The “Fixed Fee” Future of Law

As costs run away in the legal and medical industries, pay practices are going to change, explains Ben Heineman, a senior fellow at Harvard Law School.
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TRANSCRIPT

Question: What’s the future of the legal profession?

Ben Heineman: I am a Senior Fellow at Harvard in the Program on the Legal Profession. I write about this a lot. I was very involved in changing the way inside lawyers do their job. I believe that there is a major change because of the economic conditions where corporations are putting tighter budgets on law firms, which is why law firms are being forced to either lay off partners, senior associates, and they are not hiring as many young people.

I think for people who are going to law school, I think this is a good thing to be perfectly honest. They need to think of other kinds of careers and there are many opportunities in the public sector and the non-profit sector that they can take advantage of. I do think we are going to see a decline in the legal business because corporations are just going to be tighter on their budgets and that's going to last for a long time and that will mean less business for law firms.

I also think, and I've written about this, that we are going to move away from the hourly billing rate toward something called the "fixed fee" where basically you pay a price for a legal service, even if it's a complex one. We don't bill fee for service on an hourly basis. It's a problem in the medical profession; it's why healthcare costs are running away. It's a problem in the legal profession; that's why legal costs are running way, so we've got to solve the problem in both law and medicine.

Question: Is this something that’s soon to come?

Ben Heineman: I think it's happening. The fixed fee arrangements, what are called alternative fee arrangements are definitely happening in a number of firms and in a number of major corporations are pushing very hard to change the economic relationship.

When I came to GE, we changed the paradigm for inside lawyers. We got great lawyers to come inside and that meant that there could be more cooperation between the inside lawyers who are the equal of the outside lawyers on matters, but there was always a dispute about money. What the fixed fee will do, hopefully, will create a partnership on the money as well as on the matters and that will be beneficial both for the companies, for the law firms, and I think, for the public interests.

Recorded on November 3, 2009