The May issue of Corporate Counsel was a cornucopia of material of this blawg. In addition to more fodder for the “chicken and egg” issue (will lawyers offer alternative fees to attract clients or will clients have to demand alternatives to force change), there was a terrific column by Eriq Gardner (Hello, Good Buy) on the increasing use of Procurement Executives in the hiring of lawyers. I recommend the article highly.
The article notes that procurement departments have become involved in the hiring of counsel at Alliance Capital Management Holdings, Bayer, Fireman’s Fund Insurance Company, Morgan Chase, Merck, Merrill Lynch, Motorola, Oracle, Pfizer, Tyco, United Technologies and Wyeth. Not only are these companies big, they are creative trend setters. It will be most interesting to see whether inside legal departments partner with the procurement executives in a turf battle or whether the need to control and reduce expenses forces a partnership in more companies.
I’ve hypothesised that the one factor that will drive the use of alternative fees is the corporate budgeting process. Too many in-house counsel have told me of the enormous and growing pressures they face to create firm budgets and live by them. Alternatives enhance the ability to live by agreed budgets. Eriq Gardner concludes his article on exactly this point. After quoting a partner at a “major New York firm” as saying that his firm has declined to participate when a client’s procurement department demands finite fee estimates, he quotes Paul Ashley, director of global sourcing for Pfizer: “We have budgets and are held accountable too.” (See my earlier discussion on Accountability.)
I can only hope that most firms respond the way the major New York firm does. More pie for the rest of us!