Lack of Alt Fees a Pain for Clients (+ May Eventually Help Legal Tech)

A new survey of inhouse lawyers and legal ops professionals has found that around one third saw a ‘lack of alternative fee’ options from law firms as a key pain point – and that may eventually help legal tech to play a bigger role.

The survey by Priori Legal, the legal talent platform, found that of the five top pain points experienced when selecting outside counsel, 32% of clients said a lack of alternative fees was an issue. Top was cost, and second was a lack of information on the lawyers they were considering. Just under 20% said diversity was a pain point.

So, why is this going to eventually help legal tech? The answer is that if clients are looking more and more at alt fees, which although it is a term that covers a multitude of approaches, it likely means a growing amount of work will need to be on fixed or scoped fees, i.e. that a certain price is agreed for a piece of work, or part of a piece of work, and it’s up to the law firm or legal process provider to figure out how to do it at that price.

This in turn drives two aspects of legal tech:

  1. The need for billing and price benchmarking tools that allow clients to better understand what it is they want from their external lawyers, i.e. if you want a fixed price for X, then you need to look at previous examples of X to know what price to set things at.
  2. The more a law firm, or other provider, operates with a set fee the more the value of efficiency tools increases. I.e. if the fee is set at $100,000, then it’s in your interest to be as efficient as possible to get that job done and send the bill, rather than relying on the inefficiency of manual legal labour to get you to the profit margins you are looking for. Smart firms will figure out that tech and better processes will actually deliver higher profit margins….and make clients happy.

It’s also good news for projects such as the SALI Alliance, as it reinforces the need for legal matter taxonomies. If you are going to price X, you need to be able to define what ‘an X actually looks like and is called’.

I.e. if we want to turn at least part of the legal ‘market’ into a real market where there is information symmetry and buyers actually know the price of the things they are buying – which has got to be one of the pillars of a real market – then we need taxonomies and associated price lists.

In turn the drive to make that happen comes when we use alternative fees, and that also boosts the use of a range of legal tech tools.

And, all of this also boosts the growth of process-focused legal businesses, as they excel at scoped fees and efficiency. They also use plenty of tech.

All in all, good news. Thanks to Priori for the survey.

Priori’s 2021 Legal Departments Survey, fielded in January and February 2021, received responses from more than 130 GCs, counsel, legal operations leaders and other in-house professionals.