Do Alternative Fee Arrangements Really Lead to Better Value for the Client?

At last week’s COO & CFO Forum – Managing in the “New Normal”  hosted by The Hildebrandt Institute where we were a sponsor, the vast majority of the topics and discussions were centered on expense reductions, Alternative Fee Arrangements and the client’s perception of value. The speakers emphasized how Law Firms and Lawyers must be more like project managers, how law firms must be able to work under fixed fees, and how clients are getting away from the hourly billing model.

After listening to this for one and half days I had to wonder if Law Firms were not looking at this in the wrong way. As a buyer of legal services, for simplistic, routine legal matters I would say a fixed fee is appropriate. However for more complex issues, or where there could be a long-term impact, is it? Do I want it to be knowing that the firm is going to minimize costs by having the lowest paid staff work on my matter in order to make a profit? I don’t think so.

I asked Jim Jones of Hildebrandt and Ann Trotter of Viacom (two of the presenters) whether there were any studies completed showing a correlation between fee arrangement and the success of the matter.   There are not and most information is anecdotal. Are clients taking a very short-term view that by reducing current legal spend, they are actually increasing their costs long-term by having less-favorable outcomes?

If there was an area that should be studied, this is it. Anyone game?