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In-house counsel say alternative fee arrangements will increase next year, according to a recent report by the Association of Corporate Counsel.

That uptick might lead to closer partnerships between in-house counsel and company executives, the report says, because of a chain reaction between accurate budgeting, perceived value and increased trust.

The ACC Law Department Management Report, released Nov. 29, surveyed about 300 general counsel, in-house counsel and legal operations specialists across 37 industries in 25 countries. Of those surveyed, 50 percent say alterative fee arrangements will increase in 2017, while 11 percent say AFA usage will stay the same, and 9 percent say they aren’t sure.

Because of an interconnected web between budgeting and “value”—as defined by a company’s executives and managers—increased alternative billing could bolster a legal department’s importance and leverage, the report says. 
The theory goes like this: Companies appreciate it most when its legal departments stay in budget and companies that use alternative billing have a greater than 90 percent chance at doing just that, the report says. Further, when departments stay in budget, executives are more likely to view in-house lawyers as partners, consulting them on legal risks, business issues and organization. More communication, more responsibility, the report says.

“In fact, the data clearly show that when law departments are cost-efficient, innovative and value-driven in their traditional functions, they simultaneously gain [and justify] even greater access to the inner sanctums where decisions are made as to the company’s future and how that future will be secured,” the report says. It goes on, “Hitting the budget and using AFAs are statistically related in that hitting the budget is driven by AFA use, and those who hit the budget and use AFAs are more likely to have a seat at the table.”

Of those surveyed, 65 percent say the executive team “almost always” seeks the legal department’s input on business decisions, and 75 percent say in-house attorneys “almost always” meet with business leaders to discuss operational issues and risk areas.

Despite these benefits of increasing AFA use, 30 percent of respondents said they expect AFA use to actually go down in 2017. It isn’t the fault of stubborn outside counsel, the report says. Instead, AFAs are nascent enough to lack agreed-upon caps and minimums, and the report says some companies simply fail to see the value. And some companies are overburdened with outside counsel work, so they rely on the traditional billable hour, the report says.

“With caseloads we can expect to increase in volume or severity—as well as immediate urgency—a fairly sizeable minority of departments say now will be falling back on an easier, if ultimately more expensive, reliance on traditional hourly rates,” the report says.

“Over the years, we have seen the use of alternative fee arrangements gradually shift from a client request to a permanent change in the law firm business model,” said Veta Richardson, president and CEO of ACC, in a statement. “The ACC Law Department Management 2016 Report supports what law department leaders have stressed all along, which is that innovation and strategic management practices drive efficiency.”


Originally published on Corporate Counsel. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

In-house counsel say alternative fee arrangements will increase next year, according to a recent report by the Association of Corporate Counsel.

That uptick might lead to closer partnerships between in-house counsel and company executives, the report says, because of a chain reaction between accurate budgeting, perceived value and increased trust.

The ACC Law Department Management Report, released Nov. 29, surveyed about 300 general counsel, in-house counsel and legal operations specialists across 37 industries in 25 countries. Of those surveyed, 50 percent say alterative fee arrangements will increase in 2017, while 11 percent say AFA usage will stay the same, and 9 percent say they aren’t sure.

Because of an interconnected web between budgeting and “value”—as defined by a company’s executives and managers—increased alternative billing could bolster a legal department’s importance and leverage, the report says. 
The theory goes like this: Companies appreciate it most when its legal departments stay in budget and companies that use alternative billing have a greater than 90 percent chance at doing just that, the report says. Further, when departments stay in budget, executives are more likely to view in-house lawyers as partners, consulting them on legal risks, business issues and organization. More communication, more responsibility, the report says.

“In fact, the data clearly show that when law departments are cost-efficient, innovative and value-driven in their traditional functions, they simultaneously gain [and justify] even greater access to the inner sanctums where decisions are made as to the company’s future and how that future will be secured,” the report says. It goes on, “Hitting the budget and using AFAs are statistically related in that hitting the budget is driven by AFA use, and those who hit the budget and use AFAs are more likely to have a seat at the table.”

Of those surveyed, 65 percent say the executive team “almost always” seeks the legal department’s input on business decisions, and 75 percent say in-house attorneys “almost always” meet with business leaders to discuss operational issues and risk areas.

Despite these benefits of increasing AFA use, 30 percent of respondents said they expect AFA use to actually go down in 2017. It isn’t the fault of stubborn outside counsel, the report says. Instead, AFAs are nascent enough to lack agreed-upon caps and minimums, and the report says some companies simply fail to see the value. And some companies are overburdened with outside counsel work, so they rely on the traditional billable hour, the report says.

“With caseloads we can expect to increase in volume or severity—as well as immediate urgency—a fairly sizeable minority of departments say now will be falling back on an easier, if ultimately more expensive, reliance on traditional hourly rates,” the report says.

“Over the years, we have seen the use of alternative fee arrangements gradually shift from a client request to a permanent change in the law firm business model,” said Veta Richardson, president and CEO of ACC, in a statement. “The ACC Law Department Management 2016 Report supports what law department leaders have stressed all along, which is that innovation and strategic management practices drive efficiency.”


Originally published on Corporate Counsel. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.