With Validatum Pricing Espresso® we aim to bring you your morning pricing 'shot' - the best, most interesting, thought provoking and informative material we can find globally which will be of interest, relevance and help to you in your legal services pricing challenges. [Note: we don't always agree with the content of others that we post but the philosophy of Validatum Pricing Espresso® is shared perspectives, not a personal 'soap-box']
Legal Spend Management Insight and Muffins
I have spent many hours traversing the square mile in London on the hunt for legal spend management insight, and I’d liken it to trying to find a fabulous low fat chocolate muffin… I know it’s out there but finding something tasty really takes some effort! I understand that it’s hard to produce something that appeals to everyone’s slightly different tastes, but invariably I’m left slightly disappointed that the things on offer aren’t quite what I wanted – they aren’t fabulous to me.
So where is this going? As a procurement professional I love data – it allows me to understand how an organisation is spending their money, the service it’s received, the performance of one supplier relative to another, but over the years I’ve come to realise that the most detailed data often doesn’t give me the thing that myself and my team really need – insight. It’s almost as elusive as that tasty fat free chocolate muffin. Read more...
Richard Allen, Senior Consultant/Costs Lawyer
Richard Allen brings 30 years of unique commercial experience to Burcher Jennings. He was one of the first professionals to achieve Costs Lawyer status, and is one of a select group of Costs Lawyers to have made partner in a solicitor’s practice. He is also a founding non-executive director of the Costs Lawyer Standards Board and a member of the Professional Negligence Lawyers Association.
Since starting out in 1983, Richard has worked his way through both fee earning and costs, dealing with commercial debt recovery, bankruptcy and insolvency, before specialising in personal injury litigation and developing costs expertise. His exceptional work has seen him handling significant litigation and costs caseloads for major City of London, West End and national law firms. Read more...
Court says, at $800 an hour, snail-paced doc review won’t cut it
It’s not uncommon for disputes to arise over fee padding or churning, where more hours are billed than the work justifies. With the rise of large scale discovery projects, often black holes within which it is easy to hide both habitual and wilfully inefficient behaviour, those clashes have become more pronounced and more plentiful.
There are, of course, the blatant “churn that bill, baby” examples, but many of the offences are more innocently wasteful — simply a product of culture and systemic failure to innovate. Such deep-rooted problems are encapsulated in the motto, as one former law firm attorney relayed to us: “Turn over every rock, and then turn those rocks over again. Read more...
The New Value Checklist: Alignment
In a recent blog post, I explored how law firms can deliver “value” as re-defined by the sophisticated buyers of legal services. For that post I spoke with a number of legal industry insiders — law firms and in-house legal professionals — on what constitutes “value” in the eyes of this growing chorus.
These conversations led to three big-picture insights: Read more...
LSB warns on publishing ‘average prices’ of legal services
The Legal Services Board has expressed doubts over the consumer watchdog's recommendations to make law firms publish the ‘average prices’ of legal services, questioning whether such data might potentially be misleading.
The board was responding to recommendations made by the Legal Services Consumer Panel on ‘opening data’ in legal services.
The panel had recommended that approved regulators should require law firms and sole practitioners to publish the average cost of legal services on their websites and be mandated to provide this information on request. This should also include the average cost of disbursements, the panel suggested. Read more...
Top medical body hits out at '€1m legal fees'
Two years after a report calling for reform of legal costs in clinical negligence cases, the UK-based medical defence organisation, Medical Protection, said that legal costs remained "very high".
One case was settled for €40,000 damages but the legal costs for the plaintiff were €80,000, according to Emma Hallinan, director of claims policy at Medical Protection. The fees were eventually "negotiated" down to €60,000.
"We frequently see claims where costs exceed the damages paid," said Ms Hallinan. "We have recently seen two cases in which plaintiff costs were claimed in excess of €1 million. In one of the claims, the plaintiff's bill was nearly €1.4 million, and after negotiation, was agreed at €900,000. In another the bill was just over €1 million and agreed at €800,000," said Ms Hallinan. Read more...
The going rate
Canada’s uncertain economic outlook has the country’s lawyers spooked, with a healthy majority opting against a price hike this year
According to the results of Canadian Lawyer’s 2016 Legal Fees Survey, 55 per cent of respondents will freeze their prices over the next year, while a further three per cent intend to cut their rates. Just 42 per cent are planning a price boost, the lowest rate in three years.
