Quora, the hot new Q&A site, has people asking whether it is “the biggest blogging innovation in 10 years?” the “Next Red-Hot Web Start-Up” or could be “Bigger than Twitter” (“[i]t’s smart. Really Smart”).
We couldn’t resist seeing whether the Quora community had tackled the subject of hourly vs. flat fee pricing of legal fees. Literally the first search response was: “If a lawyer says that $30k has been charged up on the clock, how much are they typically prepared to write off?”
While there is some thoughtful discussion (realization rates, size of the client portfolio and so on), far more important and compelling is the premise underlying the question, namely: if your lawyer is charging you “on the clock” you will want to “cut fees” at the back end of the project.
What consumers of legal services intuitively get is that hourly-based pricing of legal services incents behavior that is not aligned with their interests (hence the assumed need to haggle down the fee at the end of a project). They know that the behavior they get with hourly pricing is more time billed to their matter and by more people, longer cycle to resolution, and people trying to do everything as opposed to what they are truly good at.
The far more compelling question for the connected, tech savvy and knowledgeable Quora community is why the relevant consumers continue to accept hourly-pricing as the standard pricing model for legal services? What has to happen to tip the model in favor of flat fee or other efficiency-based pricing?