There is more than one way to bill
5 February 2007
28 June 2013
24 May 2013
9 September 2013
12 February 2014
4 December 2013
Charging by the hour has become a comfort blanket for lawyers. It provides certainty for the lawyer that every minute of time, within reason, can be recovered.
However, it has its downside. Ironically, it removes the pressure to work quickly and effectively. It provides no certainty for the client as there is often no indication of likely total expenditure and no real way of making comparisons between firms.
In fact, the total cost sometimes comes as a complete surprise at the end of a case. Consequently fees are the biggest cause of complaints against solicitors. Rather anticompetitive, some might say.
In the wider world we are demanding certainty. We hate those situations where the price isn't confirmed until after the event and would look to build in some control. And yet lawyers regularly take clients out of their comfort zones.
So why has the hourly charging system prevailed? Well, it has the advantage of being simple and measurable. It is not subjective, there is no measure of value added and there is little to debate. It is easily evidenced, with printouts available to show the lawyer's input minute by minute.
For clients, an estimate at the start of the process can help establish whether it is within their means. Without one they spend until their money runs out, meaning that they may have to withdraw matters part-way through because they cannot afford to complete actions.
Ironically, solicitors worry that, if they give an estimate, they will lose the client. In a market where giving estimates is not the norm, a client cannot make fair comparisons and may therefore choose someone offering an hourly rate in the hope that it comes in cheaper. Until the profession acts consistently, it's a lottery.
The consumer loves fixed fees. A fixed fee delivers absolute certainty. The consumer can make an accurate assessment of value, compare prices and budget accordingly.
Fixed fees are often used in large corporate matters where a tender submission is involved. A figure will be given, often many thousands of pounds, with a number of exceptions listed in case the matter proves more complex than expected. It is then for the law firm to work out how to deliver the result within that figure.
Many law firms do this and propose a figure that is realistic, profitable and acceptable to the client. Firms will put the effort in for the big sums of money, but are less willing to put the effort into the smaller, consumer matters.
Understandably, it is hard to do everything on a fixed fee basis, but elements of the process can be quoted on separately. For example, in clinical negligence cases it is possible to quote a fixed fee for the work up until the receipt of the expert opinion. Until that is received, the prospects of success of the case are unclear.
All it would take is for a small number of firms to start to do things differently and to deliver it well. The worrying thing is that, if firms do not do this, the new entrants to the legal markets - the alternative business suppliers - most certainly will, and they will be backed by large advertising budgets with brands that are household names.
Good pricing strategies will be the key to survival for many firms. If firms are already pricing in a modern, competitive manner, there is no edge to be gained by the new market entrants. Don't let them steal a march.