Pricing professional and, in particular, legal services is complex. Above all, it is the foundation of the relationship with the client, the basis for trust.
In our business, hourly rate has been the standard, the default fee arrangement for decades, first in the US, the UK and then Continental Europe. However, time recorded and billed, calculated in billable hours, measures not only the legal work/legal services rendered but also the performance and financial incentives of the lawyers. It is a career and financial stimulus for lawyers in private practice.
Clients sometimes don’t know this.
Junior lawyers have high billable hours targets. Performance reviews and remuneration/bonuses are primarily based on hours billed. Hence, a natural incentive to inflate hours. On balance, (relationship) partners vet the time reports and routinely write off excess time recorded before the bill is sent. Often when they realize their billable time has been reduced, junior lawyers lose motivation for future work for the same client or on similar matters.
Our firm prefers more efficient and fair fee arrangements focused on outcome, not simply on time spent. When agreeing the matter’s scope and pricing with our clients we consider multiple factors including:
– client’s objectives
– client’s budget and feasible buffers
– our partner firm’s requirements/conditions
– value added
– urgency/speed
– team size and seniority
– (estimated) value of the matter
– opposition – the opposite party/ies and their adviser/s (quality, history, reputation, teams and individuals, etc)
- specialisation (are our specialists available currently? how many competitors do we have in that area who would be able to provide the same or similar quality advice? etc.