Generative AI doesn't have to cause mass unemployment or mass overwork in the legal profession. We can use it to free lawyers from task performance and enter a new era of client-centred productivity.
I think this is the more likely scenario. Just like with email, we were promised a faster, more efficient way to communicate. No longer would we have to write or type up a letter, address it, get postage, send it out, and then wait several days for the recipient to receive it, before having to wait a similar length of time for them to respond. With email you can send a message to someone and it will arrive within minutes. All that saved time could be used for more important things.
Except what happened is that we now spend an inordinate amount of our day managing our email — more time than we used to spend on written correspondence!
Same thing that happens with roads. When a road starts to get busy and traffic backs up, the typical solution is to build more lanes. In other words, increase the capacity. That helps for a time, but eventually more traffic uses the expanded road until more traffic uses it than did before. The problem just comes back bigger.
Work will expand to fill the space available. So if you create space by using AI to do work faster, all that will happen is that you will find more work (and as suggested, likely more complex) to fill the time.
Hi - how do you get around the vexatious litigant issue when it comes to value billing. As a prosecutor and defence counsel for various regulated professions, I find time and complexity intertwined with the approach of counsel on the other side. I have seen straightforward matters become behemoths.
When you discuss value billing and changing what productivity looks like to clients, how do you account for vexatious litigants? I am at jglick@gfsllp.ca and would welcome a conversation as I’d like to move in this direction but have gotten killed on flat fees and other arrangements for this issue. Much easier to value billing for advisory and other types of work that I do.
First, have you tried breaking the litigation down into phases? You can price each phase and the client only pays for the phases you come to. This allows you to fine-tune your pricing to the situation, and is how most lawyers who use flat fees in litigation tend to do it.
Second, this movement from charging based on effort to value or outcomes requires one big thing: a change in mindset. When you charge based on effort (hourly billing) you are looking to get compensated for what you do: the research, emails, drafting of documents, etc. “I drafted this complaint, I should get paid for doing that work.”
When you charge based on outcome you are no longer getting paid for what you did. Instead, you are getting paid for what the client received. So you might resolve an issue with a single phone call or months of motions, but the value to the client might be the same — and therefore you’d charge the same. “I saved you $500k, I should get paid for helping you realize that savings.”
The mindset shift here is quite significant and not easy, and is why so many lawyers have trouble ditching hourly billing.
Jordan, thanks for your message! Brad has already given an excellent answer to your question, so I'll just throw in a few supplementary thoughts.
Litigation is definitely more resistant to fixed-fee (or at least non-hourly) pricing, but I don't think it's entirely immune. For me, pricing comes down to uncertainty -- the less certain you are about exactly what you're going to be doing for someone, the harder it is to figure out a fair price. Drafting a straightforward will? Almost entirely free of uncertainty. Getting sued by an irate surgery patient? Uncertainty galore.
So I try to separate the certain (or at least the most predictable) from the uncertain at the start. I can feel confident that every litigation of a certain type (e.g., defence of regulated professionals) is going to contain a number of recurring elements that have in the past required a given expenditure of my resources. I would look at this as my "base fee" -- this is what I charge for taking carriage of this matter, giving it my expert time and attention, and dealing with the essential things that are likely to occur. I can put a price on that and tell the client, "You'll pay me no less than this amount, and it will cover the following activities and services: A, B, C...." This fee should be enough to make it worth your time but not so much that the sticker shocks the clients. That's probably a data question at your end.
Then I take stock of the uncertainties -- the "known and unknown unknowns." Lengthy conversations with the client at the outset will give me a sense of what's likely going to happen and what's remote but still possible. You can't anticipate every twist and turn, but the client is paying you for, among other things, your pool of knowledge of how these kinds of cases usually go. You can then assemble a table of these potential eventualities, and assign to each one (a) a percentage estimate of its likelihood to occur and (b) how much you would charge if it did.
From this point, you have a few options, including:
(1) Multiply every possibility's occurrence percentage by its price to handle, add them all up, and say, "Here's one fixed fee that will cover everything on this list, which is almost everything I can think will potentially happen. You'll pay me this amount and no more -- even if some real outlier stuff happens that I didn't anticipate." You can move the bar on this up or down the scale, depending on how much risk you're willing to take on -- I believe a good litigator should be willing to put a decent amount of their own skin in the game and take some risk that they'll have to do stuff they hadn't thought to charge for. But that's life.
