With Validatum Pricing Espresso® we aim to bring you your regular 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']
Pricing and the ‘Dunning Kruger Effect’
There is a quite extraordinary paradox at play here. On the one hand you would expect many lawyers, particularly those that are long in the tooth, to be quite pessimistic, negative and cynical with a hardwired expectation that most things go badly (and indeed many are, and they often do).
So why the perennially ebullient display of optimism when it comes to assessing the production cost of a piece of work?
When working with partners to assist them on a specific pricing proposal, all too often the conversation goes something like this;
“So what levels of resourcing will be required for this and how long do you think it'll take?” Read more...
Hunting for Hybrids: What Makes a Great Legal Pricing Strategist?
Hybrid jobs are on the rise worldwide: A major study of the US professional jobs market by Bentley University has labeled 2016 “The year of the hybrid job”. A key finding of the survey is that in order to navigate a successful and lucrative career in almost any white-collar job it is no longer enough to excel at just one thing.
Many lawyers would argue that their own roles are hybrid in nature, combining “hard” technical skills with “softer” client relationship skills and wider business acumen. As recruiters our search for these top-flight lawyers is aided in no small part by a broad consensus as to what attributes make for a good lawyer. Read more...
8 reasons why the billable hour is the cockroach of the legal sector
We are all well aware of the commonly cited ‘fact’ that cockroaches will be the lone survivors following a nuclear holocaust. But what does the indestructibility of cockroaches have to do with alternative fee arrangements and the legal sector, you ask? In short, despite being hated by most clients and subjected to significant pressures for many years now, time-based billing has refused to die.
In fact, in my experience, time based billing remains the dominant billing method for most legal work completed by large commercial law firms. This article examines the reasons why the billable hour seems impervious to extreme destructive forces (much like cockroaches) and the factors that may be holding back firms and clients that want to embrace alternative fee arrangements. Read more...
Corporate counsel questions value of legal procurement
As competition in the Australian legal market continues to rise, a comprehensive assessment of service providers is becoming more important, according to the founder of Lawcadia.
Lawcadia CEO and founder Warwick Walsh believes that a comprehensive assessment of service providers is necessary, as competition continues to grow and in-house lawyers become dissatisfied with the value on offer.
“Rapid growth in the Australian legal sector has created a highly competitive market, where there’s a great deal of choice but also added complexity when it comes to procuring legal services,” Mr Walsh said. Read more..
Clients Bring $4 Billion In-House: For All the Wrong Reasons
Corporate counsel are shifting big-time spending back in-house—resulting in $4 billion moving in-house*. This also marks the 8th year of legal spending moving in-house out of the last 10, the second largest move in-house in 16 years.
Top legal decision makers make no excuses—they want to save time and money. They tell us of increasing rates, runaway scopes of work, and an inability to leverage the relationships they have in place to benefit from their current firms’ institutional knowledge.
The move to save money may not come as a complete surprise. Just over one-half of clients think law firms don’t want to or can’t change. The big move in-house comes one year after the top hourly rate in the market hit $2,000 an hour. The headlines around increases in associate salaries also contribute to the aura of higher legal costs—whether real or not. Everyone can make the leap from higher salaries to higher hourly rates. Read more...
U.K. Law Firm Profits Fall…And Next Year Is Unlikely To Be Any Better
Quick, somebody organise a telethon: equity partners at the U.K.’s largest law firms saw their average profit fall to a meagre £619,000 ($831,000) last year. That’s barely 23 times the national average salary. As an overpaid journalist, I can only imagine such hardship.
Joking aside, the results of Legal Week’s survey of the financial performance of the U.K. top 50are significant. As I have mentioned in several previous instalments of this column, I don’t like profit per equity partner (PEP) as a metric. It is heavily influenced by leverage and how tightly a firm holds its equity, and is therefore, in my opinion, a frankly rubbish way of comparing relative profitability. (Profit per lawyer is far better.) But despite its flaws, PEP is important. Read more...
