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']
'We Lost on Price' - Post Hoc Ergo Propter Hoc
Post hoc ergo propter hoc is a logical fallacy that states, "Since event Y followed event X, event Y must have been caused by event X." And that pretty much sums up our response to missing out on a piece of work or appointment to a panel. “We submitted a price, we missed out on the work therefore we must have lost on price.”
However, even if you have been told that that is the reason why you missed out on the work, appearances can be deceptive.
It is worth taking a closer look because things are not always as they seem. Read more...
I used to think I was indecisive but now I'm not sure
Pricing improvement initiatives in law firms are unfortunately often characterised by confusion and indecision over why the initiative is required, what the initiative is intended to achieve and therefore what it should look like.
The reason for this is that there are two ways in which to view the pricing function and pricing activity in a law firm; as a standalone and insular activity confined to what you might call, ‘the home straight’. That is the interaction between partner and client or perhaps the bid team and procurement.
The other way to conceive of pricing is not as a function but rather, as a mindset. One that goes to the heart of the firm's culture, ethos, brand and reputation, delivery systems and the way in which it views its relationship with its clients at a DNA level. Read more...
Many law firms are using fixed-fee billing, despite a suspicion that fixed-fee work is risky and unprofitable. Nigel Haddon provides some techniques for doing it profitably.
Without question, the legal sector is seeing an ever-greater use of fixed fees. This isn’t something we lawyers should take pride in – it’s come about almost entirely as a result of pressure from the client side. Time and again, clients have expressed dissatisfaction with hourly rates, which can border on distrust of lawyers charging in this way. And it’s not difficult to understand why our clients feel like that.
First, what kind of ‘experts’ do we think we are if we don’t know how much something is going to cost? Second, there is a conflict of interest inherent in time-billing: we don’t mind how long the job takes – it’s all grist to our mill – but the client wants us to spend the least amount of time possible on the matter, commensurate with doing an acceptably good job. Read more...
How AI is Enabling Law Firms to Adapt to Value-Based Pricing
Artificial intelligence allows for the legal industry to adapt to an increasingly competitive marketplace in ways that benefit both law firms and corporate legal departments.
The legal industry has a storied history of resistance to technological change. Everyday business necessities such as the telephone, computer, electronic document management systems and email were all originally met with skepticism by law’s top decision makers. Their excuses against adaptation were always the same: The costs were too high, the system as it currently existed didn’t need improvement, and that new innovations could create potentially harmful security issues for their clients.
Therefore, it is no surprise that the legal industry has been more hesitant than others—such as retail, manufacturing, finance—to embrace artificial intelligence (AI) when improving business efficiencies such as e-discovery, e-billing and business modeling platforms. Read more...
Study Correlates Fixed Fees with an Entrepreneurial Approach to Practice
A 2016 study by LexisNexis, reviewed by Neil Rose in an article in the UK online publication Legal Futures, found that small firms (fewer than 20 fee-earners) that offered fixed-fee billing to clients were frequently ones that could be described as “entrepreneurial” for other reasons. In contrast to firms of comparable size they were, for example, “investing more in processes, technology and marketing,” Rose reported.
The study surveyed 112 lawyers and 108 clients.
“Most of those lawyers who saw the benefits of fixed fees viewed themselves as entrepreneurial,” Rose wrote. The study found that they “‘[tended] to be more progressive, open to change and customer-centric.’ These lawyers were also younger, from growing firms and their client conversion and retention rates were above or well above average.” Read more...
When to Raise Your Rates
How do you make more money? The two obvious ways are work more hours or charge more money.
Toward the end of last year, I was debating whether I should raise my rates and, if so, by how much. I had not raised my rates for client work in three years. My goals were to stay relatively affordable and to select a rate that reflected the value I brought to my clients.
What Does My Competition Charge?
I started by attempting to take a look at my competition’s rates. Lawyers’ rates generally are not public knowledge. We don’t post them on our websites. Prospective clients can’t compare prices like they would with products in a store or on Amazon. Read more...
A blow to the contingent fee?
The venerable and yet vulnerable contingency fee is in the spotlight at the Minnesota Supreme Court, courtesy of the Faricy law firm, which claims one-third of a settlement reached a few months after it was fired by its client.
One end result might be that contingency fee lawyers have to start recording their hours. Which they should be doing anyway, in case of occasions like this, the court said during the argument in Faricy Law Firm v. API, Inc. Trust on Jan. 10.
Faricy and API Trust had a one-third contingency fee agreement for coverage litigation against several insurers. The case before the Supreme Court involves one matter, involving Home Liquidator. API Trust fired the firm and requested a bill for unpaid services. Faricy responded that it expected to be paid the contingent fee on the Home Liquidator case, which settled for $21.5 million about two months after the firm was fired. The firm says it had advised the client to settle for $22 million and that the client used its advice and work product. Read more...
