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']
Can We Use Price Increases to Manage Supply and Demand?
“Should we be nervous about turning away work? I think the concern here is that people will consider we are too small, or that we cannot be relied upon to help when needed, or just that we will drop off people's lists. Personally, I feel we should be less sensitive about this: we are not unlimited in size, and nor do we want to be. If therefore we are turning away work, it is because we have too much already, which is a good sign, and because we have a sensible and prudent approach to taking on more work, which is a good sign too. Obviously, we need to message it right, but do you agree with this as a matter of principle?”
This was the fascinating request that hit my desk last week and it got us thinking about the role that pricing plays in managing supply and demand. Read more...
A price increase of 10%: financial suicide, or is it?
If anyone was to suggest to a law firm management team that they should hike their pricing by 10%; new clients with immediate effect and existing clients at the next review, the advice would be viewed with derision and opprobriu
Many firms genuinely believe that their brand is so weak and their relationship with the bulk of their clients so brittle and so tenuous that the smallest increase in prices will result in a mass charge for the door.
Generally, this is based on little more than gut feel and intuition and whilst these are always helpful, they are no substitute for a more rigorous and analytical approach. Time therefore to introduce into the analysis a concept known as price elasticity of demand (PED). Read more...
How Much Would You Pay For The Very Best Lawyer?
What is the billing rate for the best attorneys in the country? Though some may be loathe to divulge that information, it is a fascinating glimpse behind the veil of Biglaw — hell, half the folks working there don’t know how much their firms rake in for an hour of their work. So when BTI Consulting Group puts out the results of its annual survey getting into the nitty gritty, it is a fun time for all.
The good news, at least if you’re a Biglaw fan, is that the high-water mark went up 20 percent over last year’s top hourly rate. Law360 has the details: Read more...
Competing in a buyers’ market – three strategies for law firms
The legal industry, like any functioning market, is made up of buyers and sellers of legal services.
In recent years, Australia’s $23 billion and New Zealand’s $3 billion legal sectors have witnessed the globalisation of legal service providers and the rise of NewLaw firms (where labour arbitrage is at the centre of the business model) and LegalTech firms (where technology arbitrage is at the centre of the business model). In a buyers’ market, we have also seen increasing client sophistication in the distribution of their legal wallet, the expansion of in-house legal teams and an increase in the professionalisation of the procurement processes for legal services.
The insights from this article are derived from the 2017 Benchmarks and Leading Practices Report that was recently launched by the Association of Corporate Counsel (ACC) Australia. The study collates insights from 222 ACC Australia members, 85 In-house Lawyers Association of New Zealand members and interviews with 13 general counsel. Read more...
Clients craving ‘strategic business partnerships’ with lawyers: Survey
A new report has revealed that clients want their legal advisers to be more like business partners and shift away from purely transactional engagements.
BDO’s latest Law Firm Leaders Survey has found that client expectations have rapidly changed, with an increasing amount calling for their lawyers to act more like business partners, and “bring ideas to the table that can help them” while presenting more creative ways to add value.
The survey took into account over 200 participants’ perceptions on what trends they believe will change how law firms work with their clients. The participants were made up of managing partners, senior partners, CEOs and chairs. Read more...
Law Firm Billing: Is This Essential Function Becoming an Overhead?
Running a law firm as a business takes time. Therefore, the total of the partners’ worked hours is a mix of the billable and non-billable activities. And this is only natural, as non-billable activities are a necessary part of every organization.
However, not all non-billable activities bear the same value. Some activities, like business development, networking, etc. have a huge potential return on investment (ROI). Other non-billable activities, though necessary, can sometimes be regarded as an overhead. Read more...
Should Lawyers Advertise Their Fees?
Some clients complained to me about lawyers being secretive when it comes to pricing. Specifically, they ask why they don’t advertise their fees like other professions and businesses do. I think there are several reasons.
First, it’s tradition. Most attorneys today were trained by those who practiced at a time when attorney advertisements were prohibited, and had been for many years. Even though the landmark decision of Bates v. Arizona held that this prohibition was unconstitutional, many attorneys continued to practice without advertising their prices, and have taught other attorneys how to do the same. Read more...
Law firms increase billing rates
Demand has softened for law firms as billing rates increase. However, according to Altman Weil, there may be better news on the horizen next year.
Law firms are improving revenue through increasing billing rates as demand softens, according to Citi Private Bank.The bank has analysed data for the third quarter of 2017 which revealed that rates were increasing by between three and 3.5 per cent. However, collection time had increased and salary rises saw expenses also jump from 3.4 per cent last year to 3.8 per cent. The trend is backed up by Altman Weil which found that legal departments cut back on law firm spend - with more legal departments making cuts (41 per cent) than those increasing spend (32 per cent) in 2017. Read more...
Report: Law Firms Jacking Up Rates, Demand Flat
Law firm performance dropped off in the third quarter, as demand softened and collections started to lengthen, according to a new report by the Citi Private Bank Law Firm Group.
