Law firms' clients are increasingly rejecting the chargeable hours model and instead demanding fixed pricing for work, according to a new report by Legal Week's research arm, which canvassed the opinions of more than 1,400 in-house respondents.

Legal Week Intelligence's flagship annual research project – the Client Satisfaction Report – found the number of respondents listing fixed fees as their preferred billing option increased from 47% to 69% over the last year. There was also a significant jump in the proportion of clients opting for fixed fees with an additional success uplift (from 9% to 17%), as the idea of asking advisers to share risk grows in popularity.

Hourly capped rates are the second most popular billing method according to the survey, which this year received a record number of responses, with chargeable hours trailing far behind the other options on 12%.

"More and more GCs are being asked by their businesses to work to a fixed budget," says Stephen Hopkins (pictured, right), head of global client development at Eversheds. "Years ago there might have been flexibility to go above that, but CFOs and MDs are harder now. Law firms that cannot control costs will often cause embarrassment to the in-house team by asking for additional budgets on projects that simply aren't there.

"They don't want a fixed fee no matter what happens; they are clever and know things might change. They just want control over any additional costs."

The research sought views from general counsel, heads of legal and company secretaries, as well as C-suite staff including chief executives, finance directors and chief operating officers, with 80% of the FTSE 100 responding.

Respondents were asked to rate their main legal advisers on eight criteria, judging them on both satisfaction and importance. These ranged from quality of legal and commercial advice to service delivery, partner relationships, costs and billing and law firms' use of technology.

With a score of 9.5 out of 10, quality of legal advice was rated most important by respondents, followed by service delivery and responsiveness at 9.2.

While the use of legal process outsourcing was rated least important, scoring just 4.8 out of 10, it was valued more by clients this year than last, up from 4.4 in 2013′s research.

Respondents also attached a greater weight to the use of flexible working arrangements, with the importance rating for this category rising from 5.2 to 5.3 this year.

The results reflect an increasing trend among firms to build on both their low-cost centres and flexi-working models. Allen & Overy (A&O) recently announced plans to take on up to 100 new staff for its business and legal support centre in Belfast over the next five years, while Eversheds has begun targeting international clients with its Agile contract lawyer service. Pinsent Masons meanwhile has upped the revenue target for its own contract lawyer offering, Vario.

"Clients need to be able to find someone who doesn't ruffle any feathers and fits right in," explains Alison Bond, the Pinsents partner who heads Vario. "Obviously we don't take everyone who comes along. Part of it is looking at candidates' expertise and ensuring they have worked with similar companies to the ones we are placing them in.

"It's not surprising that other categories are rated [as more important than] flexible working. But as the market grows its impact will increase. It's still relatively new to clients."

Other categories rated more important this year than last were quality of commercial advice, cost and billing practices, and service delivery and responsiveness, as companies continue to push lawyers to look at their wider business needs and get more for less from fees to their legal advisers.

"It's part of our DNA to be as practical as possible," says A&O's global co-head of corporate, Andrew Ballheimer (pictured, below). "We always strive to advance [our clients'] interests in an appropriate and commercially orientated way, while also managing legal risk.

"Our clients are more cost-conscious now. They're very focused on value added and obviously we want to ensure they get value for money."

Hopkins adds: "It's not good enough to just say 'there's the law, get on with it'. We've moved on a long way from that. Some clients will still say that the commercial bits are their job, but the vast majority say 'you guys know our business, so we value your recommendation and input on that too'."

Satisfaction levels generally have risen across respondents, with clients happiest with the quality of their legal advice, giving it a score of 8.5 out of 10, followed closely by service delivery and responsiveness on 8.3. There were also substantial gains in how content clients were with cost and billing practices, coming in at 7.5 compared with 7.1 in last year's survey.

Again, the use of legal process outsourcing and a flexible workforce were ranked the lowest, but both saw a year-on-year improvement in terms of satisfaction, with scores climbing from 5.7 to 6 and from 6 to 6.3 respectively.

For the first time as part of the survey, clients were also asked for their opinions on firms' international offerings and their preferred way of working with them overseas. The most popular choice was a global firm with a local office at 33%, backing moves by growing numbers of firms to ramp up overseas either organically or through mergers.

Looking only at the top 30 law firms in the UK, five have carried out large international mergers over the last five years, on top of at least four more carrying out tie-ups with domestic players.

The second most popular approach (27%) was to work with a local independent firm, while 21% say they would prefer to work with a global law firm in conjunction with a local player.

"International law firms offer clients all the benefits any well-known brand does: familiarity, certainty and an expected level of service," a deputy GC at one large multinational comments. "They are experienced at dealing with clients like ourselves and are aware of what most multinationals need. That confidence factor is not to be understated. There's always an insurance policy in play going to big brand names should something go wrong.

"However, it's not the case that all international law firms are the best firms in all jurisdictions… As a GC looking to get the best service I need to do my research and target where the capability is."

Eversheds' Hopkins adds: "Consistency of service is a real challenge for GCs. Where people use a disparate set of law firms it takes a lot of project management work; just trying to get efficiencies is almost impossible. It can come all the way down to getting the bills in a consistent format and getting all the firms to hold to what they agreed to bill in the first place."

Respondents to the survey also offered some suggestions as to what they would like to change about their legal services providers in future. These include more exposure to partners other than the lead relationship partner, better understanding of the commercial priorities for their businesses, faster response times and better use of technology.

What clients value most from their advisers in order of priority
1) Quality of legal advice
2) Service delivery
3) Commercial advice
4) Partner relationships
5) Billing practices
6) IT
7) Flexible working
8) Legal process outsourcing

• For more information on the Client Satisfaction Report, email [email protected] or call +44 0207 316 9864