The most significant current public discourse regarding law firm revenues is the increasing popularity of Alternative Fee (or Billing) Arrangements. The tide has even provided a generally accepted acronym of AFA. These arrangements are aimed at destroying or at least seriously maiming the invidious hourly billing process, which economically incentivizes inefficiencies and subordinates a law firm’s economic interests to those of the client. The hourly rate may be either dead, suffering a lingering death or in a simple state of somnolence, depending only on whether the observer is an optimist, a pragmatist or an ostrich. Nonetheless, keeping careful track of hours billed will remain a much needed tool to monitor productivity, efficiency and, most significantly, profitability on engagements.
The facts are plain. We all know about the rising tide of fixed fees, alternative billing, and holdbacks depending on results, success fees, radical convergence and fixed retainers. Let’s be completely clear on what this means: Clients, particularly those of significant economic clout are passing all or most of the risk on legal engagements to the law firm.
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