A survey conducted by LexisNexis Examen at the ACC 2005 annual meeting obtained responses from 86 law departments. Those departments had many excuses for having not succeeded in seceding from hourly billing. Here is how they ranked their reasons, from Counsel to Counsel, Jan. 2006 at 15, with the number of departments choosing a reason in parenthesis.
1. Law firm resistance (37)
2. Not a priority (34)
3. Too busy (31)
4. Implementation too hard (30)
5. Difficulty tracking hours and expenses (22)
6. C-suite wants to pay hourly (15)
Of the respondents, 64 percent came from law departments of 1-5 lawyers, at which size they might not have the volume or clout to influence large law firms and overcome their resistance (See my post of Jan. 3, 2005 on being a primary or tertiary client.) The fifth reason confuses me, because one goal of escaping hourly-based bills is to make it easier to track costs.
What really threw me for a loop was the final reason, which almost 20 percent of the departments cited: the top managers of the company (C-suite) oppose change! How is it that the CEO or CFO, for example, can tell the CLO what to do when it comes to paying outside counsel? (See my post of Sept. 13, 2005 about Board control of outside counsel.)
Perhaps the choice was not given on the survey, but no one said about alternatives to hourly billing, “we won’t save money or improve quality of service.”