For too long, pricing has been the thorn in the side for many businesses employing legal services firms.
Last year, the Competition and Markets Authority published a damning report on legal services in the UK, highlighting the impenetrable nature of pricing for clients.
Around £11-12bn a year is spent by consumers on legal services in England and Wales. Yet, according to recent research, British clients may be overpaying lawyers by nearly £500m a year.
Time and time again, reports emerge about large commercial law firms failing to deliver value for money, with businesses claiming that they are paying extortionate amounts for a disappointing service.
In particular, clients abhor firms that fail to work within an agreed budget, charge for their services by the hour, and don’t inform them when the estimated fee is exceeded – leading to the sense that law firms are fundamentally uninterested in delivering value to their clients.
Before launching our firm Gunnercooke, we asked more than 50 financial directors and chief executives about what they disliked about lawyers. Top of the list? Spiraling bills and lack of transparency around pricing. They were tired of being landed with a huge bill that was impossible to anticipate.
This disenchantment is a direct result of a flaw in the fundamental structure of most law firms – a flaw that rewards inefficiency and sets up clients to lose out.
Lawyers in most of the large, commercial firms are rewarded on the basis that they bill as many hours as possible – which means that lawyers’ objectives are not always aligned with clients to bring matters to a timely close. Lawyers at some of the top law firms routinely charge an extortionate hourly rate that can see project costs spiraling as the clock keeps ticking.
Clients’ dissatisfaction around pricing is reaching a crisis point. Increasingly, law firms are responding by going back to the drawing board and reworking their pricing models.
Firms with their eye on the future are dispensing with timesheets – too long the bane of our industry. Without timesheets, law firms should adopt an approach to pricing that is the result of thorough scoping before work begins.
The lawyer should outline exactly what work they will be undertaking and how they have reached the fee they are proposing.
Once a fee is agreed, firms must then resist the urge to increase the fee if work takes longer than anticipated. Setting fees is not an exact science, but a lawyer’s fee should be proportionate to the value that they are adding to the client’s business.
Since we launched our firm in 2010, we’ve seen more and more businesses adopt this approach in the UK, with clients saving up to 40 per cent in legal fees.
Our clients appreciate that we share the risk, and that we are completely transparent about what our advice will cost.
Best of all, liberating our lawyers from timesheets means they are free to focus on quality of service and the job at hand – which is the real reason most lawyers go into law in the first place.
The argument for a clear, accountable pricing model is indisputable. Firms that don’t take measures to adopt transparent pricing will lose out.
£ Sarah Goulbourne is co-founder of challenger law firm Gunnercooke.