Smaller law firms are more receptive to alternative fee arrangements?

According to a survey by Butler Rubin Saltarelli & Boyd, reported by InsideCounsel, April 2007 at 54, the 162 readers of that magazine who responded online in May 2006 gave the edge to smaller law firms. When given the statement “Smaller law firms are more willing to explore alternative fee arrangements than larger firms,” 62 percent of the respondents checked “agree.” Of the remainder, 23 percent checked “disagree,” and 15 percent chose “neutral.”

The results would persuade me more if there had been some definition of “smaller law firms,” such as “firms with fewer than 25 lawyers,” and if the question had asked about actual fee arrangements entered into rather than fee arrangements “explored.” That is, if the question had been along the lines of “In the past 12 months, what percentage of your fees to firms of less than 25 lawyers were paid other than on an hourly basis or discounted hourly basis?” and then had the survey asked the same question of larger firms.

Having critiqued the methodology, let’s take the findings at face value: smaller firms are more willing to work outside the mainstream of hourly billing. One reason might be that partners in smaller firms are hungrier for corporate work and trade billing flexibility for being retained. Or such firms have looser controls over the billing practices of their partners (See my post of March 20, 2007 on executive committee approval.). Possibly, too, smaller firms – boutiques and specialist firms – understand better than large general practice firms what it takes to handle certain kinds of matters and can therefore price differently.

I still suspect that larger firms can more easily take on the greater risks of alternative fee arrangements and can better match their larger and more sophisticated resources to the needs of the non-standard billing arrangement.

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