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The Momentum to Fixed Fee Pricing is Growing
Wednesday, March 26th, 2014

davidvilensky

By David Vilensky, Managing Director at Bowen Buchbinder Vilensky Lawyers

26 March 2014

Dr George Beaton is a name familiar to anyone managing a professional services firm in Australia, especially law firms.  A high profile thought leader, businessman and academic, when George speaks, people usually listen.  And the latest research coming out of Beaton Capital is quite damning: law firms, says George, are consistently rated by their clients lowest when it comes to cost consciousness.  In clients’ own words, when it comes to “spending our money as carefully as if it were their own” most laws firms are continuing to fail.

George’s research shows that since the GFC, clients are shopping around more for legal services.  For individual law firms, improving perceptions of cost consciousness is critical.  Those able to exhibit a strong awareness of costs will be more profitable, not less, due to the low correlation between price and client perceptions of cost consciousness.  This important point is worthy of reflection.

The findings of George’s study were published by Australasian Lawyer magazine earlier this month (http://www.australasianlawyer.com.au/news/law-firms-failing-to-capitalise-on-greatest-opportunity-beaton-185302.aspx).  About the same time, as it happens, Sydney-based Hive Legal was launched on the premise of a value pricing approach to work.  Three senior practitioners from two major law firms have broken away to start up their own firm based on this fundamentally different pricing model.  Their move reflects how increasing numbers of my fellow professionals are coming to accept the inefficiencies, unfairness and inherent conflict of interest arising from time billing.  As the momentum builds we are going to see more partners, like those at Hive Legal, realize that change is unavoidable.

As though to underline the growing momentum, readers of the Australian Financial Review were recently treated to the headline ‘Excessive costs draw wrath of judiciary.’  The article outlined how , in the legal battle against Indian billionaires Radhika and Pankaj Oswal, five senior counsel, six junior counsel and five firms of solicitors attending a one day hearing submitted six volumes totalling 2700 pages of material in support of an application for leave to appeal.  The six volumes included large chunks of duplicated material, showing that even the lawyers themselves weren’t sure what was in the material they had submitted.

The Court of Appeal declined the request and ordered each applicant to pay the respondent’s costs and ordered the applicant’s solicitors to indemnify the applicants for 50 per cent of the respondent’s costs because of the “unnecessary or excessive content” of the application books.

Justice Clyde Croft of the Supreme Court described this as a “watershed moment.”  According to the Financial Review: “Justice Croft pointed to other cases which demonstrated judges were increasingly wielding their case-management powers, frustrated at excessive time- and cost- wasting by lawyers deliberately drawing out proceedings.”

Drawing out proceedings.  Vast teams of fee-earners.  These are the hallmarks of time billing, and it’s not just clients who are getting fed up with it – judges are too!  These are exactly the reasons why Bowen Buchbinder Vilensky adopted fixed fee pricing years ago.  Our clients spoke.  We listened.  The momentum to fairer methods of billing is growing.

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