Fees and Value in Legal Services

Abstract

A lot has been written recently on the subject of law firm fees as in-house counsel come under greater pressure than ever to reduce costs and demonstrate value to their management teams. The issue of fees goes to the very heart of the relationship between commercial law firms and those organisations with in-house legal teams. Most in-house counsel recognise that simply focusing on reducing fee rates is only a short-term gain. The real opportunity is to move away from a traditional adviser–client relationship and develop a true partnership based on a mutual understanding about quality, risk sharing and value creation, as well as competitive billing. A partnership approach completely changes the conversation compared to an adviser-client relationship. Talking about clients as 'partners' tests the approach of law firms like nothing else. Likewise for in-house counsel when, for example, a law firm says it would like to get closer to a board. A partnering approach would help close the divide which is often articulated, that law firms are focused on process and in-house counsel on results. On both sides, there are complaints of short-termism but long term equity in relationships needs significant thought-based investment. Getting to a partnership model may take time. So, as a first step in a major new initiative, C&I Group and BDO Stoy Hayward teamed-up to conduct independent research which should help us all to understand better the needs, views and experiences of in-house counsel in relation to fees and value, and to be a catalyst for a more forward looking dialogue in this area. The findings show there is a role for hourly rates, fixed and capped fees, value based billing and other structures. The challenge is learning when to use these various methods, developing accepted standards around their usage and capturing the value which legal services bring to organisations. We hope this report will facilitate positive on-going conversations between private practice and in-house counsel which helps to influence and inform the debate on this topic.