Legal industry ‘cancer’ kills innovation

by Peter Godfrey31 Mar 2014
Firms must fight the 'cancer' of time-based pricing if they are genuine about innovating and being different, a leading legal industry adviser has told NZ Lawyer sister publication, Australasian Lawyer.

“I don’t think the law profession is so much saturated with lawyers than it is saturated with sameness,” consultant John Chisholm said.  
“Firms say they want to be different, but they really only want to be a tiny bit different.”
Chisholm, who advises law firms on issues that include value pricing, did not mince his words when it came to discussing time-based pricing, which he sees as the key obstacle firms need to overcome before innovation can occur. 

“Timesheets are the real cancer of the legal profession. Measuring and rewarding by time is a real innovation killer,” Chisholm said.

Chisholm believes firms should shift to value-based pricing, constructing an agreed up-front price that ultimately takes the client’s best needs into consideration. Fixed fees also remove the element of bill shock, giving clients more certainty and predictability when they engage with firms. 

Chisholm argued that while new legal start-ups can adapt alternative models of pricing and partnerships, incumbent firms are often resistant and lack the flexibility to adopt new innovations.
He also believes firms can’t afford to wait until client demand forces them into adopting changes that are already ubiquitous amongst new legal start-ups.

“The start-ups and external disruptors aren’t waiting around for clients to demand changes.  This means we need to be more innovative as a profession,” Chisholm said.
He also took aim at the traditional partnership model which he considers another innovation blocker.

“The partnership model has real problems partly because it’s a 19th century model of management.  When you have to get 50 people to run a business, decision making is slowed down,” Chisholm said.  

“Bizarrely, if you’re a lawyer the last thing you would advise clients to do would be for them to enter into partnerships,” Chisholm added. 


  • by Phil Patterson 1/04/2014 9:28:52 a.m.

    The reason why law firms continue to charge by the hour is vested interest. Why commit to '$14,200+gst' when you can say 'it will be around $14,000'. When the invoice arrives, it has turned into a shocker of $22,800+disbursements+gst. Guess whose interest it is to remain time-based?

  • by David Gibbs 4/04/2014 11:17:49 a.m.

    The problem with fixing a fee in advance is that there will inevitably be conflict between what the client expects for that fee and what the lawyer considers that it covers. For any transaction there will unknowns at the outset. We see this all the time in fixed price contracts for any services. In giving advice in a complex commercial matter for instance it is unrealistic to be able to envisage at the outset all that will likely be required to be covered. Do we therefore include a contingency sum? Then how competitive will the "quote" be? If there is an honest approach by the lawyer and the trust and respect of the client at least the time based fee represents the actual value of the matter billed. I guess it takes time to build up that trust and respect, and it is easy to lose this if abused. We are moving too far away from being a profession and just being businessmen providing a service. We are the poorer for it.