While many law firms have over the last few years begun pricing improvement initiatives, many have failed to realise their potential and in the least successful examples, they have eventually reverted to type entirely, losing all of the gains originally achieved. There is good reason for that. It’s hard. The rewards are significant but if it was easy, everyone would have done it a long time ago.
So, we have decided to provide firms with a roadmap which will greatly increase the prospect of durable and sustainable improvements. In doing so, we have developed a law firm specific model which draws on the work of John P Kotter, Konosuke Matsushita Professor of Leadership, Emeritus, at Harvard Business School. Professor Kotter is widely regarded as the foremost international authority on the topics of leadership and change.
In this series which will span 8 weeks, we will set out the 8 steps to a successful law firm pricing improvement initiative.
Step #1 - Establish a Sense of Urgency
Most of us are familiar with the old cliché about it being hard to achieve engagement and a sense of urgency when there is ‘no burning platform’. There is a lot of truth in this. It is hard to convince law firm partners with incomes that 99% of the wider population can only dream of, that they have got it all wrong.
However, there are from time to time tectonic events that abruptly end the complacency of even the most sanguine operators. Covid-19 is such an inflection point. There is a consensus that many aspects of the way we operate as a profession will have changed for good.
If you are one of those firm leaders/visionaries who sensed the need for change a long time ago but have struggled to gain momentum, now may well be the moment to ask the question – is our approach to pricing and profitability management going to be fit for purpose as we emerge from lock down?
Early indications from client behaviour suggests that firms that don’t adapt will be ruthlessly culled. We are already hearing of anecdotal evidence that some clients have been dismayed at the ‘tone-deafness’ of some of their firms and they have made no secret of the fact that those firms will in due course pay a very heavy price for their hubris and lack of EQ.
So, time and circumstance have conspired to undermine complacency and present law firm leaders and change agents with a window of opportunity – carpe diem.
But that is not enough. There is more that firms can and should consider doing to raise the panic levels to the point where a critical mass of the firm's partners and senior management are seized of the urgency – sanitising the risks and the challenges may be intuitive, but it is positively harmful;
(a) Share the state of the firms finances candidly, perhaps even to an audience that would not normally be included. Publicise to all partners, not just those directly affected, the bids and tenders you lose. Red ink and failure are anathema to lawyers. They get people’s attention like nothing else.
(b) Make a show of the cuts that are being made that directly impact partners. Not just profit retentions but all the other frills and baubles of office that have gone by the board.
(c) Set KPIs that can’t be reached by a business-as-usual approach.
(d) Send more data about client satisfaction and net promoter scores to a wide audience in the firm, especially if it compares unfavourably with competitors.
(e) Make disturbing trends such as deteriorating realisation rates, net profit margin and write-offs highly visible.
(f) Balance the forgoing with external validation of what others are doing, what impact it is having, what a pricing and profitability improvement roadmap might look like and a ‘can do’ message, provided everyone is on board.
There will be a view amongst some in firms that now is not the time to be making major changes to something as fundamental as the firm’s entire approach to pricing. To some it feels like trying to change an aircraft wing at 30,000 feet.
While the diffidence is understandable, adherents to the Micawber, ‘Something will turn up’ school of law firm management are unhelpful in good times and positively dangerous in a crisis. It explains why 'fiddling while Rome burns' and 'shuffling the deck chairs on the Titanic' are part of the lexicon.
No, this is the time for boldness. Tinkering with hourly rates just won’t cut it.
Next week - Step #2 – Creating the Guiding Coalition