Over the last year, the legal profession experienced a significant paradigm shift moving to a predominantly virtual law firm platform, coupled with reshaping business models and reviewing law firm processes for a more streamlined and cost-effective approach for producing legal work. Overall, the legal profession effectively mastered the paradigm shift. However, as with the recession of 2008, we had many takeaways and the question was always: “Will these changes be permanent?” I think it is safe to say the pandemic of 2020 created many changes and many of those changes will remain permanent. Twice into the breach in 12 years and the mantra remains unchanged—clients want alternative fee arrangements and are steadfast for the value proposition. Law firms must continue to review and improve those processes to produce legal services with less waste, streamline costs while also promoting client value so pricing strategies that address client needs can be developed, as well as produce profit for the law firm.
Is There a Perfect Fee Arrangement?
The short and general answer is no, but individual law firms may find a different answer to the question based on varying factors that may be unique to a particular law firm. For example, every law firm’s economics are different based on practice makeup, size, location, attorneys and staffing, but understanding your firm’s economics will be essential for success. Also, any alternative fee arrangement (AFA) proposed must align with the economic interests of the client and the law firm, and most important, it must create a financial incentive for the firm to reduce costs and create incentives to accomplish specific, identifiable client objectives. The ability for any law firm to arrive at an answer to this question that satisfies the client and the law firm will be contingent upon sufficient empirical data, performance metrics/economics as well as a law firm culture that will embrace these changes. Culturally, the goal is to create a relationship between AFAs and the behaviors the law firm would like to encourage. This is essential and a great place to introduce process improvement methodologies that focus on efficiency and delivering a quality, and potentially, very profitable work product.