Corporate legal departments want to talk about rates.  They want to talk about standard rates and alternative rates. Then comes the hourly rate discount discussion because a discount means better value. For years, groups like ALM and e-billing companies have been publishing information about hourly rates.  Anyone capable of fashioning a few Google searches can find hourly rates in a myriad of different places online – PACER, court filings, FOIA requests and published rate cards on government bids.  

At Legal Decoder, we’ve studied rates over billions in legal fees in our database and came to the only sensible conclusion.  Rates are part of the fee for service equation (Rate x Time = Fee) but the far less important component when it comes to driving value.  Rate negotiation is not rocket science – it’s actually quite easy.  In response to the recent Covid-19 crisis, many of our corporate clients demanded (and received) immediate rate reductions.  It was a good move in the middle of a pandemic but is a temporary fix and not sustainable.

Differences in hourly rates often result from partners managing a portfolio of clients. For strategic reasons, a partner may offer “Client X” as 30% discount off of published rates to get the work because s/he knows that “Client Z” can be charged 125% of the published rate on a bet the company matter.  Beyond that, it is easy for a law firm to overcome rate reductions simply by billing more time.  An extra tenth here and there and the problem is solved. As such, rate negotiations are arguably just a red herring - a seemingly plausible, though ultimately irrelevant, diversionary tactic. The conversations should focus on the work itself.  More specifically, who should be doing it, and how long should it take. Time efficiency is the red flag issue. Providing benchmarks on work product delivery is where real value is derived.

At Legal Decoder, our Legal Spend Management platform provides 29 different flags specifically designed to ensure optimal staffing and workflow efficiency. Our Staffing Efficiency Flags show whether the right person performs the right task in the right amount of time, while our Workflow Efficiency Flags identify waste, redundancy, friction, and repetition. With all things being equal (competence, experience, training, etc.), a lawyer in a top New York law firm should be able to deliver the same work product in the same amount of time as a lawyer in Kanas City or Portland. Our proprietary analytics first look at the work that was done, and then by whom in order to benchmark that information against our database. When the system identifies over/under qualified personnel taking excessive time on a task, repeating tasks, duplicating work, or any number of inefficiencies, the time entry will trigger the appropriate flag.

Legal Decoder’s unique flagging functionality helps our corporate clients realize immediate and sustainable savings by focusing on time efficiency – not rates. And the numbers are significant.

The law firms also win. When work is aligned properly, the leverage model shifts, and the firm becomes more profitable by delivering the work at a much lower rate. When repetition and redundancy is fixed, realization is improved.  And perhaps most importantly, when you submit a clean invoice, you get paid on time with no need for any discounts.