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This topic has been debated for a number of years now and there are great arguments from both sides. From the client side it is much easier to budget when the costs are known up front. From the law firm’s side, not everything can be clearly defined making costs unpredictable.
Time tracking is still necessary in a flat fee environment. It is the only way to accurately determine the effectiveness and profitability of a flat fee arrangement. You can’t manage what you don’t measure.
What I believe is missing in these debates and articles, is the understanding that making this change is not about flipping a switch in a billing program. It is about changing values and culture; both are not easy and will take time. Certainly processes and in some cases people will have to change. Not all firms will be successful and not all firms should try. It requires firms to manage engagements and improve processes for delivering, to maintain a consistent healthy margin.
This topic just came up in a meeting I was having with an attorney here in Chicago. She said their firm’s philosophy was to work with what the clients want. She explained not all clients want flat fees; some would prefer to stay with the billable hour. Their firm prefers to work with their client to establish the billing arrangement that best meets their client’s needs, and rather than guess, they ask.
So maybe the debate is not should we or shouldn’t we, but what do we need to do to be prepared for what our client wants.
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