Beyond the RFPs and AFAs
Going through a request for proposal or law firm panel review can involve a lot of pain and agony, leaving the winning parties with a sense they have made it through the marathon and now the rewards — in the form of work — will come naturally. But many in-house counsel have observed that once a law firm panel review or RFP for legal services is complete, there is a tendency for complacency to set in. Firms get on the approved list and there is an assumption the work will flow without any further care and feeding on their part. That’s not always the case. It seems there is much room to grow on both sides of the table when it comes to how law firms and in-house work together in the process of procuring legal services.
According to Nancey Watson of NL Watson Consulting Inc., law firms are responding to “more and more RFPs” and the complexity of RFPs is getting more difficult for firms to respond to. At a recent Legal Marketing Association conference held in Toronto, Watson led a discussion panel with in-house counsel and procurement professionals who help manage external counsel. She asked them about how their organizations are handling fee arrangements and RFPs. Read more...
Greater price transparency would help people make better choices about legal services
The majority of solicitors do not advertise prices, despite evidence that customers are willing to shop around, and are more likely to make 'good financial decisions' when prices are more readily available.
These are among the findings of our research into price transparency in the legal services market. Including a large-scale randomised trial of 4,001 members of the public, independently conducted by Economic Insight, the research also featured surveys of 1,001 recent home buyers, and 1,146 law firms.
The research found that despite two-thirds of people surveyed saying they had shopped around, and 71 per cent saying they had researched options for at least an hour before selecting a conveyancing solicitor, only 15 percent of consumers were able to obtain the pricing information they wanted without having to make a specific request first. Read more...
LEGAL & PROCUREMENT: Resistance or Collaboration or How to Make it Work
Over the last 5 years, I have seen the ascendency of Legal Procurement professionals and of Directors of Legal Operations in the corporate setting. In almost every instance over the last 20 years of leading procurement initiatives for banks, telecom companies, utilities, and insurance companies, I have encountered procurement professionals who also manage the procurement of other professional services for their companies. Categories such as IT, benefits and payroll, and management search come to mind. Similarly, Directors of Legal Operations tend to have responsibility for activities such as recruitment, technology, infrastructure and budget. It is inevitable that procurement and legal operations should overlap when it comes to managing more structured processes for retaining external counsel.
Legal departments jealously guard their relationships with external counsel. There is ample evidence that in-house lawyers continue to do so in the face of initiatives to better leverage a company’s prestige and buying power as a way to secure greater value from external counsel. Read more...
Public procurement challenges: costs awarded against winning tenderer who objected to amending confidentiality ring
Bombardier Transportation (UK) Limited v Merseytravel  EWHC 41 (TCC)
The courts have ruled that a successful tenderer who raises unreasonable objections to an application to vary a confidentiality ring in a public procurement dispute may be liable for the claimant's costs of the application, even though not a party to that dispute.
An important point of principle in procurement cases concerning the potential liability of a non-party to costs has been recently considered by the court. The decision follows on from an earlier judgment (Bombardier Transportation UK Limited v Merseytravel  EWHC 726 (TCC)) where the claimant, Bombardier, successfully applied to vary the terms of a consent order to widen a confidentiality ring into which the non-party's tender documents had been disclosed. Read more...
STATE OF THE PROFESSION
Man pleads guilty, lawyer charges $120k 'cancellation fee'
A lawyer attempted to charge his client a $120,000 "cancellation fee" when the man pleaded guilty and the case didn't go to trial.
That level of that fee was not fair or reasonable, according to a Law Society Standards Committee and the barrister was ordered to reduce it to $40,000.
The barrister, who is not identified by the standards committee and charged $8000 per day for attendances in court, told the client in a letter: Read more...
Solicitors Regulation Authority consultation on price and other information
Through his research, Richard Moorhead, Professor of Law and Professional Ethics at University College London Faculty of Laws, provides deep and original insights into lawyers and the practice of law. The Dialogue is privileged to feature Richard as a contributor. In his first contribution, Richard examines the issues of the price transparency of lawyers’ services from a policy perspective.
In a recent Consultation document the Solicitors Regulation Authority (SRA) is proposing to:
- require firms to publish their price for services (limited initially to a select number of legal services) Read more...
The Legal Industry's Scoping Problem
The legal industry needs to move past thinking about pricing and start thinking more about scoping their matters, writer Keith Lipman argues.
