Articles
Corporate counsel’s greatest unmet need is to get better value from their law firms. Yet according to clients, few law firms are currently delivering optimal value—and even fewer are distinguishing themselves for their ability to help clients control and manage their legal budgets.
The BTI Consulting Group’s newest research uncovers how clients are using alternative billing arrangements to get more for less—and why law firms are making out on the deal.
Three Key Trends In Alternative Billing
BTI recently completed its 7th annual survey of legal services, including in-depth telephone interviews with more than 250 in-house counsel at large and Fortune 1000 organizations. This comprehensive research uncovers what is capturing clients’ attention in law firm billing—what’s innovative, what’s not, and how your law firm can leverage simple changes in billing into new business and higher revenue.
1. Nearly 70% of large organizations use some form of alternative billing
Our analysis reveals that the use of alternative billing arrangements is widespread among large and Fortune 1000 organizations. Nearly 70% of corporate counsel report that at least some of their legal work is contracted under alternative billing arrangements. Among unconventional billing methods, fixed fees dominate.
2. Fewer than 15% of outside counsel fees are paid under non-standard arrangements
Despite the first trend, the amount of legal fees paid outside of the traditional billable hour context is relatively small. Less than 15% of legal work, on average, is performed under alternative billing arrangements. More than three-quarters of companies spend less than $1 million on legal fees using unconventional billing methods—a startlingly small number given the airplay dedicated to alternative billing.
3. Litigation paves the way for alternative billing
Corporate counsel most likely to use alternative billing arrangements hail from highly litigious industries such as manufacturing, pharmaceuticals and energy. They are typically smaller in size (outside of the Fortune 500) and spend less overall on outside counsel than their larger counterparts.
However, the demand for alternative billing arrangements is rising at companies of all sizes. As clients demand more value from their law firms, savvy outside counsel are devising innovative ways to capture the attention of the world’s biggest clients. Read on to learn what law firms are doing to win client recognition—and business.
Three Best-In-Class Approaches To Billing
Billing issues are among the most frequently voiced challenges corporate counsel face with their law firms. Over billing, unpleasant surprises and confusing invoices top the list of complaints. Yet in the midst of this turmoil, 55 law firms set themselves apart for innovative billing, winning recognition and business from some of the world’s most demanding clients. Here are three billing approaches corporate counsel applaud as best-in-class.
1. Get Creative
The most innovative law firms are proactively approaching corporate counsel with new and creative ways of billing, many of which can have a positive impact on the bottom line. From the perspective of clients, innovative billing is just as much about a law firm’s process as it is about the financial transaction.
Corporate counsel specifically laud key process changes that help streamline the review and approval of invoices, such as:
a. Electronic billing tools and software
b. Well-organized bills categorized in line with the clients’ profit centers
c. One-page summaries of all active matters
Plus, law firms benefit from these as well: the easier an invoice is to understand, the quicker it gets paid.
2. Be Predictable
Corporate counsel is accountable for devising—and sticking to—internal budgets. Law firms can help by adding a level of predictability to their fees (often in the form of budget estimates) as well as by keeping clients informed of changes or unexpected events that impact costs.
A proactive approach to budgets, in particular, wins kudos from clients, and distinguishes savvy law firms from their competitors. Law firms who make budgets a matter of course cater directly to client needs, helping corporate counsel to meet internal requirements and streamline legal management.
3. Offer Client-Focused Alternatives
Corporate counsel celebrates the law firms who work with them to determine new approaches to billing. (Fixed fees are the most frequently used method of alternative billing, relied on by more than 50% of corporate counsel. Contingency, or success-based fees, are the second most popular at nearly 25%.)
Yet what stands out in clients’ eyes is a firm’s willingness to consider alternatives rather than the alternatives themselves. Corporate counsel specifically recognizes law firms for being flexible and accommodating.
For example, two very different clients—with different types of work, needs, and billing arrangements—can consider the same law firm as the absolute best in innovative billing. Each client believes that its billing method is what one corporate counsel refers to as his “special arrangement” with the law firm.
It is this sentiment, not the billing itself, that makes the best law firms shine in the eyes of clients.
