More Movement Away From Hourly Billing

LegalWeek.com reported last week that both Mayer Brown and Reed Smith are evaluating new cost structures that will bring fixed or capped fees for transactional work.

"Mayer Brown's senior management is in the process of reviewing how the firm bills clients and is considering proposals to overhaul fee structures for core transactional practices including corporate, banking and real estate.

The proposed changes, which the firm said have been accelerated as a result of client demand for greater certainty during the downturn, would see Mayer Brown offering fixed fees for all transactional work, as well as more regularly using abort agreements and success fees.

Separately, Reed Smith has also been looking at changing fee structures within its transactional practices. The firm has a committee made up of partners from across the firm reviewing proposals and is looking at an increasing use of fixed or capped fees for clients within its financial industry group (FIG), corporate and real estate practices, for transactional work."

Sure, this is an important development simply because it signals the readiness of two of the larger global firms to reassess historically entrenched billing practices.

But, actually, the implications are even more profound. This development is more than a possible trend in cost structures and more than a comment on difficult economic times.

Fixed pricing for transactional work, by definition, encourages the unbundling of legal services. The act of articulating an a la cart menu of legal services is, in itself, a form of unbundling.

Transactional pricing isolates the tasks being performed and separates them from other services. And that is inherently different than the traditional business model of a firm offering a stew of services, all intertwined, and all covered by the umbrella of billable hours.

As we quoted Robert J. Ambrogi back in April:

"Legal services are evolving from a highly bespoke, highly customized product toward becoming a commodity. As part of this evolution, legal work will be unbundled into its constituent tasks and many of those tasks will be standardized and systematized."

Another brick in the wall.

Adjusting to Fewer Associate-Level Positions

As noted recently in the ABA Journal, many large firms are delaying hiring new associates, and some are putting their summer apprenticeship programs on hiatus altogether.

Obviously, though, a decreasing number of entry-level associate positions doesn't necessarily mean there is less associate-level work to be done.

That's why one of the major challenges facing firms today is reshaping business practices to accomplish associate-level work without charging clients senior-level rates.

One of the solutions many firms are turning to is the flexible use of off-site associates for legal research.

An example of this trend is LegalEase's own Research Pathfinder, a program that offers thoroughly researched breakdowns of all relevant case law, statutes and any other opinion, law review, and any secondary research related to a specific legal issue.

All within 24 hours and all for a $250 flat fee.

LegalEase's Research Pathfinder applies two levels of quality checks by U.S. attorneys to our network of global attorneys to provide the 24-hour turnaround.

You can view additional information on LegalEase's Research Pathfinder here.

A Change in Seasonal Hiring

As we discussed back in February, the seasonal hiring pattern at large law firms is a tradition that becomes ripe for reconsideration during tough economic times (and potentially altogether as the professional landscape evolves).

The practice of offering employment to a predetermined, fixed number of newly minted law school grads at the end of each summer is based on the expectation of a corresponding level of attrition from more senior attorneys.

Many of us, though, anticipated that the current sea of churning economic uncertainty would result in far fewer senior staffers choosing to jump ship. Fewer empty deck chairs would mean fewer new hires, especially with many firms working to trim overall headcount.

Well, those predictions are now actuality.

The ABA Journal reported this last week that many large firms are delaying job offers to summer associates.

This comes as especially unwelcome news to current second year law students after last week's reports that many large firms a scaling way back (or even eliminating) their 2010 summer apprenticeship programs and recruiting.

Again, according to the ABA Journal:

• "Skadden, Arps, Slate, Meagher & Flom has cut the size of its 2010 summer program by more than half.

• Morgan, Lewis & Bockius has canceled its summer program and all on-campus recruiting.

• DLA Piper and Orrick, Herrington & Sutcliffe have postponed recruiting.

• Law firms opting against interviews at Yale include Baker & McKenzie; Milbank, Tweed, Hadley, & McCloy; and White & Case.

• Law firm interviews are down by a third or a half at New York University, Georgetown, Northwestern and other top law schools. It’s even worse at lower-ranked schools."

The wrinkle here is that this will leave organizations top heavy with more senior attorneys, causing dispraportionate billing fees for associate level work, potentially creating further demand for "virtual associates" available through LPOs.