Issues and challenges around pricing, alternative fee arrangements and value understandably still get plenty of air-time. They received top billing at the recent COLPM (College of Law Practice Management) Futures Conference in Chicago. I read through my notes from talks by two senior in-house counsel  – there are strong words and some important messages and tips for law firm leaders, particularly in non-USA jurisdictions:

In-house counsel are adopting different approaches to working with law firms around price and billing – some want a collaborative arrangement while others have had enough and are doing all they can to avoid using law firms. Firms need to take careful note of these developments. (graphic – Sean Larkan MPh)

Mark Ohringer, General Counsel of Jones Lang LaSalle (invented outsourcing of real estate management; top two property managers globally; 40 000 staff in 62 countries) didn’t pull any punches:

  • We have tried fixed fee deals and hourly billing with law firms – ‘in our experience it all sucks and the law firms simply don’t manage this well. I am flummoxed by how to deal with this – if I could have 100% of my legal work done in-house, I would – unfortunately for me, reality dictates otherwise’.
  • We minimise work we send to law firms as fees are not managed and are sky-high. ‘I choke when I see the bills that come through’.
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The impending demise of the billable hour as a basis for charging for professional services and in particular, for legal services, has been anticipated in various media for some time.  In support of this argument it is usually stated (often as ‘fact’) that this method of billing encourages inefficiency i.e. the longer it takes to do a job the greater the billable hours and the more lawyers can and will bill.

I have never believed it is as cut and dried as this.

While there are undoubtedly issues with time-based billing, it is a system which has worked reasonably well for lawyers and for clients, both of whom are good at managing the limitations so as to achieve a fair outcome.

In-house counsel have thrown a firm life-line to the billable hour as a basis for charging – Sharon Larkan Graphic – ArtStudio on iPad & PS ©

Survey of in-house counsel:

So it was interesting to read of the results of the inaugural Compass Corporate Counsel Annual Survey 2011 (pdf) conducted by Mallesons, and  reported on by Alex Boxsell (pdf with annotations!) in the AFR (26 August 2011) which indicated that:

  • a majority of corporate counsel still use billable hours as a basis for charging – there was a broad preference for this;
  • there may be criticisms and imperfections but it is still the core and staple system which has worked reasonably well for a considerable time;
  • half the respondents stated that 90% of the work they have done for them is done on the basis of billable hours;
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