The pricing function in many law firms is something of an orphan. No-one knows who it belongs to so it ends up belonging to no-one. Individual department heads and fee earners make decisions on the fly with little regard to the firms’ pricing policies...
Pricing; the orphan...
The pricing function in many law firms is something of an orphan. No-one knows who it belongs to so it ends up belonging to no-one. Individual department heads and fee earners make decisions on the fly with little regard to the firms' pricing policies, processes and protocols (if indeed such policies, processes and protocols exist).
If the firms' managing partner, senior partner or CEO do not overtly, forcefully and visibly make it clear to everyone in the firm that pricing is a critical part of your remit, ensuring that a pricing plan is developed and implemented, over which you will be exercising penetrating oversight and a vice-like grip, don't even bother starting to head down the pricing improvement track. You will be largely wasting your time, effort and money.
Sure, this needs the support of the Board or the whole partnership or whatever the firms' governance rules require, but pricing leadership by definition includes securing that support. Anything less than a vigorous and forthright approach will result in any attempt to improve the firms' profitability through more sophisticated pricing, floundering. Results will be at best, insipid and transient, at worst, non-existent.
Volition v compulsion...
It is at this point that we come up against the perennial issue of volition versus compulsion in law firms. This goes to the very heart of a firm's ethos and the reason that the partners choose to be in business with one another. This volition versus compulsion ethos sits on a very long continuum. At one end there is little compulsion, there is a laissez-faire approach, people are encouraged to conduct their practices a certain way but there is little compulsion to do so and little accountability where there is a failure to do so.
At the other end of the continuum, there are firms where everything is very structured and regimented, there is little scope for autonomy and individuals including partners of all seniority and status are held accountable. Often, but not necessarily, those latter firms are more profitable than firms at the other end of the continuum. For those firms, there is a collective view that they are prepared to abdicate a significant measure of control and individuality in return for a higher income.
That is a judgment call for each partner and for each firm to make.
Compulsion is more profitable, end of...
What I can say is that there is absolutely no doubt at all, based on the empirical evidence which we have accumulated working with many firms of widely ranging size in many parts of the world, that those firms which introduce some element of compulsion around pricing best-practice will significantly outperform financially those that don't.
I have already specifically mentioned Senior Partners and Managing Partners. They are in many respects ideal because by definition they should bring immediately recognisable seniority, respect and gravitas to the role that sends a very clear message to everyone else about how seriously the firm takes pricing.
So what do I have to do?
It does not mean that you have to do everything, which is neither possible nor desirable, but you must do a lot more than simply act as a figurehead for the cause. You need to take personal responsibility for establishing the overall pricing strategy. You must identify pricing resource and skills deficiencies and seek to address those.
You must create an environment and a culture of pricing capability awareness and aspiration, and you must lead by example. Simply telling the Finance Director that he or she needs to get the firm up to speed on pricing does not cut it by a long shot!
Can someone else fulfill this critical role such as a CEO, COO or CFO/FD? Yes, certainly, we have worked with firms that have done this successfully. Indeed some of the larger international firms now have very able specialists in the pricing role, but delegation still comes with the proviso that the delegate shares the same recognisable seniority, respect and gravitas as a Senior Partner or Managing Partner. Alternatively, it must be clear to everyone, including every other partner that when that person speaks, they speak as the SP/MP's proxy.
If not, you are simply giving them a 'hospital pass' with the resulting risk that others will see that for what it is; not important enough or worthy of your personal involvement, so why should they bother taking it too seriously.
And the dissidents?
And what of partners who don't or won't 'get it'? Well, in relation to recidivist, recalcitrant pricing delinquents it may be that a firm has to adopt Voltaire's view about how the English used to breed better Admirals (after the execution of John Byng in 1747) – that is, occasionally to shoot one; 'pour encourager les autres'.