With the Validatum Pricing Espresso® we aim to bring you your pricing 'shot' - some of the most interesting, thought-provoking and informative material we can find globally which will be of interest, relevance and help to you in your firms' pricing challenges.
Pricing: “There are a lot of tricks I knows…”
These lyrics from the musical Les Miserables (Master of The House) are the inspiration for this post. It has for many years been customary for firms to include a variety of sundry charges at the end of the bill but a cost benefit/analysis may well reveal that whilst the practice...
Charge 'em for the lice,
Extra for the mice
Two percent for looking in the mirror twice
Here a little slice, there a little cut
Three percent for sleeping with the window shut
When it comes to fixing prices
There are a lot of tricks I knows
How it all increases, all them bits and pieces
Jesus! It's amazing how it grows!'
Pricing - a technology solution
Research by Validatum® suggests that the UK top 200 law firms wrote off over £4 billion last year in recorded billable time. Client expectations around value for money, cost savings, cost predictability/certainty and price transparency continue to apply unrelenting pressure.
At the same time, partners loathe pricing and this whole aspect of the client relationship. Few partners have ever had formal pricing training, pricing is viewed as an administrative/regulatory ‘pain in the neck’, and fee-earners usually can’t record the time spent pricing towards their personal targets. Often, partners have no idea whether the job that they are pricing is profitable or not. Read more...
The 6 Worst and 5 Best Ways to Break the News about Rate Increases
Clients are wondering. How much? When will I know? Some wonder how they will find out. A few top legal decision makers express amusement about exactly how and when firms initiate direct contact when sharing rate increases — setting the rate increase dance in motion.
Corporate legal budgets are largely already set for 2022. Clients built in a rate increase — but it always seems to fall short of the actual rate increases. Read more...
‘The River of Gold’: Can Law Firms Use Data to Move the Needle on AFAs?
Historically, law firms have had more data at their disposal than clients. That’s posed a challenge in getting both parties to move beyond the billable hour.
Almost a year ago, I trained my eye on the impact the pandemic was having on law firms and clients’ conversations about pricing.One thing was clear: The disruptions of those early months sent clients scrambling. Questions about cash flow prompted some clients to lean on firms for not just deferred billing, but alternative fee arrangements. But that wasn’t always the case. For others, the need for pressing legal advice made the question of cost secondary. Read more...
GCs Have the Data, But Not the Will, to Break From the Billable Hour
More legal departments are prioritizing billing data analytics and reporting. But GCs who hail from a law firm background may still be too comfortable with the billable hour to use that information to push for alternative fee arrangements.
First, the good news: Legal departments are getting better at cleaning up their data around outside legal spend. But even the best organized billing data in the world can’t drive more alternative fee arrangements if general counsel don’t have the desire to push their law firms away from the billable hour. Read more...
The future of legal technology in law firms
Traditionalists at heart, lawyers are notoriously slow when it comes to embracing new technology – everybody in the legal sector knows that. But the pandemic has moved this not-so-tight-lipped secret into an industry misnomer.
The new University of Oxford’s Technology Innovation in Legal Services report for the SRA, which surveyed 900 SRA regulated law firms, found over a third (35%) of firms had introduced new technology in the last 12 months, while over half (55%) had improved or increased use of existing technology.
To find out where technology in the legal sector is headed, I spoke with Mari Sako, Professor of Management Studies at Saïd Business School University of Oxford, and Director of Solutions at LexisNexis, Chris O’Connor. Read more...
Billable Hour Credit Is Helping These Big Law Firms Move 'From Thought to Action' on DEI Matters
"Reframing efforts in an additive way is psychologically powerful. It diversifies the voices we hear within the firm on DEI matters, too, since the credit is available to everyone," a Cooley lawyer said.
DEI billable credit is on trend in Big Law. While long-term results are still in the making, young lawyers seem encouraged by the movement toward giving credit for advancing diversity and inclusion. Read more...
'Aggressive' Rate Hikes Expected in 2022 as Demand Surges and Supply Lags
"For some firms, this will be a historic opportunity to make progress on rates," said one industry observer.
