I’m a cynic, so usually read industry reports published by industry providers with a huge pinch of salt, but every now and then you get an exception to the rule. So is the case with BigHand’s recently published ‘The Legal Pricing & Budgeting Report’, which is full of really insightful information (so read it!).
Here are my 10 take-outs (NA = North America and UK = UK):-
From
The damning:
1.
To the surprising:
2.
3.
To some obvious:
4.
5.
And some knowns:
6.
7.
With a few, “What the?” (as in, only…)
8.
9.
With a great conclusion:
10.
As I said, as a rule I don’t recommended reading these types of reports as they typically are a waste of time; but this is one I have no problem saying “go read it!” – and if you have any thoughts/comments, post them in the comments section below!
The goal isn’t to find people who have already decided that they urgently want to go where you are going. The goal is to find a community of people that desire to be in sync and who have a bias in favor of the action you want them to take.
In around 2009 I recall reading Seth Godin’s, then recently published, blockbuster ‘Tribes: We Need You to Lead Us‘ and thinking this would have a profound impact on the way clients engage law firms. To give this thought some context, it was around the same time as we had started talking about a new fad called ‘unbundled legal services‘ (which would later also become known as ‘limited scope representation‘ – see ‘The great unbundling of legal work‘ in the Australian Financial Review). It was also a time when ‘disaggregation‘ and the rise of Legal Process Outsourcing (LPOs) (predominately in India at that time but later this would extend to South East Asia and South Asia) would have many of us who worked on bids and tenders discussing issues around disruption of the legal services supply chain – if for no other reason than clients were asking us to provide answers to these questions in their requests for tenders.
A cold wind, amounting to real structural change, in the way clients purchased their legal services was coming (Pfizer Legal Alliance).
THE ‘NEW NORMAL 1.0’
Fast forward a decade and probably the only person who still talks to me about Seth’s Tribes is my good friend Julian Summerhayes, and it is never within the context of an RFT or legal services more broadly.
Nope, in short tribes, disaggregation and unbundling, while definitely remaining vogue, never really had the impact and penetration that I – and I would suggest many others – thought they would.
The ‘New Normal 1.0’ had, to all practical purposes, failed.
KRYPTONITE TO THE ‘NEW NORMAL’ – TEAMS
Probably the biggest obstacle to the growth of tribes post 2009 has been the role that teams have historically played within the legal profession.
Since the times of Dickens a junior apprentice lawyer has worked with, and been mentored by, their senior (supervising) partner. It has always been thus, and with it has come an almost umbilical cord tie between lawyers who have worked in the same team.
Many an in-house General Counsel has sat at the foot of the table of the private practice partner to whom they send instructions. A relationship that has been forged within the confines of a team structure.
TRIBES REBOOTED – TRIBES 2.0
It’s my opinion that one of the biggest likely outcomes COVID-19 will have on the profession is the re-emergence of tribes – tribes 2.0!
There are a number of reasons why I think this might be the case, but probably the biggest is that in-house counsel have, over the past three months, become used to working with remote teams.
It should not, then, be too far removed to say that in-house counsel will be happy working with subject matter experts across firms who can enable them to achieve their objectives rather than with an individual firm that might get them across the line.
In short, on the right deal, in-house counsel will be happy to work with a group of lawyers from various law firms rather than one firm – a tribe over a team.
THE CHALLENGES
Moving from teams to tribes is not a foregone conclusion, it faces challenges.
High among these will be:
How is risk allocated?
Who wears the professional indemnity risk?
My own view is that these can be overcome with:
properly scoped Engagement Letters
proper use of Legal Project Management
a good understanding of Workflow Process Methodology
But that still leaves the issue: How do we price the ‘New Normal 2.0’?
HOW TO PRICE THE ‘NEW NORMAL 2.0’?
The cynic in me says that many law firms will not have the first idea how to price the New Normal 2.0. This presents a significant problem because if they cannot price it, then they cannot sell it (pricing still remains the principal form of credentialisation despite, or rather because of, whatever experience you claim to have).
ONE ANSWER – THE ROLE OF SCOPE PRICING IN THE ‘NEW NORMAL 2.0’
Scope pricing will play a critical role in the pricing in the ‘New Normal 2.0’.
Unlike a fixed fee, capped or fee estimate pricing, scope pricing does it exactly what it says on the tin – it prices to the scope of work being undertaken by the relevant lawyer. This means that proper use of scope pricing should allow in-house to teams to unbundle the legal work within their project – either between the role the in-house plays and the role the private practice firm plays; or, in the case of this post, the role that multiple lawyers with subject matter expertise from various firms play in a project.
And, if done properly, the biggest upside to scope pricing over any other type of pricing of legal services is that, by definition, there really shouldn’t be any scope creep – what you see [in the tin] is what you get!
Came across the bones of a really interesting game you can play with your deal team at your next after action deal debrief/lessons learnt meeting.