(2) Charge the base fee and say, "Take a look at this list. These things are not guaranteed to happen, but there's a variable chance each one will. If any of these things happen, that's the additional fixed amount I'm going to charge you to handle it. If they don't happen, you don't get charged." Kind of similar to the first, but you give the client their options in a different manner that might suit them better.
(3) Charge the base fee, and say, "Take a look at this list. These things are not guaranteed to happen, but there's a variable chance each one will. If one of them happens, my base fee doesn't cover it, and I'll charge you my hourly rate of $X to handle it." Again, it might suit the client or the situation better.
These aren't the only or even the best options, necessarily. Someone like Brad with much more experience in the area can give you better insight. But I like this approach because it does two things:
- You're being honest and upfront with the client, not just about costs and fees, but also about the typical architecture of litigation of this type and what they can expect will happen. This gives the client useful information, shares your confidence with them, and positions you as a partner and accompanist more than a service provider. Your clients are grownups, and they'll appreciate being treated like one.
- You're being smart and fair to your own business, making sure you're getting paid properly and reasonably for your time, attention, and expertise. You're covering off as much uncertainty as you want, up to a point -- if you really want to divest yourself of all risk and place it all on the client's head, you'd charge by the hour. There's no business downside to that for the lawyer. But fixed fees, or base fees + variables, or base fee + hourly, introduces a sliding scale of shared uncertainty, and I think that's fair and professional.
I'm neither a pricing expert nor an ethics specialist, so I'd encourage you to consult each of these before diving fully into non-hourly pricing. But as an initial framework, I hope this is useful food for thought.
Hi Brad - and Jordan - I have utilized both a “bill by phase” and a “share the risk” model and neither has proven successful. I am not trying to be a naysayer - and I know there are certain types of work that may be highly amenable to shared risk (PI, some employment, maybe tax)
Brad - what if your litigation is not quantifiable? I prosecute and defend professionals. When I prosecute, I have dealt with professionals who have brought 14 motions in courts and tribunals and had to be declared a vexatious litigant. Where is the “risk” and “success” in that?
I have also dealt with a client where we did a flat fee “in part” with success and I resolved the matter in two phone calls despite the fact that we both thought it was going to litigation. The client was miserable and refused to pay the agreed fee because I didn’t do the work.
Ever since I left a big firm 6 years ago I have tried and tried again to institute different structures because I keep being advised of a paradigm shift that lawyers need to accept is coming. Yet, my experience is that clients in my area who have tried these shifts have not been happier and the fees paid in the end, when I look back on them, have not been more fair?
Even in areas of our office practice that are amenable to “shared risk”, our experience has not been overly favourable. On employment files - our clients who opt for “shared risk” absolutely hate it when we do great work and they realize they would have paid much much less if they had paid an hourly fee.
I totally get that technology will lead to changes, and one of those changes will be how we bill - I’d welcome thoughts if you have specific experience in billing on files that carry high uncertainty and are not quantifiable (no damages, awards, etc).
Again - my own experience (across perhaps a dozen files across 6 years on my own) is that these alternative “value” billing’s have not succeeded for me in increasing fairness or contentedness with my clients - but every time I read these sorts of articles it makes me want to experiment more.
Value isn’t just about money — in fact, it’s often the smallest part. It includes lots of intangibles like peace of mind, someone to talk to, understanding of the situation, the ability to move on, freedom from harassment, goodwill, speed of resolution, etc. If you are going to try to price out a matter, you need to take all of these things into consideration. You need to spend time to discuss the situation with the client to understand what value they would place on your service and proposed resolution.
Part of your job as the lawyer is to help your client see the value they will receive. I had lunch with another lawyer today who charged a client a flat $1500 to resolve a licensing issue. She made one phone call and was able to get it completely resolved. The client was thrilled to pay that fee because she explained up front that it would likely only take 1 phone call but then he would have peace of mind, a quick resolution, no further letters or calls, etc.
In your example, it sounds like you planted the expectation in the client’s mind
that there would be lots of work required to resolve the issue, and when it only took 2 calls the client’s expectations weren’t met. It probably felt to them that you overplayed what would be necessary to resolve the issue. You didn’t know it would get resolved so quickly, but if you focused the conversation with the client on resolving their issue as quickly as possible so they could move on and have peace of mind, they might have been ecstatic about the quick resolution and been happy to pay the fee. “We think this is likely headed to litigation, but if we get it resolved without getting to that point, how much would it be worth to you?” might have completely changed the client’s view of the fee.
