A survey by the Corporate Executive Board found that large-company spending on law firms grew by 49 percent between 2002 and 2005. And while non-law firm costs increased by 20 percent over the past 10 years, large law firms’ prices jumped almost 75 percent in the same period.
Some GC’s have identified two major issues in what constitutes “reasonable fees” as viewed by a GC: first, internal law firm calculations of “overhead” often include partner compensation (even if just the salary/draw component) and second, partners simply make “too much money.” There is likely a disconnect between what GC’s believe (see above) and the law firm/partner perception of these same issues.
Bruce MacEwen recently covered much of this ground. He does well at describing and discussing the components of law firm reveneue, in terms that probably provide comfort to partners who have understood these elements for years. His prescription (moving back to a “for services rendered” bill) eliminates the unwanted attention that can be focused on detailed itemized bills simply because they exist, but it doesn’t really address the GC side of the problem, which, after all, is the source of the pressure on lawyers. Firms have to figure out how they can meet the needs of their GC clients by providing increasing value over time. The implication, however silent or unstated, is that if you’re communicating in terms of (value = hours x rate), then you have inherently fated yourself for unhappiness.
ThoughtStorm’s approach to finding alternative fee structures to resolve this partner/law firm conundrum is to treat law initially like we treat any other industry: apply our three-stage technique of data-driven analysis, informed decision-making, and intentions-based guidance. We make changes based on the unique nature of law as a business in the actual prescriptions for the practice’s problems and in the methods and processes we develop for lawyers and law-firm workers to follow to improve results.