Alternative billing and the need for better analysis

In their article on Alternative Billing and the Best of ABA TECHSHOW Jim Calloway and Natalie Kelly discuss the nature of alternative billing, which “could be said to be simply a shift in the way firms use ‘time’ as the commodity and to more of the ‘value’ or the ‘legal service product’ as the commodity.” Calloway and Kelly also point out the necessary considerations to make for firms considering alternative billing arrangements and the need for thorough analysis from a firm perspective, but “Equally important is the need for firms to analyze and anticipate whether or not alternative fee arrangements are even wanted, and whether or not they will likely be accepted by clients.”

As we have discussed in our previous blog post ‘Difficulty to estimate time’ here on Legal Innovation Blog, the difficulty to estimate time have real impacts when it comes to new fee arrangements. As Mary Abraham states “When lawyers work in a world that rewards according to time spent, it becomes imperative that we understand better exactly how much time an activity times.” “… consider that as we shift to alternative billing arrangements, bad estimates come out of the lawyer’s pocket rather than the client’s pocket.”

This difficulty is also mentioned in the article by Calloway and Kelly above, where they give a general review of the tools as would be encountered during a generic alternative billing arrangement and billing cycle, from the pre-analysis to the post-billing analysis.  “Information gathered after the bills have gone out can play an extremely important role in alternative billing arrangements. Accepting the premise that firms must continue to track time, or at least keep a log of work that is being performed, firms can analyze both profitability and productivity in ways to help the firm determine whether alternative billing arrangements will be feasible. This information may lead a firm to understand that it is more profitable and productive for the firm to use alternative billing arrangements. It may also lead the firm to see that the value of work performed actually has a ‘price’, and that this ‘price’ may be appropriately applied and used either all of the time or in specific instances in billing for delivery of legal services.”