We are constantly writing about the change that is occurring in the legal industry. We hear the drumbeat of “innovate,” but with so much writ of late and so little said, it is becoming difficult to not treat the word “innovate” with disdainful irony. Without cognition of the core problem, innovate becomes meaningless. We are in a scoping crisis.
I previously argued disruption of the legal industry stemmed from the addition of “expected price” to our definition of client-value: “deliver quality matters” became “deliver quality matters at the expected price,” and changed everything. It is understandable that our first reaction was to infer we were in a pricing crisis, and then set about building pricing groups and developing those skills to our current sophistication. But pricing alone is insufficient as scoping is inextricable to it—and lawyers don’t scope. Read more...
7 key pricing trends to consider in 2018
2018 has started. What is your strategy to boost profits in a growing and booming economy? How will you optimize customer behavior and monetize on the willingness to pay of your customers? How can you shift back from a predominantly internal and cost-cutting focus to an outside-in focus, resulting in smart monetization of market opportunities?
80% of the respondents in our 2017 Global Pricing & Sales Study (GPSS) think that TopLine growth through pricing is the biggest driver of future profit growth, as cost reductions become less feasible. Despite these beliefs and the fact that pricing has a substantial and immediate impact on a company’s profitability, it is too often neglected as a source of innovation and driver for profitable growth. This whilst many successful companies, turn out to be successful in pricing. They outperform their peers by smartly quantifying, defending and monetizing their value in the market and forcefully monitoring their actual pricing across customers, channels and countries.
We have identified seven key pricing trends for 2018 that can help you to improve pricing power, redefine commercial strategy and provide inspiration for profit growth. Read more...
Just 6% go for cheapest solicitor - SRA conveyancing research
A law firm’s reputation counts for more than cost in choosing a conveyancer, according to what the Solicitors Regulation Authority today hails as the largest-ever behavioural trial on price and decision-making in legal services. Just 6% of customers chose their solicitor on the basis they were the cheapest, the trial found, and a mere 1% because they were value for money. Nearly three-quarters chose a conveyancer on the basis of a recommendation from an acquaintance or intermediary.
The SRA nevertheless insists the findings underpin its transparency agenda, pointing to evidence that consumers make better decisions when prices are quoted on firms’ websites.
The study is based on a randomised trial of 4,001 members of the public conducted by Economic Research, together with surveys of 1,001 recent homebuyers and 1,146 law firms. Read more...
Legal services pricing: a LatAm perspective
I recently started an article about what pricing is and how it works for delivering and/or hiring legal services, where it was only possible to describe the general pricing process and the two main strategies for said process. I received several comments requesting to deepen my approach to this subject since, as I mentioned in the quoted article, the traditional education in the different Law Schools or Faculties in Colombia (and, I believe, the world in general) do not include subjects or courses that provide tools for the administration of the services that we pretend to provide as professionals, let alone concrete courses related with pricing for legal services to the point that, at least from my experience, the discussions regarding how the pricing works or should work are currently almost black magic.
Thus, considering the multiple requests to broaden the matter, I have decided to publish this complete article to LinkedIn. Let us get started. Read more...
Perspectives on the future of law
The legal profession is in the midst of significant change, and is headed into a period where there will be even greater change. These changes are driven by disruptions that alter the very nature of how traditional legal services have been performed and provided to clients for decades. These disruptions include:
- access to justice
- client empowerment
- alternative legal service providers
This article will give some insights into these disruptors and suggest how members of the legal profession can respond to them. Read more...
Six things modern GCs want from their law firms
From his background in major BigLaw firms and General Counsel, now turned independent consultant to law departments and law firms, Steven Walker contributes ‘Six things modern GCs really want from their law firms‘ as the first of a series of posts on The Dialogue.
The role of the modern General Counsel is broader and, arguably, more challenging than ever before. The GC is the principal legal advisor to the client company, frequently chief compliance and risk officer, leader of the legal department and function, executive team member and general commercial advisor, as well as coach, mentor and counsellor.
Today’s GCs, regardless of the size of the law department, are constantly looking for ways to improve department performance, deliver even better legal services, find cost efficiencies and liberate staff time to spend on strategic, value-add or personal growth and development projects. It is therefore timely to examine what might help a modern GC in these efforts in a series of articles, starting with six things modern GCs want from their law firms. Read more...
Legal departments bypass smaller firms despite preferring them
Small firms can be more innovative but are less likely to pass the muster with GCs when searching for suitable law firms.
In-house general counsel are three times more dissatisfied with larger law firms than smaller innovative rivals. Despite this, in-house teams are overwhelmingly appointing law firms based on personal connections rather than a rational appraisal of which firms would be best for the job. The report surveyed more than 300 general counsel (GC) and senior in-house lawyers at international businesses generating more than $1 billion in annual revenue. It revealed levels of dissatisfaction to be three times higher with larger law firms (19 per cent) than smaller rivals (6 per cent). Read more...
