The Corporate Executive Board's managing director Steven Williams believes the Real Rate Report’s findings will help in-house corporate counsel to make better decisions and optimise departmental spend: ‘The Real Rate Report's groundbreaking analysis will arm general counsel with new ways to reduce their law firm spending, negotiate fees and improve settlement strategies,’ he says.
Initial findings from the report were released last month. Out of the 3,448 partners, associates and paralegals filing invoices to multiple clients, 78% charged different hourly rates to different clients for similar work - the largest rate differences ranging from $350 to $1,000 an hour.
The report evaluated 18.9 million invoices between 2007 and 2009, highlighting changes to legal billing models over the three-year period. Alternative fee arrangements (AFAs) have increasingly become the norm, as corporate counsel move away from the billable hour. Additionally, squeezed budgets have resulted in more value-based fee structures than ever before.
Julie Peck, vice president of marketing and communications at information services company Wolters Kluwer, adds that the Real Rate Report is ushering in a new era of transparency for the legal profession. ‘Both sides are looking for clarity,’ she says. ‘There is intense cost pressure on both sides of the equation. Legal departments are pressed more and more to cut costs without increasing risk or compromising quality. Most have done a good job of cutting expenses by 10-15%, but their chief financial officers need more.’
This trend supports the findings of the Legal Strategy Review Industry Report released last year. One corporate counsel respondent stated: ‘We would love to give our internal processes more attention, but if you can find someone in my team with the time to review them, I would be very surprised. We know we need to drive down costs and process is key, but that’s easier said than done.’
‘In some cases this results in staff cuts,’ admits Peck. ‘But most cost-cutting is coming from using less outside counsel. So, the question immediately becomes: how do I decide which hours to cut? Which services cost me a lot but aren’t cost-effective? How do I reduce cost on low risk matters while keeping high-end law firm partners available for work that really matters. This report can provide the insight to make those decisions.’
At the same time, it will add further fuel to the debate on billing and alternative legal models; especially around legal services outsourcing (LSO), which corporate counsel and law firms are increasingly recognising as a cost effective option for legal support, and one that allows greater visibility in terms of spend and return on investment (ROI). The report will throw a spotlight on the high value work undertaken by lawyers, and help lawyers and in-house counsel to pinpoint which legal processes and services can be successfully outsourced to an experienced LSO provider.
The findings will also allow legal teams to benchmark their performance against rival firms. ‘Law firms are always looking to see how competitor firms manage their rates and staffing matters,’ says Peck. ‘But that information has always been difficult to get hold of. Now firms can compare these findings to their own structure, own fees, own legal spend and see how they’re doing against other firms of their size.’
In addition, the Real Rate Report will provide insight into law firm staffing behaviour and actual rates charged by law firms to major corporate clients by geography, work and matter type, matter phase, and timekeeper roles.
For further reading on AFAs, visit Alternative legal fees: Shelving the hourglass
