Interac Corp.’s chief legal officer, Conni Gibson, is pushing the company’s legal team to embrace alternative fee arrangements (AFAs) as a core part of their strategy. Reflecting on the significant change from traditional billable hours, Gibson emphasizes that outcomes matter more than merely logging time.
"Efforts are appreciated, but outcomes are measured," she explains, stressing that this approach aligns with the company’s drive for efficiency and predictability.
And it’s the unpredictability of legal bills that’s an issue Gibson sees as critical to address. AFAs provide a financial structure that benefits both Interac and its external law firm partners by making costs more foreseeable. This shift enables Interac to better forecast expenses, which she considers essential.
“The value of moving to AFAs, really the biggest value, is around better predictability,” Gibson explains. Interac tracks the profit and loss of each of its products, and this clarity in legal costs helps the business units avoid surprises at the end of a project. The goal, Gibson says, is a future where nearly all legal work is handled through AFAs, underscoring her commitment to this model.
Building a lasting partnership with law firms, as opposed to a simple client-provider relationship, is integral to Interac’s approach. This requires a cultural shift internally, especially as the legal team recalibrates to think proactively about which firms are best suited for specific projects. This shift has involved building a panel of select firms that Interac will partner with for the long term.
“It starts here, right with a shift in mindset...having these discussions on the AFA before the law firm even puts pen to paper,” Gibson notes, which enables greater alignment on expected results.
Gibson also discusses the potential of artificial intelligence to change the legal landscape, both internally and in collaboration with external counsel. She sees the legal profession, traditionally resistant to new technologies, on the brink of a transformative shift.
“We are on the cusp of a seismic shift in terms of adoption of AI,” she says, adding that her team has already adopted various AI tools to handle routine tasks. This frees her legal team to concentrate on more strategic issues, aligning with Gibson’s goal of maximizing value in each legal matter.
Although AI’s direct impact on AFA discussions remains in its early stages, Gibson believes it could become an invaluable tool in fostering predictability and driving collaboration on legal budgets.
“I think it’s going to be a real game changer,” she says, envisioning a scenario where predictive modelling powered by AI could ensure both Interac and its law firm partners agree on fees that align with expected outcomes. Still, she cautions that AFAs are not a one-size-fits-all solution and require open dialogue to ensure that the arrangement meets both parties' needs.
In Canada, where AFAs are still uncommon, Interac faces challenges in pushing this model forward. “Very slow adoption,” is how Gibson describes the progress of AFAs in the Canadian legal sector, noting that she’s been advocating for these models for over a decade with limited industry-wide traction. She finds it surprising that while consulting firms have long embraced fixed-fee models, law firms still often claim that legal services are too uncertain to accommodate non-hourly billing. However, Gibson rejects this reasoning, arguing that unpredictability is not exclusive to legal work. AFAs, in her view, can apply to nearly any legal service if properly managed. It’s a challenge for clients like Interac, she notes, to continuously push for these changes.
“It’s incumbent on clients like me to keep pushing...to keep saying, I don’t want to pay by the hour.”
Although Canada lags, Gibson observes that other regions, notably Europe and the US, are leading the way. She attributes this difference to the greater purchasing power of US firms, which enables them to demand and receive flexible billing structures. In her view, Canadian firms need a stronger push from clients before widespread change will occur.
For her, the billable hour is a relic in most other professions, and she sees no reason why legal billing should be any different. To address any perceived risks in AFAs, Gibson favours innovative structures, such as staged or risk-sharing agreements, where the fee fluctuates based on performance outcomes. She notes a recent project put out for a request for proposals, where several firms offered creative AFA models involving shared risk, which she sees as encouraging signs of progress. But she remains clear-eyed about the work needed to ensure AFAs don’t compromise service quality.
“If I do an AFA, the law firm might just sort of cheap out,” she says, referring to the risk that firms could assign less experienced staff to control costs. The key to mitigating this, Gibson argues, is in fostering a “strategic relationship” with law firms, treating legal work as a collaborative endeavour rather than a transaction.
In measuring the success of AFAs, Gibson acknowledges that Interac is still refining its benchmarks, but clear assessments of outcomes are critical. Metrics go beyond financial results, extending to client satisfaction from Interac’s business partners and feedback from the law firms. Gibson appreciates the more robust dialogue that AFAs facilitate, where the focus shifts from transactional billing to strategic results.
“It’s more work than just paying by the hour because you do have to sit down and focus on the collaborative aspect, the relationship aspect.”