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The Mad Clientist

Hope or Hype: Clients Speak on Why Alternative Billing Does Not Solve the Value Challenge

By March 16, 2010April 16th, 2020No Comments

4 out of 5 clients get their best value from old-school hourly billing, according to candid feedback from more than 250 GCs. While experts, the press and even law firms spend scores of hours touting the “death of the billable hour”, corporate counsel continue to funnel over 90% of their spending through traditional billing methods (including hourly billing and contingency fees). The reason: Few clients equate alternative billing with getting more value. And without more value, really, what’s the point?

A leading General Counsel from a Top 10 pharmaceutical company explains, “Everyone talks about discounts and alternative methods but when it comes right down to it very few actually do it.”
He’s half right.
3 out of 4 corporate counsel report using some form of alternative fee arrangements, including fixed fees, blended rates or value- or task-based billing. This includes a handful of sophisticated, vocal proponents such as Pfizer, DuPont, Cisco and FMC Technologies who funnel tens of millions of dollars each year through alternative billing deals.
Yet the majority of companies using AFAs spend less than 10% of their legal budget using non-traditional billing methods.
It’s a question of value, say clients. AFAs alone do not deliver more value to corporate counsel. In fact, BTI’s research indicates the cost savings from AFAs mirrors that of discounted rates at just shy of 15%. Superior value, say GCs, comes from extraordinary client service, on-target budgeting and a commitment to exceed expectations.