Redwood Analytics

At our User Conference this year we had a presentation called "Contingent Work: Worth the Investment?"  The title of this presentation poses a question that is asked by many firms, especially those that are large in size.  There are many boutique firm lawyers that have made fortunes off of contingent work.  It is the nature of their business and they are very good at it.  For larger firms it becomes a more difficult practice to manage.  Every lawyer loves to talk about the big contingent win, but you rarely hear the talk of how long it took, and how many resources were drained, and how the client and lawyer were playing with house money for years.  In addition, the small cases that are lost seem to also be lost in the mindset of the firm.

We have worked with a number of firms analyzing their contingent practices to see if the value returned is worth the investment.  There have been enough requests that we even considered creating a software product around it.  The reality is this:  for large firms, contingent work is an alternative arrangement that is useful for particular matters and should be used sparingly; unless you have a practice that excels in their intake process.  Some firms have indicators of success and will not take on a contingent matter unless it has a significant premium and with a high percentage chance of success.  This percentage varies from firm to firm.  The way they measure that percentage also varies and can be debated.  I suggest developing a cohesive strategy around the intake process s if your firm does want to work in the contingent arena.  If you do not you could have a bunch of junk matters that are eating up time and resources with little chance of success.  In such an hour-starved market many attorneys are looking to fill their books

Contingent work is an alternative arrangement and there are many variations to how the arrangement is structured (this will be discussed at another time.)  Just like any other alternative this arrangement has its pros and cons.    For the client, the pros are quite apparent.  They pay based off of the results achieved by the firm.  They don't pay for time, only results.  For those clients who have cash flow uncertainties this is a good option.  Also for the firm, the pros are generally a premium based off of the work and in most cases terms are clearly outlined so there are no surprises.  The cons fall almost completely on the law firm.  If the firm has little experience with these cases, they could lose their shirts.  These cases can be long in nature and for firms with cash flow concerns they can drain a firm into bankruptcy.  The firm assumes all the risk, but again if I recall from my business classes, "with risk comes reward."

The main takeaway is that each firm needs to decide:

• Should the firm invest time into contingent work?
• What is the formula for contingent intake and what determines success?
• In what areas of law should these arrangements be offered?

How to come up with a formula and the variations to contingent arrangements will be discussed in my next post.