Handout a piece of paper to each of your deal team members and ask them to rank, in order of priority, the top 5 reasons – from the following list – why the customer is happy to pay your fees in full (no discounts/write-offs, etc allowed):
Demonstrated an understanding of the customer’s business/industry throughout the deal
Demonstrated an understanding of relevant law
Responsiveness to customer’s requests – phone/email/meetings
Built good rapport and a trusting relationship during the deal (was in the trenches with the customer)
Used expertise to help save the customer money (either on the deal or fees)
Used Legal Project Management techniques to stay within the deal scope and didn’t allow scope creep without first taking to the customers
Used technology, AI, Legal Process Outsourcing and value adds to make the customer’s life easier during the deal
Offered the customer a great discount
Hourly rate was attractive to the customer
Any other reason(s)
Remember, they can only pick 5. And they need to be in order of priority.
I would love to hear feedback on which five were the most popular chosen.
I’ve been ‘white-boarding’ legal matters since my days helping out on front-end major projects back in 1996; so the concept of ‘mapping out’ how a transaction might progress, what may be ‘in scope’ and ‘out of scope’, the approximate amount of time the transaction may take and how we are going to resource it are not new to me. In more recent times (largely following the GFC in 2008) the legal industry has formalised my approach of ’white-boarding’ matters to become Legal Project Management.
While I was never really that sure over the years how Legal Project Management differed from the more general Project Management, I have been assured – on numerous occasions – that there is a difference. When asked how, the most common response I received was that:-
Legal Project Management is the discipline of project managing ‘tacit knowledge’ – as ‘knowledge workers’, while
Project Management is the discipline of project managing tangible products, e.g., the construction of a hospital.
And until the last month or so I thought that was a pretty good answer.
So what changed?
Well, in the last month and a bit I have attended a collective 5 day (2 day and then a 3 day) course on Project Management Fundamentals run by PM-Partners Group here in Sydney.
The two day Fundamentals (essentially, theory) session was outstanding and broken-down into the following nine (9) modules:
What makes projects succeed (and by implication, fail)
The essential project management philosophy
The project life cycle
Project planning – project definition and scoping
Project planning – creating the WBS & schedule
Project planning – estimating
Project risk
Project execution & control
Project closure
In turn, if you were on a course where you learnt all about:
scope creep
the difference between what a risk is and what an issue is (hint, one has happened and the other hasn’t)
how to do a business case and a project plan
the triangle of scope, cost, time and quality
the four dependency types [finish-start; start-start; finish-finish; and start-finish], and
you get to work on creating a Work Breakdown Structure and Estimating (Optimistic, Pessimistic and Most Likely – also looking at the Cone of Uncertainty)
Wouldn’t you think you had been on one of the best Legal Project Management training courses around?
Well, that’s exactly what the two day PM-Partners run Project Management Fundamentals course taught me and I have walked away from that course thinking to myself that you can keep the classify ‘Legal’, at the end of the day it’s project management and it’s this type of project management we need to get better at.
My biggest take-out though?
Understanding the difference between a risk and an issue, because anyone doing pricing should get their head around this because it really is as important (and probably goes hand-in-hand with) as what happens with scope creep [helpful extra tip: want to understand scope creep, look up what happens with the formula: n (n – 1) /2].
Get in touch if you want to hear/find out more, otherwise get yourself on a really good PM Fundamentals course because I can guarantee it will pay for itself!
“The growth of AFAs has been much slower than many predicted, remaining at roughly 16% of revenue in 2015…
… Most of the resistance has come from clients who are not comfortable with what law firms have proposed as AFAs, and would rather stay with hourly rates and discounting.”
I completely understanding why clients feel frustrated with the so-called Alternative Fee Arrangements (AFAs) that law firms often propose to them and are pushing back on these. Whenever you discuss AFAs with law firms, all you tend to hear is talk of ‘fixed fees’, ‘capped fees’, ‘success fees’, ‘risk collars’ and other such loft terms, more often than not being held as if they were innovative disruptors in the way we price legal services when the reality is 99.9% of them have the billable hour underpinning them and have been on the pricing menu for more than two decades. So why shouldn’t clients just go with a standard billable hour and get a 10% discount at the end of the matter – much simpler and proven route (and, as a side note, interesting to see the report continues to show realization rates on the slide!).
No, as a profession, the time has come to accept that if we want to be real about offering clients alternatives to the billable hour then we must get on the front foot and become more creative about what we are offering them. And the best, and possibly only, way we will achieve this is if we start to have conversations with our clients about this.
And herein lies both a solution and a way forward!
Given this was a survey of 429 attorneys and operational professionals working in corporate legal departments by Thomson Reuters, you would think it would be a good indicator of in-house aptitude (side note: notice only 1% mention Reverse auctions? Definitely not reflective of the noise being made in the market around these!)?
