AFAs Have Arrived: Is Your Law Firm Ready?

An AboveTheLaw panel discussion addressed the question, "Should law firms still use the billable hour?"

During that conversation, I urged firms to work on new pricing strategies but answered "yes" to still using billable hours because, in my opinion, "most firms (and clients) aren't where they need to be to make a sweeping change to alternative fees only."

A few weeks later, Microsoft announced its Strategic Partner program for outside counsel. One highlight of this initiative: Microsoft hopes to move 90% of its legal work to alternative fee arrangements (AFAs) within the next two years.

The Microsoft Strategic Partner program has generated a firestorm of press on alternative fees, including an article by Miriam Rozen on the Microsoft firms' "jittery" response. It also has shined a spotlight on GlaxoSmithKlein, another Fortune 500 company that has taken huge strides towards moving off the billable hour. GSK's groundbreaking work on AFAs has been documented in an excellent Harvard Business Review case study by Heidi K. Gardner and Silva Hodges Silverstein.

The Microsoft and GSK initiatives are powerful examples of big companies and top-tier law firms that are figuring out how to make AFAs work, even in complex cases. Their programs send a strong signal that it can be done, and - in the case of Microsoft - it appears that thirteen mega-firms have very publicly agreed to try. Whatever your stance on hourly billing, this is a big deal and could have a significant ripple effect in the industry.

In light of these events, I would like to modify my answer to the question posed to the AboveTheLaw panel. While I stand behind the bulk of that response, I would add the following advice to my lawyer colleagues: If you aren't actively working on ways to improve efficiency and structure profitable, competitive alternative fee arrangements, START. RIGHT. NOW!

BigHand Matter Pricing has built these considerations into its easy-to-use litigation budgeting tool. Our detailed reports, average costs-per-task, and easily updated framework are the perfect solution for clients who are tired of hearing “but it’s litigation...“

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