Pricing – Aligning Client and Firm Interests

Topics: Billing & Pricing, Client Relations, Corporate Legal, Law Firm Profitability, Law Firms

salary negotiations

It’s no surprise that pricing discussions with clients can be difficult. However, when a firm can align its interests with clients’ interests, a true partnership can exist.

Most general counsels want a fixed fee in order to drive down their costs and be able to budget for a predictable legal expense; however, Paul Jones, the general counsel of Harley-Davidson, is an exception. About four years ago, he asked various firms to respond to a Request for Proposal (RFP) for a fixed fee over three years—not to reduce his costs, but for value and efficiency purposes. He wanted to build deeper partnerships with fewer firms that have a stronger interest in the success of Harley-Davidson. Working with fewer firms also ensured Paul a consistent defense for every litigation claim, his contracts to have the same clauses, and his outside counsel to better understand his business. With a fixed fee, his law firms and the company would have a shared interest in resolving the cases together. Earlier this year, Harley-Davidson re-upped with the firms for new three-year agreements.

From the firm’s perspective, it’s easier to negotiate a fixed fee when you’ve represented the client for a number of years and have the historical data to determine trends and truly understand your costs of providing the services. In such a scenario, you have an idea of the number of cases you will be handling, as well as the time involved. Once the fee is set, you have to manage the fee. Here, too, the firm has an opportunity to review how the files are staffed, use project management skills to be more efficient (while still maintaining the quality of the work), and effectively use budgets.

For any alternative fee arrangement to work the client must be the center of the strategy. Be proactive with your clients and offer different types of arrangements. Demonstrate to them that you understand their business concerns, you care, and are willing to deliver results.

For any alternative fee arrangement to work the client must be the center of the strategy.

Fixed fees don’t just work with large clients; they can also be valuable for smaller clients. The key is communication and defining what you will do for the fixed fee. If the project changes direction, then you have to be able to explain how the scope of the arrangement has changed. It’s interesting how many lawyers don’t like having these conversations with their clients.

When clients object to a fee, it is often tied to a concern about value. If you are able to explain the value, you can overcome their objections. Trying new fee arrangements requires open and honest communications and trust between the parties. Ultimately it’s about the relationship between firms and clients and how we as lawyers deliver the services.

A fixed fee thoughtfully developed can be a win-win for both the client and the firm—a monthly fixed fee results in a steady cash flow for the firm. By restructuring the way the case is staffed, it allows younger professionals the opportunity to develop their expertise. The benefits are many for the clients and—oh, by the way—in Harley-Davidson’s Jones’ case, he did also reduce his costs.