As
we
step
into
2025,
the
legal
operations
landscape
continues
a
transformation
anchored
by
a
simple
question:
What
does
value
truly
mean
in
a
legal
department?
As
we’ve
seen
through
our
work
at
UpLevel
Ops
and
Value
Strategies,
the
answer
often
transcends
traditional
cost-control
measures.
Instead,
it
lies
in
fostering
a
change
management
culture
that
prioritizes
efficiency,
transparency,
and
alignment
between
legal
departments
and
their
partners.
The
Rise
(and
Necessity)
of
Value-Based
Pricing
Many
legal
departments
are
abandoning
the
billable
hour
in
favor
of
Value-Based
Pricing
(VBP)
fee
arrangements,
a
model
designed
to
align
fees
with
actual
deliverables
and
results
instead
of
hours
spent.
Why?
Everyone
agrees
that
the
billable
hour
incentivizes
inefficiency
and
misalignment.
VBP
flips
this
dynamic,
creating
partnerships
by
aligning
incentives
between
the
client
and
the
firm.
VBP
is
not
considered
an
alternative
fee
arrangement;
instead,
it
is
an
entirely
different
methodology
for
pricing
legal
matters.
Legal
departments
that
have
converted
to
VBP
report
significant
reduction
in
outside
counsel
spend
(20%
–
50%),
improved
budget
predictability,
and
reduced
administrative
costs.
The
significant
reductions
in
outside
counsel
spend
come
from
a
process
that
requires
the
firm
to
be
more
efficient
in
delivering
legal
services,
and
the
client
benefits
from
that
efficiency
gain.
Administrative
savings
come
from
the
elimination
of
invoice
reviews
and
accruals
processes. In
addition,
VBP
enhances
collaboration
and
communication
between
in-house
teams
and
outside
counsel.
Change
Management:
The
True
Catalyst
for
Success
Internal
change
management
is
key
to
rolling
out
a
VBP
program.
As
with
most
program
implementations
in
a
legal
ops
environment,
getting
the
internal
team
to
do
something
different
can
sometimes
be
a
big
lift.
Having
buy-in
from
the
executive
team
can
be
very
helpful
in
motivating
the
team
to
move
forward.
Another
useful
method
is
piloting
a
smaller
practice
area,
especially
with
a
practice
area
manager
open
to
new
ideas
and
trying
new
processes.
After
a
successful
pilot,
that
manager
could
evangelize
the
benefits
of
VBP
to
the
rest
of
the
department.
Another
way
to
incentivize
internal
team
members
to
implement
VBP
is
to
explain
how
the
program
will
benefit
them
personally.
These
benefits
include
the
elimination
of
invoice
reviews
and
the
accruals
process.
How
Do
You
Determine
the
Value-Based
Fee?
Actual
pricing
under
the
VBP
model
is
derived
from
five
components:
matter
type,
matter
value,
jurisdiction,
type
of
firm,
and
risk-sharing.
-
Firm
and
Matter
Type
–
A
definition
of
matter
type
and
firm
type
begins
with
understanding
Value
Price
Points
(VPP).
This
can
be
thought
of
on
a
relative
scale
as
there
are
types
of
matters
and
certain
types
of
tasks
that
have
a
lower
VPP
than
others.
These
VPP
(or
market)
differentials
can
be
due
to
many
factors,
including
the
complexity
of
the
work,
commonality
of
the
work,
the
number
of
skilled
practitioners
available,
and
the
“perceived”
value
of
the
work.
Understanding
VPPs
for
different
matter
types
and
tasks
is
helpful
in
setting
pricing
and
assigning
the
proper
resources
to
do
the
work
(partner,
associate,
paralegal,
etc.).This
concept
of
VPP
also
applies
to
firm
types.
Different
firms
have
different
VPPs
based
on
size,
brand,
reputation,
matter
breadth,
client
list,
geography,
overhead
structure,
etc.
It
is
important
to
match
the
VPP
of
the
matter
with
the
VPP
of
the
firm
that
will
do
the
work. -
Matter
Value
–
One
of
the
key
components
to
creating
a
value-based
price
is
to
perform
a
Matter
Value
Estimation
(MVE).
There
are
three
types
of
value:
economic,
perceived,
and
strategic.
An
MVE
begins
with
an
economic
value
estimation.
This
is
typically
the
actual
economic
value
of
the
matter.
Perceived
value
is
the
economic
value
of
the
matter
adjusted
to
the
perceived
value
of
the
client.
Typically,
in
litigation,
it
is
significantly
less
than
the
economic
value.
For
a
transaction,
it
may
or
may
not
be
the
same
as
the
economic
value.The
final
step
in
an
MVE
is
the
determination
of
the
strategic
value.
In
litigation,
this
is
the
financial
impact
on
the
corporation
of
losing
the
case
and
the
economic
impact
of
potential
future
litigation
or
brand
impact.
