect resulted in a number of responsive firms setting up internal departments or hiring consultants to send out client surveys or contact clients personally for their feedback. Those firms that instituted those programs, Reed Smith among them, extracted valuable information that they wouldn’t have gotten otherwise–information that helped them provide higher quality service for existing clients and expand their reach into servicing other client needs.
Marti Candiello, now founder of ClientBridge, was Reed Smith’s Director of General Counsel Relations and now offers her interview and feedback services to any firm willing to align perception with reality. Comments from her advisees make the value of the exercise clear. "Clients said things to you that they have not said to us, even though we try to get them to be completely frank with us…about any shortcomings in our performance. They also mentioned opportunities that go beyond what we had heard about from them. It shows the value of the exercise.”
Here’s to the convergence of perception and reality!