Nowadays it wouldn't be terribly unusual to hear the general counsel of a Fortune 500 company call billable hours a "medieval guild system" that leads to "unhappy lawyers and unhappy clients." But Cisco Systems, Inc. general counsel Mark Chandler has articulated—and acted—on those views for more than a decade, making him one of the industry's earliest proponents of fixed-fee billing systems. In Chandler's estimation, fixed-fee systems align outside and inside counsel's interests, which are natural opposites: Companies operate on a budget, while law firms are economically motivated to do as much work as possible.
Chandler implemented fixed-fee arrangements when he took over the helm of Cisco's law department in 2001. Today, 80 percent of his company's outside legal spending, spread among dozens of firms, is done through various sorts of fixed fee systems. (The remaining 20 percent is made up mostly of matters too urgent to spend time negotiating fees on.)
"Mark was a pioneer in championing fixed-fee arrangements," says Fenwick & West chairman and corporate partner Gordon Davidson. When his firm started handling corporate work for the San Jose–based networking equipment maker in 2003, Chandler asked Fenwick to project how much work it would do for Cisco in the coming year. Fenwick then received an annual flat fee based on that projection, which could be adjusted if the work came in over or under the estimate. "It has definitely made us more efficient," Davidson says.