For
a
transaction,
this
includes
the
financial
impact
on
the
corporation
if
the
deal
does
not
go
through. -
Jurisdiction
–
This
factor
considers
the
court
and
the
geography
in
which
the
matter
is
adjudicated. -
Risk-Sharing
–
Pricing
structures
can
incentivize
risk-sharing
by
law
firms
and
drive
toward
the
client’s
goal
of
paying
more
for
results
and
less
for
effort.
This
alignment
of
incentives
between
the
client
and
firm
provides
better
value
for
the
client
and
allows
a
law
firm
to
earn
a
premium
for
outstanding
results.
What
Types
of
Fee
Structures
and
Price
Metrics
Are
Used
in
VBP?
In
the
application
of
value-based
fee
arrangements,
there
are
numerous
structures
and
metrics
are
used
to
create
the
actual
fees.
Below
are
a
few
basic
structures.
More
complex
arrangements
are
hybrids
of
multiple
structures.
-
Task-based
─
This
structure
is
usually
a
fixed
fee
for
a
specific
task
and
is
often
seen
in
patent
prosecution
or
immigration
law.
An
example
is
a
fixed
fee
for
completing
and
filing
a
utility
patent
or
H1B
visa. -
Tier
or
category-based
─
Some
legal
work
can
be
divided
into
value
tiers,
and
often
a
fixed
fee
is
assigned
to
each
tier
or
category. -
Scope-based
–
For
legal
work
that
is
project-based
with
specific
deliverables
or
has
a
defined
scope
of
work
delivered
consistently
over
a
period
of
time,
a
fixed
fee
would
be
defined. -
Unit-price
metrics
–
Different
price
metrics
should
be
considered
in
each
engagement.
Under
the
traditional
hourly
rate
model,
the
unit
price
metric
is
dollars
per
hour.
Since
hours
worked
is
not
synonymous
with
value
delivered,
consider
other
value-centric
metrics
such
as
dollars
per
document,
dollars
per
deposition,
or
dollars
per
motion.
There
are
an
unlimited
number
of
ways
to
modify
the
metric
based
on
different
types
of
matters,
goals,
and
outcomes.
Summary
–
Benefits
of
Value-Based
pricing
Many
corporate
legal
departments
are
beginning
to
realize
that
the
current
hourly
billing
model
is
unsustainable.
With
billing
rates
for
some
firms
topping
$2500
per
hour,
the
question
becomes,
“Where
does
this
end?”
In-house
attorneys
want
to
move
off
of
the
billable
hour
model
but
don’t
know
how
to
accomplish
it
or
how
to
evaluate
if
an
alternative
fee
is
right
for
them.
VBP
is
fast
becoming
the
new
standard
for
clients
to
focus
on
the
value
received
in
legal
services,
not
the
effort
expended.
With
AI
dramatically
reducing
the
time
required
for
legal
tasks,
law
firms
will
need
to
shift
their
revenue
model
from
hours
burned
to
actual
value
delivered.
Over
the
next
few
years,
this
transformation
will
accelerate,
making
value-based
pricing
not
just
an
option—but
a
necessity.
Fortunately,
this
methodology
applies
across
all
legal
matters
and
practice
areas.
It
gives
legal
departments
the
budget
predictability
they
need
while
significantly
reducing
total
legal
spend
and
increasing
in-house
productivity.
It
can
also
be
used
to
build
new
partnerships
between
firms
and
clients
that
are
based
on
value
delivered
and
client
success.
Like
the
other
top-tier
professional
services
industries
that
converted
to
this
methodology
over
20
years
ago,
VBP
is
the
future
of
legal
services.
The
change
will
most
likely
not
come
from
the
law
firms
but
from
clients
beginning
to
demand
results-based
compensation
models.
Stephanie Corey is
a
co-founder
and
CEO
of
UpLevel
Ops. Stephanie also
co-founded
LINK
(Legal
Innovators
Network),
a
legal
operations
organization
exclusively
for
experienced,
in-house
professionals.
She
previously
founded
the
legal
operations
trade
organization
CLOC
(Corporate
Legal
Operations
Consortium)
and
is
a
former
executive
member.
Please
feel
free
to contact
and
connect
with
her
on
LinkedIn.
Ken
Callander
specializes
in
helping
corporate
legal
departments
optimize
their
outside
counsel
relationships,
ensuring
greater
value,
efficiency,
and
budget
predictability.
As
part
of
the
Advisory
Team
at
UpLevel
Ops,
he
partners
with
legal
teams
to
implement
strategic
outside
counsel
management
programs,
including
transitioning
from
hourly
billing
to
value-
based
fee
arrangements.
His
clients
span
industries
such
as
technology,
healthcare,
construction,
the
sharing
economy,
private
equity,
and
multinational
conglomerates.
Please
feel
free
to
contact
or
connect
with
him
on
LinkedIn.
Kathryn
