Law Firms

Will Client Demand For Greater Value Lead to Meaningful Change Inside Law Firms?

As law firms strive to provide more “value” to clients, legal industry insiders warn that without a permanent overhaul of business practices, firms will face decreased profitability in 2010.

Cynics say the mass amounts of law firm layoffs last year – 12,196 people were laid off at 138 large law firms tracked by LawShucks – were merely quick fixes meant to maintain profit levels for partners, the Chicago Tribune reports

The recent shift from lockstep compensation to merit-based pay might be a more lasting solution, but it will also require increased training and feedback for associates, the newspaper adds.

In order to meet the demands of corporate clients faced with shrinking legal budgets, more firms have abandoned hourly fees and adopted alternative billing methods, such as taking on a specific matter or entire portfolio of work for a fixed fee. However, for lawyers that have been evaluated and compensated almost exclusively on the hours they bill their entire legal careers, movement away from the billable hour won’t be an easy one.

Between 7 percent and 15 percent of legal work is currently billed on an alternative fee basis, Michael Roster, chair of the Association for Corporate Counsel’s Value Challenge, told the Tribune. Roster predicts that work to grow to 25 percent in the next two years. In contrast, Microsoft Corp. will base 45 percent of its U.S. legal budget on alternative fee arrangements.

Also see: “Mike Roster: The Cost of Value”

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