By Joe Palumbo
In our present age of corporate cost-cutting, a category now under the knife is attorney fees. Law firms have been accustomed to hourly rate charges. It’s difficult for a firm to determine how long a legal assignment took or should take to complete. Another factor to consider with the services of a large law firm is how many attorneys should be assigned to the job.
I spoke with Maryann Zalesak of College Point from the law firm of Stern, Adler & Associates. Zalesak said that in her law firm billable hour vs. a flat rate schedule is contingent on the legal services to be rendered. Notwithstanding business firms are beginning to challenge the hourly cost structure. And how are they doing it?
As the corporate cost crunch intensifies, firms, in their selection of legal services, are seeking to gain more control by scrutinizing fees with audits. Some of the existing more costly law firms find themselves being increasingly less competitive as business firms seek to lower costs. And that’s not just limited to fees, but how the fees are derived.
Companies are seeking law firms that offer competitive flat assignment rates in lieu of a more lucrative structure in which law firms bill by the hour. With a flat fee arrangement audits become non-essential, further reducing corporate costs. In addition to the employment of such a system, it does not matter how many attorneys work on a project. This, too, will give law firms the incentive of time frugality, resulting in additional cost-cutting.
But like it or not, law firms will find it necessary to make adjustments as the business world increasingly shuns the billable hour system. And corporate America has an excellent beef. Hourly rates can run anywhere from what is considered a low $200 an hour to more than $700 an hour. That’s a pretty tough meter that’s running, especially when you have no control or access to the meter.
In our present frail and still infirm economy it is the client toward which the scales of prevalence are tipping. In order to stay competitive, law firms appear increasingly happy to accommodate clients’ wishes for flat fees. So how’s the legal business doing?
They, too, are now entering the world of cutting costs, closely listening to client demand and realizing that in this economy the client no longer wants to be asked for more money along the way. The bottom line now calls for set prices and no more surprises.
Joe Palumbo is the fund manager for The Palco Group, Inc. and can be reached at palcogroup@aol.com or 718-461-8317.