Released Monday, the data is based on a survey of 183 law firms, including 129 of the nation’s largest firms and 54 boutiques.
“One of the keys is that revenue growth decelerated in the third quarter,” said John Wilmouth, a senior client advisor with Citi Private Bank. Read more...
The perfect pricing storm; artificial intelligence and hourly billing
Law firms today face increased pressure to do 'more for less' resulting in rapidly growing interest in compelling technology-augmented hybrid offerings: focused on process-oriented work, applied at scale, leveraging technology to produce effective solutions that address the GCs evolving role as manager of legal spend and supply chain risk.
For many law firms, this means fewer billable hours. If AI will allow document review for example, in a fraction of the time it used to take, that's someone's billable hours target out the window. The use of AI in legal service delivery is exciting and represents a great opportunity, particularly for early adopters, but it has a vicious sting in the tail. Something will have to change with traditional pricing models. Read more...
LEGAL PROJECT MANAGEMENT
Introduction to project management: in-depth article
This article looks at the principles of initiating projects across multiple functions of an organisation. We look at how to scope a project, build a project team, create the necessary documentation and get senior management to back your project.
As an in-house lawyer you may, from time to time, find yourself engaged in, or even managing, projects from small to large-scale. It’s a complex and challenging role but by using proven techniques and methods, you can develop the knowledge and skills necessary to build the foundation for launching and initialising your project. Read more...
What is Legal Project Management?
Whilst Jackson Pollock is world famous for his abstract art, it’s safe to say that everyone who looks at his work will see something completely different. The reality is that Legal Project Management (LPM) is much the same; it means something different to every law firm and pretty much everyone you speak to. It can mean anything from a simple method of managing your matters more closely, to something more formal which you proactively use as a selling point to add value and to retain your most important clients.
Finding something that works for your firm, fits with your firms’ culture, maximises your expertise while complementing the experience you have already, and at the same time exceeds (or even meets) the expectations of your clients, can often lead to wasted time and effort. Some of the most prominent US law firms such as Seyfarth Shaw LLP are leaders in this field but have been at it for many years. Read more...
How should you start implementing legal project management?
You are asked to be the operational lead for implementing legal project management in your law firm or department. How should you make a start?
Ultimately, successful implementation depends on many factors, some of which will be out of your control.
However, the more you can control the better. Working effectively with colleagues, especially your project sponsor, should also help enormously. Read more...
Where to implement legal project management?
The benefits of applying legal project management (LPM) successfully are well known and include things such as:
- improved scoping, which in turn results in better estimates of cost and effort required to deliver legal work;
- better management of legal matters once they are underway and
- improved communications with clients and third parties. Read more...
Cutting BigLaw Down to Size: New Alternatives for Legal Services Procurement (Part 1)
A number of unwelcome trends over the past decade have put BigLaw firms on the chopping block. Among these has been the increasing involvement of procurement in managing legal services, along with the emergence of a range of attractive alternatives to traditional full-service firms. While this has been a nightmare for BigLaw firms, it is a shared opportunity for legal services procurement and for emerging alternative legal services providers.
In Part 1 of this two-part series, we focus on BigLaw’s challenges, changing corporate buying behaviors and the rise of procurement in legal services sourcing and spend management. In Parts 2 and 3, we will focus, respectively, on the emergence of non-traditional/alternative legal services providers and on the significant implications for legal services procurement practitioners. Read more...
Overpriced, Overgrown, And Overlapped: Biglaw’s Fragile Fundamentals And How They’ll Play Out When Recession Hits
Profitability should be tanking. That it hasn’t yet is curious; that it will is certain.
Biglaw is defying the laws of economics. Over the last 20 years, the Am Law 100 has raised price at over twice the rate of inflation despite adding lawyer capacity at twice the growth rate of the economy and almost doubling the number of cities in which each firm competes. Profitability should be tanking. That it hasn’t yet is curious; that it will is certain. The next downturn will set the tinderbox ablaze. Read more...
Ingredients of enduring BigLaw firms
Ingredients of enduring BigLaw firms is a rejoinder to George Beaton’s recent post, Why BigLaw firms fail. My post explores how the ingredients of enduring law firms work inter-dependently to assure the sustainable success of firms that execute these basics consistently.
In his post, George details our analysis of the most common reasons for law firm failure and concludes that in the majority of cases failure could have been prevented. In Ingredients of enduring BigLaw firms, I set out our work on what makes for an enduring law firm.
Reasons for BigLaw firm failure
OMG! The accountants are coming!
I’ve titled my post ‘OMG! The accountants are coming!‘ prompted by the recent report in Bloomberg’s BigLaw Business titled Law Firms, Regulators Keep Eye on Big Four Move to Legal Services.
The Bloomberg report stated:
Sixty-six percent of those law firm partners and managing partners surveyed by ALM over the summer declared they were either “very concerned” or “somewhat concerned” about their law firm’s ability to compete with “alternative legal service providers” and accounting firms. Read more...
