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The Evolution Of The Legal Model: Why Billable Hours No Longer Work

Billable Hours And Flat Fees

The Evolution of the Legal Model: Why Billable Hours No Longer Work

Over the past few years, several reports have proclaimed boldly that the billable hour is dead in the field of legal services. Has this billing method really become obsolete, why and is there a better alternative out there?

Reasons Why the Billable Hour is Becoming Obsolete

In order to be profitable, a law firm has to discover the best way to bill clients for its services. The billable hour has been setting the standard for some time, but a number of issues stem from the use of this methodology:

  • Charging clients by the hour often leads to highly inflated prices. A client will be charged, whether the entire block of time is used or not.
  • The billable hour will often lead to client animosity. The client will get charged whether they get a positive or a negative outcome out of the interaction. In addition, the billable hour endangers the positive relationships that is so essential for building trust and forming a partnership between a lawyer and a client.
  • A client will find it difficult to come up with a preliminary and accurate estimate about what they’re going to be charged. Not knowing how much legal services will cost can contribute to a lot of anxiety and uncertainty.
  • Billable hours can also result in a lot of inefficiency inside the law firm itself. Prolonging litigation and inefficient practices can often be prioritized for the purpose of charging clients more. As a result, the overall reputation of the law firm will suffer.

What is the Alternative?

According to the Report on the State of the Legal Market, power dynamics are shifting. Clients today have higher standards and more demands. They insist on getting value for the money spent on legal services. As a result, billable hours don’t really make a lot of sense in a dynamic that is slanted towards the client (and rightfully so!).

Another factor is also pushing legal companies to offer both quality and cost-efficiency. The competition is higher than ever before. According to the American Bar Association, the total national lawyer population has gone up from 574,910 practitioners in 1980 to 1,022,462 lawyers in 2000 and 1,335,963 attorneys in 2017. Most of these professionals (about 74 percent) end up in a private practice. If a client in need of legal assistance is dissatisfied with one service, they will easily find a quality alternative that is much more cost-efficient.

The switch away from billable hours is an obvious one but which billing method can deliver better, more sustainable results?

Flat fees have more or less risen to popularity in the legal world. Whether an attorney needs five or 10 hours of work to complete a task for a client, the fee will remain the same. This model results in predictability and it makes it easier for clients to plan the process in advance.

Depending on the field of practice, outcome-based payments could also make sense. An attorney will get paid when they help clients get a positive result. Needless to say, this model provides additional incentives for legal professionals to offer their clients the most adequate and tailored assistance every single time.

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The Most Important Protections to Include in a Coaching or Consulting Agreement

Consulting Agreement

Professional coaches and consultants have to hold a consulting agreement with clients before moving forward with service provision. This is one of the most important interactions because it will determine all other aspects of working together.

A well-written consulting or coaching agreement ensures easy conflict resolution and standardized problem addressing. Consulting agreements need to feature a couple of important protections. The International Coach Federation highlights a few of the essentials and today, we’ll take a deeper look at them.

Client Responsibilities:

Standard consulting agreements highlight the responsibilities of the client as a part of the relationship.

Such contracts state that coaching and consulting are not the same as going to a psychologist or a therapist. There will be no diagnosis or treatment of an underlying mental condition. In addition, the client understands that they will be responsible for incorporating different coaching principles in relevant aspects of their life – relationship, finances, professional development, education, etc.

Fees, Expenses and Payment Clause:

A consultant agreement should state clearly how much services will cost, whether clients could anticipate additional fees, and how the payment is going to be made.

This section could also feature a detailed schedule or a calendar of the session that will occur. The length of each meeting with the coach or consultant should be outlined so that both parties have a clear idea of the scope and duration of interactions.

A Confidentiality Clause:

Standard coaching and consulting agreements also feature a confidentiality clause. Good ethical practices necessitate the provision of such an article in the agreement.

All of the information shared between coach and client will remain confidential during and after the completion of the sessions. While relationships between coaches and clients are not considered legally confidential in the US, ethical practices established by coaching/consulting organizations necessitate the maintenance of privacy.

The confidentiality clause should also highlight when a breach of confidentiality may occur (for example, in the case of illegal activity on behalf of the client that has to be reported to authorities).

Rendering Services:

How exactly will coaching or consulting services be provided to the client? Face-to-face communication is no longer required in order to ensure the best possible outcome.

A coaching agreement should stipulate the manner in which clients will be given access to their sessions. Will consulting always take place in person? Will there be over the phone, online, or video chat sessions?

Depending on the communication medium chosen, additional terms and conditions may be introduced to ensure both the privacy and efficiency of the communication.

Cancellation and Termination Provisions:

It’s also a standard practice for coaching/consulting contracts to list cancellation and termination clauses.

Usually, clients can end their relationship with a consultant at any time. This part of the agreement will highlight the situations that enable a consultant to terminate the relationship with the client. Having a client missing multiple meetings, for example, could be reason enough for contract termination.

Speaking to a legal professional is always a good idea when considering protections to include in a consulting agreement. A tailored, personalized document is the one that will offer the highest level of security and ease of overcoming hurdles.