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']
Hourly Billing and AI: The Perfect Pricing Storm
It’s time to relearn what value pricing looks like.
Law firms face overwhelming pressure from current and potential clients to do “more for less,” resulting in rapidly growing interest in technology-augmented offerings. Firms are now focused on leveraging technology for process-oriented work, applied at scale, to produce effective solutions that support the general counsel’s evolving role as manager of legal spend and supply chain risk.
Many firms are adopting artificial intelligence (AI) in order to complete more work in far less time. But, while this exponential increase in efficiency can be exciting and represent a great opportunity (particularly for early AI adopters), it can have a vicious sting in the tail. Before identifying that sting, however, it is worth recapping the three main pricing paradigms used by law firms today: Read more...
Law Firm Rate Setting (Part 2): Hard-Learned Lessons
In Part 1 of this series, we looked at lessons around law firm rate setting that the top-performing firms in our recent Dynamic Law Firm Study had to teach.
In particular, we looked at what role higher rates charged by some of the class of Dynamic law firms might have played in helped those firms rise to the top. Left undiscussed was the finding that, not only did Dynamic firms have higher average hourly rates, but they also beat the market in terms of year-over-year worked rate growth. In other words, these firms managed to find ways to convince their clients to pay them among the largest year-over-year increases in their agreed rates seen in the market. Read more...
Big Law Should Raise Partner Billing Rates 10+ Percent Now
It’s critical to the long-term viability of Big Law that partners delegate more and that firms re-balance where margin is generated; raising partner rates aggressively will help with both.
We’re close to a peak of the business cycle. Client businesses are performing strongly; they can afford aggressively-increased partner billing rates. But the logic for raising rates strongly now is more than just opportunism; it’s about Big Law’s long-term viability. For firms to remain prosperous two things must happen: partners must delegate more and firms must re-balance where they generate margin (i.e. profit) from more junior to more senior lawyers. Raising partner rates aggressively now will help on both these fronts. Read more...
‘Clients typically don’t want’ movement away from billable hour
Speaking to Lawyers Weekly, the managing partner of a BigLaw firm posited that it is preferable, from the perspective of many clients, to retain a billing model whereby those clients can retain more control.
Gilbert + Tobin managing partner Danny Gilbert said that discussion about the viability and longevity of the billable hour model in law firms was a “fairly oft-visited and unresolved subject”.
And while it would be difficult for BigLaw firms to move away from the billing methods they are so programmed to utilise, it would also be so for clients of those firms, he argued. Read more...
‘It will be viewed with as much ridicule as slavery’: NewLaw practitioners slam time-based billing
In a torrent of LinkedIn comments last week, lawyers in the NewLaw space across Australia slammed the billable hour and argued clients prefer fixed fee pricing.
The comments came in response to a Lawyers Weekly interview with Gilbert + Tobin managing partner Danny Gilbert, who posited that clients of BigLaw firms prefer billable hours as a pricing model for the reason that it allows those clients to retain more control.
Voicing their views on LinkedIn, close to a dozen practitioners debated whether the billable hour is “dying or thriving” and reflected on their own experiences with pricing options. Read more...
Beyond the Billable Hour: It’s Not About Economics—It’s About Relationships
About a year ago, the legal department at Microsoft announced it would be shifting away from the billable hour in the vast majority of its outside counsel arrangements. In describing these intentions, Corporate Vice President and Deputy General Counsel David Howard wrote about forging “a new type of relationship” with the firms handling Microsoft’s most important legal work.
About a year ago, the legal department at Microsoft announced it would be shifting away from the billable hour in the vast majority of our outside counsel arrangements. In describing these intentions, Corporate Vice President and Deputy General Counsel David Howard wrote about forging “a new type of relationship” with the firms handling Microsoft’s most important legal work. Read more...
Building the Pricing Machine (Part 3): The Voice of Experience
The voice of experience has advantages and disadvantages. Interestingly, in some cases a particular attribute can actually fall into both camps: being around a long time gives you the advantage of having seen and learned a lot; but it can also lead to people (including yourself) assuming you know more than you do.
With that in mind, we attempt to offer here, and in our upcoming webinar, Building the Pricing Machine: The Voice of Experience, a few thoughts that will hopefully help pricing professionals of all stripes in the legal space. Read more...