In Alberta, where the economic effects of the worldwide oil price plunge has hit hardest, the numbers are even more stark, with 66 per cent of respondents reporting a no-change approach, plus another seven per cent who will give their clients a price break in the next year. By contrast, only 28 per cent plan to increase their rates. Many respondents specifically cited the recessive economy for the decision, including one lawyer at a mid-size Calgary firm who reported the current market had forced a price freeze on it “in spite of higher overheads.” Read more...
How to Price Legal Services to Build Client Relationships
If you’re concerned that too many of your client relationships might be at risk, fee predictability could be your best bet to keep them in the fold. Providing high-quality advice and delivering the legal work that’s needed, though crucial, is insufficient on its own.
The big question for inside counsel and law firms is, can we achieve fee predictability and still ensure a profitable relationship? Thankfully, the answer is yes — but you’ll probably need to make specific adjustments to your processes, particularly around pricing. Anyone can offer clients flat fees or blended rates or some sort of alternative fee structure. But without understanding what it costs to deliver the work, it’s difficult to price legal services in a way that ensures sustainability. Read more...
Profitable Firms Grew Rates at Double the Pace of Midtier Counterparts
Hourly rates at the nation’s most profitable firms rose at double the rate of firms in the middle or regional markets last year, a new analysis by Wells Fargo Private Bank shows.
No matter how Wells Fargo sliced the data, which examined rate increases between 2014 and 2015, the difference between the most profitable firms and the rest of the pack was stark.
“The highest firms in the food chain are getting much higher rate increases than the rest,” said Jeff Grossman, a senior vice president in the banking giant’s legal specialty group in Charlotte. Read more...
Client Service Recovers from Record Drop Driving New Business Gains
Only 40.1% of clients recommend their primary law firm to a peer, after the second biggest drop on record last year, when 33.3% of clients recommended their primary law firms. The increase is impressive but still leaves more than half of all clients wanting—and these clients will seek out, find and retain the firms they want.
Client-to-client recommendations are the express lane for new client relationships and new business. Clients almost always hire the law firm their peers recommend—without checking out the competition. As a client-to-client recommended firm the business is yours to lose.
How does the client–to-client recommendation bring such exalted status? Clients trust each other to share only the best with each other—every client knows they will need a recommendation one day, which drives them to follow the unwritten “recommend only the best” code. Read more...
$2,000 per hour? What Legal Procurement Should Do Now
The time to tighten one’s belt seems to be over – at least for some lawyers.
Starting salaries for lawyers right out of law school have just been raised at a number of firms. According to a Wall Street Journal article, New York firm Cravath Swaine & Moore increased its starting salary to $180,000, effective July 1. It was reported that the (unusual) midyear pay raise has immediately been matched by at least nine other law firms.
After breaking through the $1,000 per hour rate limit in 2011, the highest paid partners in New York have just surpassed $2,000 per hour. Similarly, top London lawyers now command more than £1,000 per hour. Read more...
Compensating for Profitability
Compensating based on profitability ensures that a firm’s bonuses are tied to created profits. While more difficult to accomplish, the results are often better.
Awarding a bonus based on a percentage of the profit created would incentivise the right behaviours and ensure the firm is spending earned money effectively. Bonus rates typically depend on a firm’s profit targets, the difficulty of the work, and client service factors.
One issue that arises in profitability based systems is that that some associates may enjoy higher profitability because they are assigned to clients with higher bill rates. In these instances, an evaluation must be made if there is a corresponding skill or workload premium. It is possible that an attorney assigned to a client with a lower bill rate is actually adding more long term marketable skill sets. Read more...
Top law firms boost hourly rates for equity partners by 3.9%, leaving mid-tier firms $400 behind
The most profitable law firms have pulled far ahead of second-hundred firms in their hourly billing rates, according to a study of rate increases between 2014 and 2015.
The most profitable firms raised average billing rates for equity partners by 3.9 percent, with an average billing rate of $1,085, according to the study by Wells Fargo Private Bank. The most profitable firms were defined as firms with profits per partner of at least $2 million and revenue per lawyer of at least $1 million. Law.com (sub. req.) covered the findings.
The average rate increase for equity partners at law firms across the Am Law 100 was 3.4 percent, for an average hourly rate of $875. The average increase for equity partners in second 100 firms was 2.3 percent, for an average hourly rate of $650. Read more...