When I was a mid-level partner, it dawned on me that there were a lot of small businesses and sophisticated individuals who occasionally had legal issues but did not have full-time in-house counsel to help. This was mainly due to their needs: their legal problems were infrequent and not usually complex. And their financial situation was such that hiring a full-time in-house counsel in light of those needs was not practical.
I wondered at the time if my firm could set up a system to, in effect, have me serve the legal needs of these entities like an in-house counsel, but on a part-time basis for those clients. My idea was we would be paid a yearly retainer to supply services on an as-needed basis. In today’s parlance, I would become a fractional general counsel (GC) on a subscription or flat-fee basis.
Two Problems
The firm had two main objections. The first was a knee-jerk one. At the time, the firm was not built to handle this kind of flat-fee subscription billing model. Management worried that the clients would just ask for legal help for anything and everything (why not? I mean, it’s already paid for). These demands would end up making the engagement unprofitable. In those days and times, flat fees were virtually unheard of.
The second was more substantive. The firm believed it would be difficult for one lawyer to handle the various questions raised by the clients across various disciplines. Since most lawyers in the firm were more or less specialists, there was no one with the breadth of experience and knowledge who might be able to adequately serve in that role. I was a litigator, and it was certainly not me.
After thinking about it, I concluded management was right. Indeed, the whole idea was based upon one lawyer having the sophistication, knowledge, and experience to serve as in-house counsel on a part-time basis. Spreading the work among various lawyers simply did not seem practical to me and was antithetical to the concept.
Flat Fees and Subscription Pricing Today
Of course, responding to the billing model objection in today’s climate would seem easier. There are a lot of examples of flat fees and subscription-based prices working very well. Indeed, I later handled a national matter on a flat fee basis. There were internal problems, but we made it work mainly because the team was composed primarily of partners who shared in the origination and were specialists in the matter.
Certainly, there is room for abuse by overly demanding clients, and it does take some level of trust to make it work. (An ironic concern given how often billable hour lawyers run up the tab unnecessarily.) Indeed, I have seen examples of clients being overly demanding for services, on the one hand, and firms, on the other hand, trying to do as little as possible to make the matter profitable. (To address this potential, I built protections into my deal, which helped me if the cost went over a certain amount and helped the client if the costs were under some certain amount. Sort of a trust but verify concept.)
So subscription-based services can work. But even today, moving to flat fee and subscription-based billing in general is tough for large firms built on the billable hour model. Compensation and advancement in most of these firms are based in large part on hours billed. The fractional GC model based on flat fee and subscription models thus seems more suited and more practical for smaller firms or solos that are more flexible and nimble.
But that leaves the substantive issue the firm raised: how can one lawyer be general enough and, at the same time, skilled enough to handle the different types of issues a client may raise.
Enter AI
The second objection, the more substantive one, was more troubling at the time. To work, the fractional GC would need to be the go-to person upon whom the client relies. In a firm, there is the option of seeking out those with more expertise to answer more complicated inquiries. But I was not sure then and now that having that go-to person round up other lawyers to answer questions is a good idea. Just like a full-time in-house counsel, the fractional general counsel needs to know the client and the client’s business and be the trusted advisor.
But with the advent of AI, it becomes much more realistic for a fractional GC concept to work. Many questions somewhat outside the fractional GC’s expertise can be answered by using specialized AI tools to provide the requisite background, combined with the fractional GC’s judgment and knowledge of the client. It creates a workable concept for those businesses and individuals whose legal needs don’t require a full-time general counsel.
On the lawyer side, this option would provide an opportunity for general practitioners and business lawyers to serve clients with low overhead and costs. Lawyers, for example, looking to get out of a large firm and work more directly and personally with clients. Or older lawyers looking to maximize their abilities and experiences on a part-time basis. Or in-house counsel looking to cut back from full time. In fact, there are reportedly a good number of lawyers doing just this.
It’s Not for Everyone
Make no mistake, the fractional GC arrangement is not for everyone. To be candid, being able to serve this kind of role requires a level of experience and sophistication in dealing with business and individuals. At the very least, it requires someone who can quickly gauge the accuracy of AI outputs and recommendations. It takes someone who can competently evaluate appropriate pricing and the valuing of legal services. But more than all that, it requires someone with the judgment to deal with clients and issues. Judgment that generally takes years to obtain.
Even then, no doubt, there will occasionally be questions and needs that the fractional GC and their AI cannot competently answer (litigation issues, for example). Just like the full-time GC, it would be the fractional GC’s job to make the recommendation to seek a specialist when needed. Again, that takes experience and judgment.
And it goes without saying that there need to be confidentiality and privacy protections built into the tools the lawyers use, but there are tools on the market that do just that.
The main trick, of course, would be to price the role correctly and gauge how much work and time will need to be devoted to the client, but this is not insurmountable for experienced lawyers.
A Win-Win — For Some
Unlike when I first thought of this, all this is today doable, particularly for those clients who don’t need or can’t afford a full-time in-house counsel. And it’s doable on the lawyer side for those with a certain degree of judgment and experience but who don’t want to work for a large firm or who are looking to cut back. One side of an equation with needs and one side who can serve those needs.
It’s a win-win proposition.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
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