IN-HOUSE & PROCUREMENT
Efficiency Remains Elusive as Legal Departments Bring Work In-House
Empowered by technology and seeking to cut costs, legal departments have been bringing more of their legal services in-house. But departments doing so are hitting limits and running into efficiency challenges, according to Exterro’s “2017 In-House Legal Benchmarking Report: Optimizing Legal & E-Discovery Activities.”
The report, a survey of 86 in-house professionals, including general counsel, corporate attorneys, litigation support staff, paralegals and legal directors, found that 51 percent of legal departments conducted at least half of their organization’s legal services in-house.
Of those, 17 percent conducted at least 75 percent of such work in-house, while eight percent conducted all their legal services on their own. Over one-third of respondents also said they increased the amount of work they handled in-house over the past year. Read more...
Unspoken Criteria Clients Use to Evaluate Your RFP
Clients are becoming much more skilled in evaluating law firms. They are on the lookout for clues as to what they will get once they hire a firm. Top legal decision makers see so many pitches and presentations they have now developed a clear set of criteria—some of which they share—and some not.
Lack of sharing is neither a trick nor negligence—its client preferences which have become ingrained in their thinking. Clients think about some especially important requirements so often they believe the proposing firms know what these unspoken requirements are.
Other unstated criteria are not yet fully developed but clients know them when they see them—these are the most dangerous—because clients still have an expectation you will meet these unstated criteria. Read more...
Small goes large on legal spend
Small legal departments are spending more on law firms and look set up up their budgets in 2018.
Chief legal officers at small legal departments are set to increase their spend next year whilst departments with one lawyer have already upped external legal spend. According to the Altman Weil 18th annual Chief Legal Officer Survey, 59 per cent reported they increased outside spend while only 12 per cent reported a decrease. When analysising total law department budget, 45 per cent increased total department spend in 2017, 36 per cent decreased their budgets and 19 per cent made no change. However, in law departments with over 50 lawyers, only 22 per cent increased their total spend in 2017, while 59 per cent made cuts. Read more...
In-House Lawyers Plan To INCREASE Spend on Outside Counsel: Lobster Dinners For Everyone!
For a decade now, the trend has been for in-house counsel to decrease their spend with outside attorneys while they bring more and more work in-house. It’s cheaper that way.
But Altman Weil’s annual in-house survey suggests that trend is going to finally start moving in the other direction. From Corporate Counsel:
The report said 40 percent of respondents plan to increase their outside counsel spend in 2018, while only 33 percent anticipate a decrease. While that hasn’t happened since before the financial crisis of 2008, the report said the gap between internal and outside counsel spend has been narrowing over the last three years. Read more...
CLOC survey shows in-house legal departments cost less, but external still getting big piece of budget
Legal departments are showing themselves to be cost effective, but they are still sending out a good portion of work to external providers, according to a survey from the Corporate Legal Operations Consortium.
CLOC released the results of its 2017 State of the Industry Survey, with findings from 156 member companies with US$10 billion of spend that represent 11 per cent of the Fortune 500 companies from 11 countries across 32 industries. About six per cent of respondents to the survey were from Canada. Read more...
Corporates investing in technology to cut outside counsel costs
As global organisations' legal needs increase, corporate law departments are adopting more innovative practices to better control outside counsel costs says a new report whose participant base primarily includes Fortune 500 level companies.
The 2017 HBR Consulting (HBR) Law Department Survey found that the majority of law department respondents (82 per cent) expected their legal needs to increase in the next year – up from 79 per cent reported in last year’s results. The top areas requiring increased legal attention over the next year include commercial contracts, regulatory compliance and international business units. The report said: ‘The past decade has seen a profound shift in law department spending. As companies bring more work in house in an effort to decrease outside counsel costs, their internal teams require additional technology to be more productive and efficient.’ Read more...Read more...
Time Is The New Black
Recording activity for business purposes is different from timekeeping solely for billing purposes. Most solo and small firms understand the need to capture all their effort as they strive to spend more time working on client matters. However, some firms have moved to flat fees and stopped recording hours. As many Biglaw firms shift to alternative fees, they need to continue to record hours. Regardless of the reason for flat fees, it’s not good practice to stop keeping track of hours. Also, all should reject the value billing theory that recording time is unnecessary. Timekeeping is not dead for Biglaw or any law firm.
My law firm work experience is limited to Canadian Biglaw, where I was a finance director about fifteen years ago prior to attending law school in Arizona. However, I have spent the past seven years talking with law firms of all sizes, mainly for Traklight and Evolve Law but also for my key performance indicator (KPI) writing. The KPI work has focused on solos and small law firms. I believe that Biglaw can learn from their best practices, particularly with respect to timekeeping for budgeting, costing, and pricing. In addition, considering that the Big 4 accounting firms track time, Biglaw should pay attention. Read more...