If you focus your initial conversations with the client on cost, that is what they are going to focus on throughout and when they get the bill. If you focus on value instead, now they see your fee as more of investment.
Hi Brad - and Jordan - I have utilized both a “bill by phase” and a “share the risk” model and neither has proven successful. I am not trying to be a naysayer - and I know there are certain types of work that may be highly amenable to shared risk (PI, some employment, maybe tax)
Brad - what if your litigation is not quantifiable? I prosecute and defend professionals. When I prosecute, I have dealt with professionals who have brought 14 motions in courts and tribunals and had to be declared a vexatious litigant. Where is the “risk” and “success” in that?
I have also dealt with a client where we did a flat fee “in part” with success and I resolved the matter in two phone calls despite the fact that we both thought it was going to litigation. The client was miserable and refused to pay the agreed fee because I didn’t do the work.
Ever since I left a big firm 6 years ago I have tried and tried again to institute different structures because I keep being advised of a paradigm shift that lawyers need to accept is coming. Yet, my experience is that clients in my area who have tried these shifts have not been happier and the fees paid in the end, when I look back on them, have not been more fair?
Even in areas of our office practice that are amenable to “shared risk”, our experience has not been overly favourable. On employment files - our clients who opt for “shared risk” absolutely hate it when we do great work and they realize they would have paid much much less if they had paid an hourly fee.
I totally get that technology will lead to changes, and one of those changes will be how we bill - I’d welcome thoughts if you have specific experience in billing on files that carry high uncertainty and are not quantifiable (no damages, awards, etc).
Again - my own experience (across perhaps a dozen files across 6 years on my own) is that these alternative “value” billing’s have not succeeded for me in increasing fairness or contentedness with my clients - but every time I read these sorts of articles it makes me want to experiment more.
Fantastic post. Inspiring too. I think there’s a lot for lawyers to like in this vision of the future. I agree it’s a seismic shift, but I think as an industry this not just a vision we should get behind, we may not actually have a choice.
I think this is the more likely scenario. Just like with email, we were promised a faster, more efficient way to communicate. No longer would we have to write or type up a letter, address it, get postage, send it out, and then wait several days for the recipient to receive it, before having to wait a similar length of time for them to respond. With email you can send a message to someone and it will arrive within minutes. All that saved time could be used for more important things.
Except what happened is that we now spend an inordinate amount of our day managing our email — more time than we used to spend on written correspondence!
Same thing that happens with roads. When a road starts to get busy and traffic backs up, the typical solution is to build more lanes. In other words, increase the capacity. That helps for a time, but eventually more traffic uses the expanded road until more traffic uses it than did before. The problem just comes back bigger.
Work will expand to fill the space available. So if you create space by using AI to do work faster, all that will happen is that you will find more work (and as suggested, likely more complex) to fill the time.
Hi - how do you get around the vexatious litigant issue when it comes to value billing. As a prosecutor and defence counsel for various regulated professions, I find time and complexity intertwined with the approach of counsel on the other side. I have seen straightforward matters become behemoths.
When you discuss value billing and changing what productivity looks like to clients, how do you account for vexatious litigants? I am at jglick@gfsllp.ca and would welcome a conversation as I’d like to move in this direction but have gotten killed on flat fees and other arrangements for this issue. Much easier to value billing for advisory and other types of work that I do.
First, have you tried breaking the litigation down into phases? You can price each phase and the client only pays for the phases you come to. This allows you to fine-tune your pricing to the situation, and is how most lawyers who use flat fees in litigation tend to do it.
Second, this movement from charging based on effort to value or outcomes requires one big thing: a change in mindset. When you charge based on effort (hourly billing) you are looking to get compensated for what you do: the research, emails, drafting of documents, etc. “I drafted this complaint, I should get paid for doing that work.”
When you charge based on outcome you are no longer getting paid for what you did. Instead, you are getting paid for what the client received. So you might resolve an issue with a single phone call or months of motions, but the value to the client might be the same — and therefore you’d charge the same. “I saved you $500k, I should get paid for helping you realize that savings.”
