#alternative-fee-arrangements

#alternative-fee-arrangements

This may be the last year that law firms can expect billing rate increases to drive financial stability, according to a new survey of more than 800 senior finance and legal professionals in large firms across North America, the United Kingdom and Ireland. Technology company BigHand's 2026 finance report suggests that firms can no longer rely on traditional measures of profitability, as clients are demanding more efficiency and predictability amid the increased adoption of artificial intelligence across the legal profession, according to Law.com.

Many corporate legal departments and law firms have gone "all in" on alternative fee arrangements, while others have chosen not to adopt them at all. After more than a decade in common use, only an average of 23% of legal work is performed under an AFA despite wide acknowledgement of their benefits. Why does this divide exist? It's not just about financial risk but also execution. The main benefit of implementing AFAs into legal operations is that it simplifies legal billing by shifting the focus from hours worked to value delivered. However, many organizations unintentionally introduce complexities that diminish their effectiveness.