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Alternative fee arrangements might not save money, according to survey results

Managers of law departments take it on faith that alternative fee arrangements (billing terms other than straight hourly, AKA AFAs) at least result in better value for money spent if not reduce total external expenditures. Perhaps that credo is illusory.

According to Managing Ptr., July-Aug. 2010 at 14, and an international survey of law firms by Kerma Partners, “The majority of firms view AFAs as being just about as profitable (within a 10% variance in either direction) than (sic) hourly fee arrangements. One-third deem AFAs to be less profitable by between 10% and 25%, and only 8% deem AFAs as being at least 10% more profitable than hourly fees.”

Law firms should know about their own profitability, so these findings should douse some of the cost-saving claims put forth for AFAs.

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3 responses to “Alternative fee arrangements might not save money, according to survey results”

  1. First, I’m not sure law firms know as much about their own profitability as you might think. They know revenue, but many have a more tenuous grip on where, exactly, there profit is coming from.
    Second, there’s every reason AFAs should be win/win. They encourage law firms to be efficient with their use of resources, not just using less of them but using them more efficiently — i.e., tasks done by the legal pro who can most efficiently and profitably (not revenue, profit!) handle them. If they charge 10% less but do the work at 20% lower cost, firm and client both benefit.

  2. paid surveys says:

    I agree on this article, I have experienced this. And it didn’t made me save a money. Thanks for making this clear this to everyone.

  3. Great post. It’s very informative and I believe the survey results.