LEGAL PROJECT MANAGEMENT
Project management principles and tech driving in-house litigation
A new report has found that the leveraging of legal project management principles and use of legal technologies is driving the success and efficiencies of smaller legal teams.
“You don’t need a large team to provide litigation services effectively,” is the message being touted in Exterro’s 2018 In-house Legal Benchmarking Report.
The report found smaller teams were far more likely to perform most of their litigation services in-house than their larger counterparts. Read more...
Legal Project Management Demystified
Viewing cases as projects has a number of critical advantages for law firms.
“It’s 1911 for the business of law,” a lawyer named John McCormack quipped to me over breakfast in Nashville a number of years ago. He should know — not only is he a lawyer, he was deep into industrial engineering studies at Vanderbilt University. McCormack’s observation has since become somewhat of a mantra for me, and it’s featured in any presentation I give on management for law firms.
Why Are Law Firms Mired in the Days of Ocean-liner Travel, Epic Mustaches and Large Bathing Suits? Read more...
Similarities Between Legal Procurement and Manufacturing Procurement
When we started seeing “procurement” on legal services RFPs a lot of people mistakenly thought that procurement was only for buying pens and pencils. As legal procurement — or as some prefer to call it “legal sourcing” — is on the increase, I wondered if there were any similarities between legal procurement and, for example, other kinds of procurement such as manufacturing procurement.
I spoke with procurement consultant Bruce Morrison and was surprised to see that there are many similarities. Before starting his own business in supply chain consulting, Bruce was the vice president and head of production procurement for 21 years at GlaxoSmithKline (GSK) and a member of the company’s Global Procurement Leadership Team. His experience in manufacturing procurement provided me with some great examples of the similarities between the manufacturing and legal procurement. Read more...
News focus: Buying in to price transparency
New rules on publishing price and service information kick in this week. Enforcement will be light-touch at first, but marketeers say law firms should exploit the opportunity to showcase their wares
For some it is what they have been doing for years. For others, an unwelcome and time-consuming intrusion from a meddling regulator.
Whatever your opinion of new transparency regulations, they are now unavoidable. Firms offering certain services will be required to publish price and service information on their websites from Thursday (6 December). The rules apply to conveyancing (residential), probate (uncontested), motoring offences (summary offences), immigration (excluding asylum), employment tribunals (unfair or wrongful dismissal), debt recovery and licensing applications. Read more...
Insights from Managing the Professional Service Firm live on
It's 25 years since David Maister published Managing the Professional Service Firm (1993).
Recently, while preparing a presentation to professional services CMOs, we dipped into chapter 2, 'The Professional Firm Lifecycle' and were reminded of the depth of David's prescience on how meeting the range of clients' needs profitably requires different business models.
Figure 2-1 in Managing the Professional Service Firm shows David's original classification of work types.
He colourfully described a spectrum ranging from brain surgery (the most complex, mission-critical work requiring specialised Expertise) through grey hair (requiring lots of Experience) to routinised, procedural work (Efficiency). The 3Es is our mnemonic. Read more...
Data Snapshot: The Richest Law Firms Are Getting Even Richer
Since 2000, the wealthiest 25 firms in the Am Law 200 increased their profitability at a rate that outpaced their peers. Here’s what that might mean for competitors.
The most profitable firms in the Am Law 200 are pulling away from the rest of the industry.
That’s the takeaway from an analysis of data gathered by ALM Intelligence going back to the year 2000. A look at the top 25 firms by profit per equity partner (PPEP) in this year’s Am Law 200 ranking reveals a wide and still growing gap in profitability between the upper crust and everybody else. Read more...
6 Top Tips For Running A Successful Law Firm Panel Process
Running a panel tender for law firm services can be challenging and time-consuming. So what can procurement do to ensure they tick the right boxes?
A panel tender process can be long and arduous for all parties involved. A recent survey said 42 per cent of law firm respondents spend over 15 hours on each tender, with 19 per cent spending over 20 hours.
Firms complete multiple tenders each month. When you think that most respondents are partner or director level, this adds significant additional cost to a law firm’s operations. This will, in turn, factor into increased costs for the client. Read more...