Jeff Carr sent me a link to a post by Richard Smith of Sydney, Australia. I don’t know Mr. Smith. He is a “business development expert with over 20 years’ experience.” He works to develop and implement “successful business strategies for leading professional services firms; including working closely with stakeholders to maximise revenue potential from existing and targeted clients.” He recently wrote a commentary on an article by Firoz Dattu and Dan Currell of AdvanceLaw. I do know Firoz and Dan, both highly respected members of the legal service community. I hope my acquaintance with them does not color this post, but perhaps its does. The Advance law post that leads to this article is here.
Richard Smith takes issue with this paragraph in the Advance Law article:
Third, flat fees. A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper. You now know that we think this is a half-question (and not the interesting half). The whole question is: do alternative fees work better, all things considered?
Mr. Smith responds with this:
Let’s look at that third question again with highlights by me:
“A natural question about flat fees or other alternatives to the billable hour is whether they are cheaper.”
Actually, that’s a very, very long way from the natural question.
But then we get…:
“The whole question is: do alternative fees work better, all things considered?”
And while that question may seem a lot closer to the answer we seek, it is still – well – the wrong question.
Flat fees, or other alternatives to the billable hour, should not be about whether they are cheaper. In many cases they are more expensive.
Nor, per se, are they about whether they work better (and by that i am unfairly reading “easier”). In some cases they are far more complicated and getting them to work is a real art of communication (that is, if you have scoped the matter and given appropriate thought to LPM, etc).
But, crucially, what alternatives to the billable hour should be about is simple: ‘Do they offer better value?’; To the client? And to the lawyer?
And if they don’t, the simple truth is this: maybe you shouldn’t be using them.
It seems as if Mr. Smith ignores the fact that the AdvanceLaw team is writing about questions presented by data they have accumulated from their clients. Of course it is interesting to know if flat fees have proven to be cheaper that hourly fees for similar work. Is Mr. Smith really suggesting we should not examine relevant data? And then, even though the AdvanceLaw authors make it clear that there is a more important question that simply the comparison of fee totals, Mr. Smith quarrels further, leading to the conclusion that AFAs have to provide better value to clients and to the lawyer, or they shouldn’t be used.
Having been using AFAs for nearly 10 years, AFAs can provide great value to lawyers, but only if they change the way they do their work. The old way is burdened with fat and excess, and it is why clients grew so frustrated with the billable hour. Second, firms need to decide if customer service is a core value of the firm. If it is, you find out what is of value to your clients and you figure out how to provide it. It is an exceptionally rare matter in which, over the duration of a matter, an AFA cannot be used. The challenge must be to carefully and precisely identify the client’s objectives. Once that is done, a fee to incentivize the accomplishment of those objectives is possible.
Forgive this rant–it is unfair to take a point made in one context and criticize it for not addressing points that are not in the context you want.