Modern law firms are bringing legal practices into a new frontier of individualized representation and increased access to counsel for clients across the country. Part 1 of this series covered the power of autonomy and how it’s allowed attorneys to tailor their clients’ representation while embracing the entrepreneurial side of a legal practice. Part 2 of this series leans more into that entrepreneurial side of law by discussing how re-aligning financial incentives within law firms helps attorneys grow their legal practice in a holistic way, resulting in improved client retention and satisfaction.
Aligning Incentives for Increased Success
While autonomy is necessary to forge your own path within your legal career, it isn’t the only fundamental shift in the legal industry that’s had a positive impact on attorneys’ relationship with their client. Another critical shift is aligning financial incentives for attorneys in a way that promotes client relationships and success instead of only traditional law firm metrics.
Law firms have treated attorneys as though they’re only as good as their last billable hour for decades. This created a push for attorneys to bill more, increase their hourly rates, and focus on growing their book of business by taking on client matters with more billing potential. The treatment of attorneys (and sometimes clients) like numbers on a spreadsheet can start to take away from the focus of what the practice of law should be: representing clients in a way that helps them reach their individual goals.
That’s not to say the numbers aren’t important; of course, any business needs to make financial sense. The focus, however, should be on the representation side of the law and encouraging attorneys to spend their time working alongside their clients to create success.
How Can Financial Incentives Promote Attorneys’ Relationships with Clients?
Alternative fee arrangements allow for a tailored approach to legal services. Each client has unique goals, so why wouldn’t the engagement letters and fee arrangements be unique as well? Some examples of fee arrangements that promote client interests include:
- Flat fees: an attorney would charge a set amount for the legal services provided to a client. This offers transparency and the ability for a client to know exactly what to expect when they engage with an attorney. This type of fee arrangement is common with clients that do not need ongoing legal counsel but have a specific need with an end date in mind.
- Recurring monthly retainer: this style of fee arrangement operates kind of like a membership plan for legal services and is more common for clients that hire in practice areas like Outsourced General Counsel. The specific work the attorney does might vary from month to month, but the client and attorney have agreed upon how much time or the type of legal services the attorney provides with a set fee each month. It’s a great option for organizations with ongoing legal needs but not the need of a full-time attorney.
- Contingency or success-driven fee: these legal fees are often used by attorneys in litigation and alternative dispute resolution practice areas. The amount the attorney charges depends on how much the client is awarded (or saves). It can also be used in transactional law when working with clients in M&A or complex transactions where attorneys’ work product and due diligence directly impacts the outcome of the transaction.
- Hourly billing: certain client matters work best with hourly legal services and some attorneys work better with billable hours. Attorneys and clients can work together to determine their rates for specific legal services, which can be a great fit for ongoing legal counsel or client matters that may only require a couple of hours. When possible, attorneys will estimate how many hours a matter will take so that clients have an idea of what to expect. If the work ends up taking more time as the issue evolves, attorneys will communicate that with their clients to offer full transparency and confirm they’re still on the same page when it comes to the legal work.
- A combination of billing methods: “alternative fee arrangements” means exactly that – attorneys and clients can work together to choose an invoicing method, schedule, and rate that works for both parties. Creating this individualized form of legal services helps build the trust clients need to work effectively with their attorneys by showing clients you understand their needs and would like to work with them to create the best solution for both of you.
In addition to alternative fee arrangements, re-aligning financial incentives to promote client success requires determining what to actually incentivize. Does your firm highly incentivize the largest book of business? What about the most billable hours? What do you receive in exchange for being a top performer? Most of the time, partners receive a larger year-end bonus for meeting certain metrics. But does this style of incentivizing truly promote client success? Are clients better off when attorneys receive bonuses?
What if instead of incentivizing more billable hours, firms started to incentivize collaboration and firm growth so that clients could receive full service legal care at every stage of their representation?
We can’t speak for all virtual firms when it comes to compensation packages, but Practus incentivizes the representation side of practicing law through collaboration and as part of a team of attorneys representing clients. Collaboration is a key part of our law firm culture, which means we have a built-in referral network, attorneys in a variety of practice areas, and financial benefits for keeping work within the firm.
Rather than focusing on the number of billable hours attorneys accumulate or exerting energy on office politics to hopefully secure that bonus, partners shift their time spent to developing ways to provide comprehensive legal services to clients.
The remote capabilities of a virtual firm make this style of collaboration much easier than it would be at a traditional law firm. Attorneys aren’t limited to working with people on the same floor, building, or even city because we can connect with each other regardless of location. The removal of geographical constraints within the practice of law can be extremely helpful when your client needs representation from attorneys licensed in multiple states or someone with local or specialized experience. Autonomy, alternative fee arrangements, and incentivizing collaboration are three aspects of a modern law firm that work together to provide clients with individualized legal services, often yielding higher client retention rates and satisfaction.
The digital nature of these firms also provides access to legal counsel in legal deserts (areas that do not have a sufficient number of active attorneys or attorneys with necessary expertise) while helping rural and metropolitan attorneys grow their legal career with a location-independent referral network. Subscribe to be the first to read Part 3 of this series, focusing on how virtual law firms are helping bridge the gap in these legal deserts.
