Yesterday, we began with the first part of Tim Corcoran’s webinar on the strategic role of alternative fee arrangements. After Tim’s elephant analogy, he gave the attendees a short economics lesson. Using a graph with two parallel arrows, Tim said that essentially, we charge a rate that is higher than our cost to deliver. Price needs to be higher than the cost, and profit is derived from the difference between the cost and the price. 

But law firms do a poor job of calculating costs – other than their overhead and real estate, they don’t know the cost of the delivery of their legal services. 

So the challenge is, as we saw in the recent downturn when there was downward price pressure, because we haven’t fundamentally changed our delivery costs, our profit turns to loss. In the first part of the webinar, Tim had talked about the inevitable movement from premium and strategic to commodity, meaning that clients will pay less for something over time. That’s what we’re seeing – clients are refusing to pay for work that they believe doesn’t have the same value it once had, but law firms who have not adapted their cost structure for this are experiencing loss. 

Continue Reading ILN Webinar Series – Alternative Fee Arrangements Part II

Part II of our Business of Law webinar series with Tim Corcoran took place in November, but things have been so hectic with travel and hurricanes and holidays that I’m only just getting to the recap! So without further ado…

The topic of the second webinar was the strategic role of alternative fee arrangements, which was a natural sequel to the first session on legal project management. Tim re-emphasized that the industry has changed, and we need to adapt to the changing times. 

Continue Reading ILN Webinar Series – Alternative Fee Arrangements Part I

Now, as I mentioned in my summary of the GC Panel at the LMA Conference this year, Jeff Carr says he’s banned the word "alternative," because there should be nothing alternative about alternative fees.

But, for the sake of this recap, we’re going to use it, as that’s what the session focused on.  Tim Corcoran shared with us the salient points from the alternative fees session that he attended at LMA (and often speaks on himself). 

  • Most law firms are reactive when it comes to offering alternative fees because they’re concerned that they’re dilutive to profits. But the firms that have figured this out and are acting proactively are seeing business development opportunities and more work. 
     
  • There’s a correlation between value and charging – lawyers need to understand this. 


Continue Reading Are you Thinking…Alternatively?

One of our sessions during the ILN’s 2010 Regional Meeting of the Americas in Houston focused on the always popular topic of law firm management.  The panel was moderated by our Chairman, Peter Altieri of Epstein Becker & Green in New York.  On the panel were Steve Arthur of Harrison & Moberly in Indianapolis, Indiana, Carlos Rodriguez-Vidal of Goldman Antonetti & Cordova in San Juan, Puerto Rico, Doug Winthrop of Howard Rice in San Francisco, California, Bill O’Neill from McDonald Hopkins in Cleveland, Ohio and Anders Lundberg from Hellstrom in Stockholm, Sweden.

Creating Demand

Altieri began by saying that one of the challenges in the current economy for firms is creating demand. In the past, they had much more pipeline work than there is now, in part because clients are trying to do more in-house. He added that even the big firms are coming in and being price-competitive, and asked the panelists to comment on this.

Winthrop said that his firm has been seeing a tremendous rebound in the litigation sector of the firm, which has them quite busy.  Now, they’re facing the issue of whether to hire more attorneys on the litigation side, or ask the business lawyers to chip in.  He said they’re concerned that they’ll find themselves with overcapacity, so they’ve addressed the issue by doing both.

Continue Reading ILN Conference Re-Cap: Law Firm Management Panel

During the ILN’s 2010 Regional Meeting of the Americas in Houston, Texas last week, we were treated to a presentation by our host firm’s managing partner, Martin Beirne of Beirne Maynard & Parsons, and Jeff Carr, Senior Vice President, General Counsel, and Secretary of FMC Technologies.  Jeff’s presentation focused on "Getting Out of the Box in Counsel Engagement and Service Delivery – the Value Challenge." 

Beirne introduced Carr, saying that he’s the author of the Associate of Corporate Counsel’s Value Challenge – something that he’s been talking about for fifteen years.  Carr said that FMC Technologies is a 9 year old company, with about 120 years of history, and is one of those that touches people’s lives in many ways.  

Carr jumped right into talking about his experience as a general counsel, saying that his legal spend is less today than it was in 2001, in a world where firms’ rates go up 10% a year.  He added that FMC Technologies pays, on average, 107% of their invoices to law firms – he would later explain how and why this happens.

How is it possible to have a smaller legal spend? Carr said companies need to change how they buy what they buy, how they pay for it, and go from being reactive lawyers to being proactive lawyers.  What drives him? If he can save his company $1 million, that equates to a half a cent of share earnings.  That’s what drives companies.

He said that his legal team’s mission statement says that they’re not lawyers – they’re there to help achieve business goals.  Only one person who is currently on his team was with him in 2001 because the others either didn’t want to move when they changed their headquarters to Houston, or they didn’t want to practice law the way that his team does.  They were not willing to embrace change and the discipline that they require to be successful lawyers at FMC Technologies.

Continue Reading ILN Conference Re-Cap: Getting Out of the Box in Counsel Engagement and Service Delivery – the Value Challenge