Good intentions...

The road to hell is, so the saying goes, paved with good intentions. Firms often know that pricing is something that they need to address, or at least would benefit from addressing but aren’t quite sure where to start. Or, there have been a number of false starts, leaving the firms’ lawyers rather cynical and jaded about the whole topic of pricing.

Managing Partners and people in senior management roles often bemoan the fact that they have had a couple of attempts at implementing change from within but have been met with indifference if not resistance.

“What would you know; you’re just one of us. We are in a difficult market don’t you know. Now is not the time to be trying to get cute with our pricing. We need turnover and we need it now. There are people we have to keep busy. Just get the work in. Do what you have to. If you have to ‘drop your pants’ on the price, just do it!” Sound familiar?

Where to start...?

So, as with the elusive end of the ball of twine, where do we start? There are broadly speaking three areas you need to tackle; the list under each heading below being anything but exhaustive, they are:

(1) Pricing governance and policy:

The firm needs to debate and reach a consensus on such things as;

• A shared and consistently implemented approach to pricing – ‘Pricing and the Cheshire Cat’.
• Pricing policies that are well understood and universally enforced – for example do you have firm wide policies about what is written off, by whom, for what reason and up to what level?
• Do we as a firm have a preoccupation with turnover as opposed to profit? Which is more important to us and why? You may think the answer obvious but not so.
• Price and market position disconnect – most firms do not understand that price is a powerful proxy for quality. Firms claim a certain market position vis quality of advice and service and then price below that, and in so doing, undermine the firms' brand and all its marketing and BD efforts.
• Poor or non-existent induction training on pricing – the blind leading the blind?
• Misaligned reporting dashboards - ‘Pricing And The Need To Rethink Reporting Metrics’.
• Too much pricing autonomy – ‘Abdication of Pricing Responsibility – Whose Money Is It Anyway?’
• Intra-firm pricing challenges – ‘Pricing Cannibalism aka Necrotising Fasciitis’.

(2) Pricing Analytics & Reporting:

• Practice management software has historically provided plenty of data, but data on its own is largely useless unless it also provides actionable insights
• Mutual pricing information asymmetry between lawyers and clients is the norm
• Fixed fee arrangements in particular suffer from poor realisation rates due to lack of historical analysis
• Any firm serious about utilising Damages Based Agreements will have to first invest in analytics capability, and not simply an Excel spreadsheet

(3) Pricing Skills, Resources & Pricing Execution:

• Pricing: Administrative function or a skill? – ‘Value Pricing – Capitalist Acts Between Consenting Adults’
• A broad lack of price negotiation skills and a lack of awareness or understanding of the many pricing strategies and tactics available to lawyers results in pricing that is often a poor ‘fit’ for the client and/or the firm - 'Price Negotiation: Why Would You Bring A Pocket Knife To A Gunfight?' and 'What Distinguishes Top Price Negotiators From The Rest? - Mindset'.
• A lack of pricing collateral, templates, pricing precedents and infographics
• Incomprehensible client engagement and pricing documentation is focused on regulatory compliance and limitation of liability issues but frequently falls at the hurdle when it comes to providing, with clarity and without equivocation, answers to clients’ most basic questions; “What are you going to do for me, who is going to do it, when will it be done by and how much will it cost”
• Poor or non-existent triaging and ROI assessment of RFPs – ‘Keep Your Powder Dry – The Hidden Cost of RFPs’

These are but a few examples. Suffice it to say, a comprehensive list would look like most firms’ current client care tomes.

Clearly, these issues can’t all be tackled overnight or simultaneously. Which issues are picked off and in which order very much depends on the precise status of pricing in a firm at any given point in time. There simply isn’t a one-size-fits-all answer to that question.

Pause and take stock first...

Before riding off in all directions at once therefore, it can often be helpful for firms to do a pricing ‘stock-take’ first - a snapshot if you will. Where are we currently with your pricing? What resources do we have? What are we good at in the pricing space and where are we doing poorly? What parts of the firm are doing well on pricing and which areas are struggling? Why?

This kind of candid stock-take, drawing as it does on amongst other things, the candid and anonymous views of partners (and other lawyers in the firm if you wish) can help to provide a solid platform for further decisions about pricing. Unfortunately, Managing Partners, CEOs, FD’s, CFOS, BD Managers and even Pricing Managers can find it very difficult to galvanise their people from an internal position. Familiarity often breeds, if not contempt, then at least indifference and selective deafness.

We are often invited to work with and support people in those roles, to bring a rigorous external and independent perspective to a firm wide pricing ‘stock take’. To find out more, have a look at Pricing Diagnostic Reports on our website.