"I don’t care what you raise your rates to, just make sure you quote me a 10% discount."
In a number of meetings I have attended recently with leaders of large firms, similar stories are being told. The firm proposes an alternative fee and the client declines to pursue the alternative fee, instead asking for "10% off" the firm’s hourly rates. According to these law firm leaders, at least some personnel at their clients are not really interested in cutting legal spend but instead are concerned that they be able to demonstrate this 10% savings. I’ve heard enough similar stories that either there is a grain of truth to the stories, or, alternatively, there is a single client out there obsessed with this 10% discount and I was simply lucky enough to be in meetings with the client’s law firms. I’m going with the former.
I’ve spent enough time investigating, proposing and writing about alternative fees to know that reactions to non-hourly fees for a continuum that is quite long. I also have heard enough to know that when many firms propose non-hourly fees, the proposal amounts to "pay me a lot up front and then a lot more if we get a result’." There is no true risk sharing on the firm’s part.
Suffice it to say that when firms hear the "10% solution," they are smart enough to know how to set their "base rates" so they get exactly what they want when the 10% solution is applied. Presto! Through the magic of a spreadsheet, the client saves nothing and believes it is saving 10%! Everybody’s happy, right? Everyone except for the CFO, shareholders, and the General Counsel whose bonus is predicated on reducing actual costs instead of achieving such pyrrhic victories.