The mindset shift here is quite significant and not easy, and is why so many lawyers have trouble ditching hourly billing.
Jordan, thanks for your message! Brad has already given an excellent answer to your question, so I'll just throw in a few supplementary thoughts.
Litigation is definitely more resistant to fixed-fee (or at least non-hourly) pricing, but I don't think it's entirely immune. For me, pricing comes down to uncertainty -- the less certain you are about exactly what you're going to be doing for someone, the harder it is to figure out a fair price. Drafting a straightforward will? Almost entirely free of uncertainty. Getting sued by an irate surgery patient? Uncertainty galore.
So I try to separate the certain (or at least the most predictable) from the uncertain at the start. I can feel confident that every litigation of a certain type (e.g., defence of regulated professionals) is going to contain a number of recurring elements that have in the past required a given expenditure of my resources. I would look at this as my "base fee" -- this is what I charge for taking carriage of this matter, giving it my expert time and attention, and dealing with the essential things that are likely to occur. I can put a price on that and tell the client, "You'll pay me no less than this amount, and it will cover the following activities and services: A, B, C...." This fee should be enough to make it worth your time but not so much that the sticker shocks the clients. That's probably a data question at your end.
Then I take stock of the uncertainties -- the "known and unknown unknowns." Lengthy conversations with the client at the outset will give me a sense of what's likely going to happen and what's remote but still possible. You can't anticipate every twist and turn, but the client is paying you for, among other things, your pool of knowledge of how these kinds of cases usually go. You can then assemble a table of these potential eventualities, and assign to each one (a) a percentage estimate of its likelihood to occur and (b) how much you would charge if it did.
From this point, you have a few options, including:
(1) Multiply every possibility's occurrence percentage by its price to handle, add them all up, and say, "Here's one fixed fee that will cover everything on this list, which is almost everything I can think will potentially happen. You'll pay me this amount and no more -- even if some real outlier stuff happens that I didn't anticipate." You can move the bar on this up or down the scale, depending on how much risk you're willing to take on -- I believe a good litigator should be willing to put a decent amount of their own skin in the game and take some risk that they'll have to do stuff they hadn't thought to charge for. But that's life.
(2) Charge the base fee and say, "Take a look at this list. These things are not guaranteed to happen, but there's a variable chance each one will. If any of these things happen, that's the additional fixed amount I'm going to charge you to handle it. If they don't happen, you don't get charged." Kind of similar to the first, but you give the client their options in a different manner that might suit them better.
(3) Charge the base fee, and say, "Take a look at this list. These things are not guaranteed to happen, but there's a variable chance each one will. If one of them happens, my base fee doesn't cover it, and I'll charge you my hourly rate of $X to handle it." Again, it might suit the client or the situation better.
These aren't the only or even the best options, necessarily. Someone like Brad with much more experience in the area can give you better insight. But I like this approach because it does two things:
- You're being honest and upfront with the client, not just about costs and fees, but also about the typical architecture of litigation of this type and what they can expect will happen. This gives the client useful information, shares your confidence with them, and positions you as a partner and accompanist more than a service provider. Your clients are grownups, and they'll appreciate being treated like one.
- You're being smart and fair to your own business, making sure you're getting paid properly and reasonably for your time, attention, and expertise. You're covering off as much uncertainty as you want, up to a point -- if you really want to divest yourself of all risk and place it all on the client's head, you'd charge by the hour. There's no business downside to that for the lawyer. But fixed fees, or base fees + variables, or base fee + hourly, introduces a sliding scale of shared uncertainty, and I think that's fair and professional.
I'm neither a pricing expert nor an ethics specialist, so I'd encourage you to consult each of these before diving fully into non-hourly pricing. But as an initial framework, I hope this is useful food for thought.
Hi Brad - and Jordan - I have utilized both a “bill by phase” and a “share the risk” model and neither has proven successful. I am not trying to be a naysayer - and I know there are certain types of work that may be highly amenable to shared risk (PI, some employment, maybe tax)
Brad - what if your litigation is not quantifiable? I prosecute and defend professionals. When I prosecute, I have dealt with professionals who have brought 14 motions in courts and tribunals and had to be declared a vexatious litigant. Where is the “risk” and “success” in that?
