The law firm billable hour is dead. Long live ‘commodity-linked’ fees?

by Rory Webber on February 7, 2011 · 5 comments

in Corporate counsel issues,Large law firm issues,Legal marketing,Martindale-Hubbell Connected

One of the enjoyable things about working for LexisNexis Martindale-Hubbell is that you can take the ‘global’ view about market developments affecting the worlds’ legal professions. For example, research we’ve previously published has shown that the ‘billable hour’ – widely disliked by corporate clients – is not the billing option of choice in many world regions. In Central and Eastern Europe, for example, 53% of corporate counsel respondents to a 2008 LexisNexis Martindale-Hubbell survey said they wanted their law firms to charge for their services on a fixed price basis, or for a fee agreed in advance. Around 45% of in-house respondents in China also preferred this option, in a 2010 LexisNexis Martindale-Hubbell survey.

Of course, this fact begs the question: Why is the billable hour so widely used in countries such as the UK and USA, if alternatives are so prevalent in other world regions? Why aren’t Anglo Saxon firms willing to learn from their international peers, and experiment with alternative billing practices?

One UK-based law firm – CMS Cameron McKenna – has asked itself precisely this question. Essentially, the firm has gone back to the drawing board in terms of the pricing options it offers to its clients. Some of the firm’s ideas are pretty left-field, such as offering to charge for its services by reference to the price of commodities. But other ideas it make a great deal of sense – such as breaking down legal tasks into their component parts, to allow the firm to produce viable fixed price quotes.

As part of the Connected ‘Legal Luminaries’ interview series, James Stringer of CMS Cameron McKenna explained the firm’s plans for alternative billing arrangements. To watch the interview, click the image below.

To the firm’s credit, its willingness to sacrifice a sacred cow of UK legal billing practices has won it a Financial Times award for innovation. But it will be interesting to see if other firms follow CMS Cameron McKenna’s lead. In the future, will we witness a ‘paradigm shift’ in law firm billing practices among UK firms – or just ‘business as usual’?

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