GCs: We need more data to pick external advisers
General counsel at large international companies are crying out for a more sophisticated and data-driven approach to identifying and then instructing law firms.
This is the main finding of a survey of more than 300 general counsel located in Europe, North America and Asia-Pacific, conducted by The Lawyer in collaboration with technology company Globality.
Survey respondents say the breadth of firms’ industry and sector expertise is the most important criterion when it comes to selection. Prior experience of working with a firm is second-most important while seniority and experience of partners is third. Read more...
Declining productivity costs law firms an average of more than $74K per lawyer, report says
Law firms have managed to maintain profits per equity partner and increase billing rates, but they shouldn’t be complacent. Those achievements could be masking weaknesses and preventing law firm leaders from adapting to new challenges, according to the 2018 Report on the State of the Legal Market.
The average lawyer today is billing 156 fewer hours annually than at the start of 2007, costing firms an average of $74,100 in lost revenues per lawyer each year, according to the report. The report bases the calculation on an average rate of $475 an hour.
The Center for the Study of the Legal Profession at Georgetown University Law Center and Thomson Reuters Legal Executive Institute released the report on Wednesday. The report can be downloaded here; a press release is here. Read more...
Law firms face declining productivity but must resist return to failed strategies
Declining productivity is costing law firms an average of $74,100 per lawyer each year, according to the latest research from Georgetown University.
Lawyers are billing 156 fewer hours today than 11 years ago, costing firms an average of $74,100 in lost revenues per lawyer each year. Flat demand for law firm services, declining profit margins, weakening collections, falling productivity, and loss of market share to alternative legal service providers and others, are gradually undermining the foundations of firm profitability. The report by Georgetown in association with Thompson Reuters - 'Transformation of Legal Services Market is Accelerating — Are Law Firms Ready? - said that that many of the levers firms used to help counteract the last recession (expense cuts, de-equitising partner ranks, rate increases, etc) will be less effective during the next economic downturn. The current economic expansion is now the third-longest since World War II, and the impact of the next downturn on the legal industry could be severe. Read more...
Law Firm Revenue, Profits Up in 2017: Wells Fargo Report
A Wells Fargo report shows that firms' financial metrics were generally up across the board in 2017, but the top of the market fared best.
After stalling in the third quarter, law firm financial performance finished 2017 on a positive note, with a larger segment of the legal market contributing to upward trends in revenue and profits than in recent years, according to a new report from Wells Fargo & Co.
Wells Fargo Private Bank’s Legal Specialty Group on Tuesday released the results of its year-end check-in on law firm financials, showing average increases in revenue and profits between 3 percent and 4 percent for the legal market overall. The report, drawn from a survey of 160 firms, also showed an increase in demand across the law firms participating in the survey. Read more...
The Rise Of Pricing Professionals In BigLaw
Law360, New York (January 8, 2018, 5:11 PM EST) -- The number of pricing professionals at BigLaw firms has snowballed over the past decade as clients seek more alternative fee arrangements and demand increasing complexity and specificity from law firms with regard to their legal bills.
Patrick Johansen, who tracks the number of law firm pricing professionals in the industry on his blog, Patrick on Pricing, says that the number of people in the field — a mix of lawyers and others trained in business or economics, among other things — grew from 33 in 2010 Read more...
New Pricing Strategies Drive Revenue Gains at Hogan Lovells
After hiring a top in-house lawyer at AIG to rethink its pricing strategies, Hogan Lovells finally told a cherished client: “We cannot afford to work for you."
What’s worse? Losing a great client over money? Or losing money over a great client?
Scott Green, the global chief operating and financial officer at 2,600-lawyer Hogan Lovells, said the firm addressed that conundrum with a client about two years ago, after it hired pricing expert Terry Williams, a former associate general counsel and deputy director of legal strategies at American International Group Inc. Read more...
New Video: Pricing Success Depends on Quality Legal Project Management, Says Steptoe & Johnson’s Novosel
Linda Novosel, Chief Pricing & LPM Officer at Steptoe & Johnson LLP, discusses the crucial importance of using pricing strategies and legal project management in pricing to win client business with James Jones, Senior Fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center, during the 16th Annual Law Firm COO & CFO Forum, held in New York City.
Novosel talks about her participation in the Forum’s Breakout Session Model Behavior: Winning with Pricing & Legal Project Management After 2007, and how pricing and the strategies that surround it have become much more important to law firms’ relationships with their more sophisticated clients today. Read more...