Out with the Old, in with the Alternative: A Critical Examination of How Lawyers Can Use Alternative Fee Arrangements to Satisfy Increasingly Powerful Clients

Abstract

This article examines law firms’ need to replace the billable hour with alternative fee arrangements and discusses the ethical and managerial hurdles they will face when making this transition. It analyses the characteristics of client demand for legal pricing models and determines that client demand can only be satisfied by firms that implement alternative fee arrangements. This proposition is supported by research which suggests that alternative fee arrangements optimise firm profitability and enable firms to retain their clients whose bargaining power has been enlarged by technology. Finally, this article provides practical guidance on factors firms must consider when adopting alternative fee arrangements, specifically legal ethics issues and managerial challenges that must be addressed when implementing disruptive innovations. Ultimately, the author intends to highlight the industry-wide misalignment between client demand and the billable hour, and persuade firms to optimise their profitability and chances of survival by adopting alternative fee arrangements.