For many months now, the buzz in law firm circles has been about the billable hour and its alleged imminent demise.

The legal profession is undergoing a fundamental sea change, not only because of the challenging economy and its impact on law firms and companies generally, but also because clients are beginning to demand more innovative and transparent fee arrangements.

Like many law firms, Saul Ewing LLP already offered clients a variety of alternative fee arrangements in areas such as estate planning and patent prosecution filings. However, after numerous client satisfaction surveys revealed a rallying cry for experienced attorneys and value, we determined it was time to expand their use, launching our ‘cost certainty commitment’ in June 2009.

Neither the decision nor the process to standardise and expand alternative fee arrangements happened overnight. But as we explored the idea of offering packaged alternative fee arrangements, we realised it made sense for repetitive, high-volume  work  where it was easier to predict how much time it will take, and thus determine a fair price.

We rolled out our programme into two specific areas of legal work: 1) due diligence work for potential mergers and acquisitions (M&A), and 2) administrative hearings before the Pennsylvania Insurance Department.

For our M&A group, the attorneys found that the work they do in evaluating the portfolio companies of private equity funds, in due diligence for investment and acquisition opportunities and in their work to ‘pre-qualify’ companies for a contemplated sale, was fairly predictable and lent itself well to handling these matters for a fixed rate.

Similarly, attorneys in our Insurance group have handled dozens of administrative hearings before the Pennsylvania Insurance Department and have found the process of representation to be relatively predictable in terms of cost and time involved. This work also proved to be a good jumping-off point for fixed-fee arrangements.

We felt good about our decision, but even I was surprised at the swift response. Within 12 hours of calling some of our clients’ attention to the new arrangement, we had two new pieces of business. Traffic on our website had spiked by a magnitude of 30 times. Who would have thought listening and responding to the needs of clients would be so groundbreaking?

No one has to lose out

Agreed-upon cost structures help our clients project legal costs for budgeting purposes but we are only able to set costs by making full use of existing work product and knowledge. However, just as we are focused on giving our clients value, we are mindful that value billing should also benefit our attorneys, especially our associates.

That’s why alternative billing is but one of a series of measures we will implement in the coming months to address the paradigm shifts taking place in our profession. At a time when some law firms seem to be losing their way – not only because of overly ambitious growth plans and the spiralling overheads that accompany them, but also because of fractured cultures and loss of identity – we think that it’s time to step out of the billable hour box, when it makes sense.

David Antzis is Chair of Saul Ewing's Business Department and the leader of its Mergers and Acquisitions group

This article first appeared in Legal Strategy Review, Issue 4

Picture: source