Law firms are looking to push aggressive rate increases in 2022, taking advantage of a climate in which surging demand for corporate work, in particular, has stretched them thin.
Few firms have been shy about pushing rates upward in both 2020 and 2021. But industry observers believe there’s still room for more rate growth, potentially even double-digit increases, as firms seek a financial edge that can help them attract and retain top talent. Read more...
Can Law Firms Measure Ambition Without Billable Hours?
Lawyers pretty much have to have an above-average ambition. It helps them get a good score on the LSAT, succeed in law school and land a great job. Ultimately it leads them to the big prize: They join a Big Law firm!
But after that, how do lawyers express their ambition? They probably work a lot.
Recently, people seem to agree Big Law associates are working too much. The combination of overwork, perfectionism and, lately, isolation, creates serious mental health risks—and it’s bad business. Read more...
4 Reasons Law Firms Might Drive the Adoption of AFAs
Facing a limited associate talent pool, stiff competition from ALSPs and calls for boosting diversity and inclusion, law firms could have plenty of incentive to begin pushing toward more alternative fee arrangements.
There appear to be few things more resilient in this life than the billable hour. But while some corporate legal departments or legal ops professionals have begun to push back against this time-honored payment plan, it may actually be law firms that are ultimately responsible for making alternative fee arrangements more prevalent. Read more...
Singapore To Allow Conditional Fee Arrangements
On 1 November 2021, a bill to permit Conditional Fee Arrangements (CFA) had its first reading in the Singapore Parliament. If the bill is passed, it will permit law firms and lawyers in Singapore to enter into CFAs with their clients in respect of certain types of disputes (whether relating to proceedings in Singapore or any other foreign state), together with related advice and legal services, even if formal legal proceedings are not actually commenced.
This is a further indication of Singapore’s responsiveness to the needs of international commercial parties who are considering using Singapore as an arbitral seat or location for the resolution of their disputes. If passed, this will provide new options for clients for funding their disputes, in addition to third-party funding which, as reported in our previous post, is now also possible for international arbitration proceedings and related court and mediation proceedings, Singapore International Commercial Court (SICC) proceedings, domestic arbitration proceedings and related mediation proceedings. Read more...
The tyranny of the billable hour: bridging the divide between law firms and their clients
Both sides need to improve communication and explore alternative pricing structures, writes Laura Vosper, which requires breaking down traditional structures and hierarchies
What do clients really want? Is law firm culture perpetuating frustrations on both sides?
There remains a disconnect between law firms and their in-house lawyer clients. In-house lawyers complain that their law firms aren’t listening to them and don’t understand the commercial pressures they are under. Lawyers in private practice on the other hand feel frustrated that they can’t get in-house lawyers to open up to them about their wider business challenges and needs. Read more...
Clients See Uptick in Virtual Pitching Skills
3 out of 4 clients say law firms’ virtual pitches are getting better. Virtual pitching skills will become increasingly important as 44% of clients intend to rely on virtual law firm pitches long after offices reopen.
But clients note some virtual pitches improved more than others. It breaks down like this:
- 6% indicate the pitches are vastly better
- 38% characterize these pitches as improved
- 31% see marginal improvement
Law Firms' Rate Hikes Clash With Shrinking Legal Department Budgets
“Some law firms seem to prioritize their bottom line over the economic reality of their clients, perhaps for a host of reasons,” said Fred Paulmann, a former senior attorney at Pfizer Inc. who has since founded the Counsel Management Group. “What is sustainable and what is not?”
Corporate legal departments expect outside counsel to increase their rates next year, but that doesn’t necessarily mean they’re ready or willing to pay more. Read more...
Using the Billable Hour is Like Burning Fossil Fuels
Using the billable hour is like burning fossil fuels, and the battle to move beyond the time-based legal economy is like the struggle to end global warming. Here is why.
Selling time is a profitable way to run a legal business, just as burning oil or coal is a tremendously effective way to rapidly generate energy. The flipside is that they both have multiple negative consequences. They are also both very hard to remove, largely because even though many people can see the arguments for getting rid of them, moving past our systemic dependency is really hard to do. Read more...