“A mix of sky-high billing rates, ballooning associate salaries and pressure from company executives has heightened corporate counsel’s demand for different ways to pay their outside law firms.<\/p>\n “And while they report that more of those firms are answering the call, in-house lawyers say that these new payment methods create their own sets of challenges in dealing with outside counsel.”<\/p><\/blockquote>\n . . . “The arrangements include fixed fees, contingency\/results-based fees, retrospective-based compensation, blended rate deals, discounts and more.”<\/p><\/blockquote>\n<\/blockquote>\n Hourly billing indeed has incentives that cut against lawyer efficiency, but “But alternative arrangements take longer to devise, say lawyers from both camps, and they are far from foolproof.” (The foremost problem — how to get people on a fixed fee to work hard enough — is an obvious issue far too often concealed by the lynch mob that is trying to kill the billable hour and ignored by the customer looking for other options.) Here are some of the important points made in the article (emphases added):<\/p>\n Rees Morrison [of the Law Department Management<\/a><\/em> weblog], told NLJ <\/em>that “Lawyers can avoid most alternative billing headaches through careful planning . . . Well-crafted agreements need to have buffers in place if matters get sticky.” I hope buyers of legal services will be vigilant when setting up arrangements for treating unexpected (or expected but nonetheless surprisingly resource-needy) problems that arise during a matter. You especially need to be wary of law firms that will try to exploit such events.<\/p>\n Thus, in the article, \u201cChange Orders: What a Concept!<\/a>\u201d Baker tells his audience: (emphasis in original)<\/p>\n \u201cThe moral<\/strong>: Always set your price when you possess the leverage.\u201d<\/p><\/blockquote>\n Baker then suggests ways in which the client can be maneuvered so that \u201ca premium price\u201d can be charged. He stresses, as do I:<\/p>\n “A favorite way to make the client insensitive to premium fees is the use of Change Orders<\/em> when services are needed beyond those covered in the initial fixed-price arrangement [no kiddies, pricing can\u2019t really all be done up front].”<\/p><\/blockquote>\n In a subsection titled \u201cChange Orders Indicate a Climb up the Value Curve,\u201d Ron gleefully points out that: \u201cOne of the greatest advantages in using a change-order policy for all scope changes is that they point out value pricing opportunities.\u201d<\/p>\n If you are not yet convinced to be wary of Change Orders and similar tactics, please read Baker’s “Change Orders and Innovative Pricing Methods<\/a>,” (SmartPros, Jan 24, 2000). Here’s how our prior post<\/a> summarized the article:<\/p>\n Finally, if you\u2019d like to see some of the results Ron suggests can be had using his value pricing techniques, strategies, and psychology, see \u201cChange Orders and Innovative Pricing Methods<\/em>,\u201d (SmartPros<\/em>, Jan 24, 2000). It seems that clients, properly \u201cleveraged,\u201d will offer to pay two or three times as much (sometimes ten times as much) as a professional\u2019s regular fees, and the professional can sit back and rake it in, righteously smoting the evil hourly billing system and increasing the client\u2019s perceived value. (The shrewd professional will even give the client a discount off the 200% or 300% premium fee the client has offered to pay \u2014 earning both merits points in ethical-code heaven and the client\u2019s trust and loyalty.)<\/p><\/blockquote>\n Of course, as always, I worry about the unsophisticated consumer of legal services who does not have the information, experience or leverage to venture safely into alternative billing arrangements — especially when those who tout them the most often have the smoothest, most-soothing patter about the advantages that switching from billing by the hour can bring. The Big Boy Buyers of legal services might have a learning curve, but they have plenty of time and opportunity to travel on the curve and get it right. Most “Main Street” clients do not.<\/p>\n You can read much more about the issues raised when considering alternative bill methods in our recent post, “broadening the hourly-billing debate \u2014 consider yourself, your clients and your ethics<\/a>” (Aug. 18, 2007), which collects links to other postings on the topic, and has lengthy excerpts from many of them.