The benefit of being a bit more consultative in the bid & proposal process
Are you a proposal person who’s treated merely as a ‘doer’ who manages the bid process? Is your role very administrative, focused on getting the document out on time and spending lots of time looking for content to re-use?
This is so wrong. The best proposal people are thinkers and advisers. They add value. They can shape the customer offer and articulate it brilliantly in words and pictures.
How do they do this? By using their knowledge to properly challenge the people they’re working with in a way doesn’t impact the positive energy and momentum. Indeed it adds to it. Read more...
Winning Strategies For Responding To Legal RFP's
Chances are pretty good that if a law firm received a Request for Proposal (RFP) from a company procurement group or an in house legal department, someone at that company liked enough about the firm to want to include it in their competitive selection process.
Given the importance of winning new or more legal work, or landing a position as designated counsel for a potential client, RFP’s should always be taken seriously by any firm receiving one and should not be ignored. Failure to respond to an RFP sends a clear (negative) message to the client that the firm doesn't care about their considerations or wanting to represent them. Read more...
Analysing Performance Per Hour
It is hard to argue that higher billing rates don’t result in higher profits. However, not every attorney can bill at high hourly rates. Also, most attorneys today are trying to find ways to practice profitability in a tight billing rate environment.
Whether a firm uses hourly or non-hourly billing methods, there is an underlying cost structure that can be evaluated and often improved.
While a simple cost per hour analysis using firm or group totals is easy enough to prepare, it will provide limited insight. Read more...
Bar Council pours cold water on pricing transparency
The Bar Council has criticised as ‘not practical’ proposals by the Competition and Markets Authority to encourage more openness about prices and quality of service.
Responding to the competition watchdog’s interim report on the legal services market, the bar’s representative body said that given the bespoke nature of work carried out by barristers, providing detailed upfront pricing information is not practical in ‘most cases’.
The Bar Council’s response mirrors that of the Law Society, which last month cautioned against the proposals adding that ‘market-driven solutions can and will plug the transparency of information gap’. Read more...
Legal Buyers Are Kicking Old Habits
Mark Twain said, ““Nothing so needs reforming as other people’s habits.” So, can big business kick its habit of retaining law firms to handle a majority of its legal matters?
The litany of law firm gripes is long and familiar: exorbitant cost and rates, overstaffing, budget unpredictability, IT and process deficiencies, and limited knowledge of clients’ business. One would think that law firms would be responding to all this—they read and hear about it every day.
So why are legal consumers—not law firms—driving change in the legal marketplace? Simple answer: most large firm partners have yet to feel the financial consequences of stasis and are staying the course so they can “run the table.” Read more...
Pricing strategy - there's more to it than fixed fees
The debate about time costing and value pricing rumbles on . . . . But there’s a lot more to pricing strategy than that debate – and even beyond the imperatives of positioning/differentiation and personal selling skills, legal practices could and should be doing a lot more to price their services creatively and effectively. Below are a few strategies that law practices could try more often, as well as a few practices that they should drop.
Clients like choice – and its better to get them to choose between your prices rather than between your price and someone else’s. Too many practices see just one way of doing things and offer only one – take it or leave it – offer. Read more...
Billable Hours: Are they the culprit?
We love scapegoats. Just load the sins of the people on the poor goat and send him/her out into the desert to die. Whew! That feels better.
For many years, billable hours have been the goats we love to hate. We've tried to kill them, contain them, vilify them and in every other way blame them for the misfortunes of the legal profession.
Here's our dirty little secret. Billable hours are not to blame. We are.
Who's we? Those of us in law firm management who have used billable hours on which to base our budgets, incentivise performance, measure success and identify our heroes. Read more...
Bond Dickinson wins Deal of the Year for Atom Bank work
Bond Dickinson's Newcastle Corporate team won the Deal of the Year award at the tenth annual Insider Dealmakers Awards ceremony. The dinner, which celebrated the achievements of the dealmaking community, gathered more than 300 of the region's top professionals. Read more...