For anyone in professional services, managing fixed fee arrangements is complex at best and if we’re honest; at times it can be quite scary! Scary because fixed fee arrangement, if not correctly managed, can lead to serious margin erosion and missed expectations.
Back at Sharedo HQ this is something we have been putting a lot of thought into. We want for you to be able to say goodbye to scary fixed fees and hello to intelligent fixed fees.
Our starting point was to understand the sort of contracts that people were designing. Looking across a bunch of different contracts, including our own, we see that fee structures vary by a multitude of different parameters. They vary by:
Transaction type e.g. claims, disposals
Transaction value e.g. size of reserves or a property disposal value
Special events e.g. if a case moves to litigation then fee scales may change
Abortive transactions – often elements of these cases or matters will still be chargeable but maybe to a different extent
Some work will of course fall outside of the fixed fee arrangement and be done under a more traditional hourly rate.
So traditionally you might make the fee earner responsible for specifying the fee arrangement at the start of a file and maybe review it at the end of the file. However, this manual review is fraught with errors and a natural human desire to please by under charging will more often than not lead to margin erosion.
So back at Sharedo towers we began thinking of tackling this problem in a different way.
What if every element of your fixed fee structure could be driven by intelligent events. If something changed on a file then this would be instantly reflected in your fee structures, ready for approval by all interested parties. This changes the role of fee earners from defining applicable fees to confirming intelligent fees. Removing the ‘please’ bias and ultimately ensuring that both fixed fee and time & material elements are captured correctly.
So all of the above sounds great in principle but unfortunately it doesn’t stop you from under charging for the fixed fee elements in the first place. For that you need some greater predictive analytics…but that is the subject of another blog post!