I have also dealt with a client where we did a flat fee “in part” with success and I resolved the matter in two phone calls despite the fact that we both thought it was going to litigation. The client was miserable and refused to pay the agreed fee because I didn’t do the work.
Ever since I left a big firm 6 years ago I have tried and tried again to institute different structures because I keep being advised of a paradigm shift that lawyers need to accept is coming. Yet, my experience is that clients in my area who have tried these shifts have not been happier and the fees paid in the end, when I look back on them, have not been more fair?
Even in areas of our office practice that are amenable to “shared risk”, our experience has not been overly favourable. On employment files - our clients who opt for “shared risk” absolutely hate it when we do great work and they realize they would have paid much much less if they had paid an hourly fee.
I totally get that technology will lead to changes, and one of those changes will be how we bill - I’d welcome thoughts if you have specific experience in billing on files that carry high uncertainty and are not quantifiable (no damages, awards, etc).
Again - my own experience (across perhaps a dozen files across 6 years on my own) is that these alternative “value” billing’s have not succeeded for me in increasing fairness or contentedness with my clients - but every time I read these sorts of articles it makes me want to experiment more.
Value isn’t just about money — in fact, it’s often the smallest part. It includes lots of intangibles like peace of mind, someone to talk to, understanding of the situation, the ability to move on, freedom from harassment, goodwill, speed of resolution, etc. If you are going to try to price out a matter, you need to take all of these things into consideration. You need to spend time to discuss the situation with the client to understand what value they would place on your service and proposed resolution.
Part of your job as the lawyer is to help your client see the value they will receive. I had lunch with another lawyer today who charged a client a flat $1500 to resolve a licensing issue. She made one phone call and was able to get it completely resolved. The client was thrilled to pay that fee because she explained up front that it would likely only take 1 phone call but then he would have peace of mind, a quick resolution, no further letters or calls, etc.
In your example, it sounds like you planted the expectation in the client’s mind
that there would be lots of work required to resolve the issue, and when it only took 2 calls the client’s expectations weren’t met. It probably felt to them that you overplayed what would be necessary to resolve the issue. You didn’t know it would get resolved so quickly, but if you focused the conversation with the client on resolving their issue as quickly as possible so they could move on and have peace of mind, they might have been ecstatic about the quick resolution and been happy to pay the fee. “We think this is likely headed to litigation, but if we get it resolved without getting to that point, how much would it be worth to you?” might have completely changed the client’s view of the fee.
If you focus your initial conversations with the client on cost, that is what they are going to focus on throughout and when they get the bill. If you focus on value instead, now they see your fee as more of investment.
Hi Brad - and Jordan - I have utilized both a “bill by phase” and a “share the risk” model and neither has proven successful. I am not trying to be a naysayer - and I know there are certain types of work that may be highly amenable to shared risk (PI, some employment, maybe tax)
Brad - what if your litigation is not quantifiable? I prosecute and defend professionals. When I prosecute, I have dealt with professionals who have brought 14 motions in courts and tribunals and had to be declared a vexatious litigant. Where is the “risk” and “success” in that?
I have also dealt with a client where we did a flat fee “in part” with success and I resolved the matter in two phone calls despite the fact that we both thought it was going to litigation. The client was miserable and refused to pay the agreed fee because I didn’t do the work.
Ever since I left a big firm 6 years ago I have tried and tried again to institute different structures because I keep being advised of a paradigm shift that lawyers need to accept is coming. Yet, my experience is that clients in my area who have tried these shifts have not been happier and the fees paid in the end, when I look back on them, have not been more fair?
Even in areas of our office practice that are amenable to “shared risk”, our experience has not been overly favourable. On employment files - our clients who opt for “shared risk” absolutely hate it when we do great work and they realize they would have paid much much less if they had paid an hourly fee.
I totally get that technology will lead to changes, and one of those changes will be how we bill - I’d welcome thoughts if you have specific experience in billing on files that carry high uncertainty and are not quantifiable (no damages, awards, etc).
Again - my own experience (across perhaps a dozen files across 6 years on my own) is that these alternative “value” billing’s have not succeeded for me in increasing fairness or contentedness with my clients - but every time I read these sorts of articles it makes me want to experiment more.
Fantastic post. Inspiring too. I think there’s a lot for lawyers to like in this vision of the future. I agree it’s a seismic shift, but I think as an industry this not just a vision we should get behind, we may not actually have a choice.