Hourly billing by lawyers has been coming under scrutiny for a long time now and it’s no great surprise given the world we live in where the price of most things (if not always the value) is known. I don’t like committing myself to open ended financial commitments any more than the next person, yet we expect our clients to do so. An article in The Economist drew on this: hourly rates benefit no one but the lawyer and promote inefficiency. I was talking to some friends of mine at the weekend who successfully sued their Local Education Authority at the Education and Special Needs Tribunal for not providing the additional learning support prescribed in the Statement of Needs on their young daughter. They used an expert solicitor, who only does education law, and retained him on a fixed fee basis. My friends said this gave them the comfort of knowing the bills wouldn’t get out of hand and that they could talk to him freely without worrying about the clock ticking.
That’s all fine from the client’s point of view, but how does it work from the other side of the desk? In non-contentious work I can see this can work, especially if you make good use of IT solutions – such as the type of solution offered by DirectLaw – document creation software. Indeed, for bog standard contracts you can probably take the lawyer out of the equation altogether – for example see PJH Law’s “document wizard”, which allows the client to input their own details and get a complete contract out at the other end. In effect this becomes like the “execution only” service offered by many brokers: we won’t advise you on whether you should buy 1000 shares in BP, but we’ll do the transaction for you. I can see that for a wide variety of situations this solution could be very attractive.
But what about litigation? Document production can help make firms more efficient but most have software packages that allow document creation anyway. What can change the game in contentious work? Fixed Fee pricing in litigation is difficult: at the outset do you know whether you’re faced with a one day case in the Employment Tribunal or a 14 day marathon with 20 witnesses? In my friends’ case I would imagine that their case, which went all the way to a final hearing, was probably subsidised by the other cases that settled at some point short of that. But get the sums wrong and the lawyer will be out of pocket: get it wrong too often and you’ll be out of business.
One answer, as was put to me succinctly at a recent Legal Services Act lecture I gave in Manchester, is to caveat the quote. So, on the basis that the case will proceed to a one day ET hearing “our fees will be £x” and if it becomes a 14 day slog, then £y. Sensible and prudent maybe, but how will that compare with the much bigger operations (e.g the Co-Op) who may be able to say the fee is £x full stop. No ifs, no buts, no caveats. The problem is made worse if the Co-Op et al really push Before The Event insurance (BTE) as I think they will.
How can smaller firms compete with that? Having a reputation for doing a particular type of work and being highly specialised is one answer. I doubt my friends above would have gone to the Co-Op had the option been available. They wanted a specialist and one to one service and that is what they received. Reputation, or “brand”, is going to be key. But getting clients through the door is only one part of the puzzle (albeit probably the hardest): you’ve got to be able to offer a competitively priced service when they come in or log on, or text, or tweet, or …