<\/p><\/blockquote>\n<\/blockquote>\n for the fat green frog \u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026.. by George Swede – from Almost Unseen<\/em><\/p>\n the bill collector a nightingale singing river boat\u2013<\/span><\/span> harvest moon\u2013<\/span><\/span> selling morning-glories<\/span><\/span> \u2026\u2026\u2026\u2026\u2026. by Kobayshi ISSA<\/a>, translated by David G. Lanoue<\/a><\/p><\/blockquote>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":" It’s great to finally see some straighttalk today in the legal press about alternative billing. In the blawgiverse, you will search in vain (except here at f\/k\/a, and an occasional word from Carolyn Elefant) for any acknowledgment by those who sell legal services, or their consultants, that alternatives to hourly billing come loaded with their […]<\/p>\n","protected":false},"author":94,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[3513],"tags":[],"class_list":["post-8002","post","type-post","status-publish","format-standard","hentry","category-lawyer-news-or-ethics"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p6kP1R-254","_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/8002","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/users\/94"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/comments?post=8002"}],"version-history":[{"count":2,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/8002\/revisions"}],"predecessor-version":[{"id":12467,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/posts\/8002\/revisions\/12467"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/media?parent=8002"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/categories?post=8002"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/ethicalesq\/wp-json\/wp\/v2\/tags?post=8002"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"http:\/\/blogs.law.harvard.edu\/ethicalesq\/files\/2007\/07\/clockabadioniseg.jpg\")
The NLJ<\/em> article begins: “As more corporate clients are getting the alternative billing arrangements they want, they are claiming some pushback from law firms trying to make the best of the new deals.”<\/p>\n\n
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“If the parties miscalculate how long they expected a matter to take, and if they do not make contingency plans for extensions, law firms may be tempted to start pulling lawyers off the file. “Once they blow through the fixed number, there’s less work [completed],” [James] Potter [general counsel of Del Monte Corp.] said.”<\/p><\/blockquote>\n\n
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“Very often, in-house and outside attorneys don’t mean the same thing when they use the same word<\/em>s,” he said. The word “productivity,” from the law firm’s perspective, means the hours associates can bill a matter. To in-house lawyers, it means “efficiency,” he said.<\/li>\n<\/ul>\n![\"\"](\"http:\/\/blogs.law.harvard.edu\/ethicalesq\/files\/2007\/08\/greatvaluesm.jpg\")
Value Billing is Not Always a Great Value<\/em>:<\/strong> On April 21, 2005, in our posts ron baker: sensitive guy?<\/a> and ron baker & price sensitivity<\/a>, we tried to help the buyer of legal or other professional services understand some of the traps that underlie concepts like alternative billing or value billing, as they consider pricing methods other than hourly billing. (and see “still sensitive over value billing<\/a>” May 6, 2005) We focused on Ron Baker, because he is repeatedly said by alternative billing cheerleaders at law firms to be the great theorist, practitioner and teacher of value billing and similar concepts. In his writing, however, Baker consistently makes the point — listen up clients! — that the goal of escaping the billable hour is to increase profits and charge super-premium prices, by getting the client to agree on price when the client is least sensitive to increases and the professional has the most leverage.<\/p>\n![\"\"](\"http:\/\/blogs.law.harvard.edu\/ethicalesq\/files\/2007\/09\/tinyredcheck.gif\")
Baker\u2019s parting wisdom: \u201cchange orders have \u2018value pricing\u2019 written all over them and should be priced accordingly.\u201d<\/p><\/blockquote>\n\n
![\"complaint](\"http:\/\/cyber.law.harvard.edu\/blogs\/static\/ethicalesq\/complaintbill.jpg\")
<\/span><\/p>\n\n
\ncrouched on the log
\ntime is flies<\/p><\/blockquote>\n\n
\n
\nwith shoes on steps inside
\nto the hearth<\/p><\/blockquote>\n<\/blockquote>\n<\/blockquote>\n
\nincluded in the price\u2026
\nfive-penny tea<\/span><\/span><\/p>\n
\n on a night of fireworks<\/span><\/span>
\n still selling fireworks<\/span><\/span><\/p><\/blockquote>\n
\n<\/span><\/span><\/p>\n\n
\n the peddler selling<\/span><\/span>
\n eight cent sake<\/span><\/span><\/p><\/blockquote>\n<\/blockquote>\n
\nthey even sell tea
\nnot worth a fart!
\nsummer trees<\/span><\/span><\/p>\n
\n wet with morning dew\u2026<\/span><\/span>
\n a tough character<\/span><\/span><\/p><\/blockquote>\n\n
\n
<\/blockquote>\n<\/blockquote>\n<\/blockquote>\n
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