Anyhow, here’s a Holidays thought for those law firms looking for alternatives to the billable hour that might actually (a) pay them some money, and (b) have the support of their clients:
go and speak to your client about use of budgets for matters.
After all, surely all those pricing directors, legal project managers, process improvement directors, innovation officers, etc talk with each other every now and then and come up with something helpful and original along these lines!
There’s a lot to like about Kiron’s post, and many things in it really resonated with me from a business development perspective, but what I really want to share with you though is this brilliant piece of commentary by Kiron:
“As it is with jewelry, on projects gold-plating is all form with no substance. The increase in costs is rarely justified by the value provided by superficial “bling”.
It could be an analyst adding in requirements which they came up with on their own without ensuring that those are actually required, a developer who introduces a code change or feature they believe is useful without checking with others or a quality control specialist who decides to test above and beyond approved test plans.
Don’t get me wrong – the intentions are usually good and I’ve yet to encounter an instance of gold-plating which was done maliciously. But it doesn’t matter – gold-plating is work creep.”
and ask: “Does any of this sound familiar to you?”
Because I’m guessing that if you are being honest with yourself, it does. And trust me, there’s no quicker death nail in a client relationship than scope creep.
Law firms have had, for some time now, a Client Account Manager support role within their Business Development and Marketing teams. Typically reporting to the Head of Business Development and the Client Relationship Partner, these roles have historically been focussed around a number of “key” client programs (aka Key Account Management programs or “KAM”) and can also be sector specific – for example, financial services, energy and resources and government. In the larger firms, the Client Account Manager may be required to look after up to three to four large client accounts, but normally the role is inward looking with little (in real terms) direct interaction with the client themselves (although in some cases you do find the law firm CAM and support personnel at the client talking to each other regularly).
There is little doubt these roles have served a significant purpose. One could even go so far as to say they have increased cross pollination (cross selling) among practice groups significantly. But, in these changing times, with law firms having significantly increased their investment in Client Relationship Management (CRM) tools and software, the following question does need to be asked:
is it now time to move on from the Client Account Manager role?
I recently watched an interesting video (27 minutes and 2 seconds) of a panel discussion filmed at the Briefing Operational Leaders In Legal 2014 conference (November 2014) that talked about, among other things, “client-facing account managers and better management information“.
Moderated by Julia Chain of JSC Associates, the panel included Jonathan Beak (chief counsel – legal, UK and Ireland, Thomson Reuters), Sarah Spooner (head of legal, Vodafone), Angela Williams (head of legal, global cash management and debt advisory, Barclays) and David Symonds (VP, regional general counsel EMEA, Tyco International).
The whole discussion is extremely informative and if you are a business developer looking for insight into how the leaders of some of the biggest in-house teams out there think, then you should watch it.
But, for the purposes of this post the most crucial part is the commentary by David Symonds who, discussing why Tyco appointed the law firm Eversheds as sole legal provider (in the now famous annual fixed fee arrangement tender), states that Tyco instigated what he calls certain grounds rules with Eversheds, including that only one lawyer acted for them and that the work was carried out at the appropriate level depending on what the matter is.
Nothing ground-breaking there. Until you get to 11 minutes and 53 seconds into the video. Here a general discussion is going on among the panel about what law firms do (or need to do) to differentiate themselves (the Holy Grail) and Symonds states that Eversheds were the only firm to offer a full time dedicated Project Manager to manage Tyco’s caseload.
Now this really is big news, because it cannot be long now before the rest of the international firms follow suit (Clifford Chance and Linklaters are already being mooted as implementing legal project manager roles later this year and, in addition to Eversheds, Hogan Lovells and Freshfields Bruckhaus Deringer are understood to already have these roles in place).
So, what can we expect from a Client Project Manager?
According to The Lawyer article:
HSF project managers will work with project teams and be involved in pricing negotiations with clients as well as providing coaching to partners on efficiency and best practice when managing complex cases.
which doesn’t sound all that different to the Client Account Manager role.
But, according to the team at The Project Management Hut, in addition to monitoring client matters against acceptable outcomes and strategy to ensure the relationship produces substantial benefits to both side, your typical Client Project Manager should also provide your law firm with the following five (5) sources of competitive advantage:
a better client service
better time management
better people management and supervision skills
better profitability, through project management (LPM) and process improvements (LPO), and
provide the team with client-based business thinking.
and it is #3 and #4 in that list that law firms really could benefit from.
Now all we need to decide is: do these roles sit in the finance department, the practice groups, or marketing and business development?
Fascinating blog post over on the pmhut.com website recently (30 April 2015) by Terry Bunio, Principal Consultant at Protegra, on “Why I Like Estimates” that should be add to the “must read” list of every lawyer and law firm business developer who hasn’t already read it and adopted its principles.
Some of the things that Terry sets out that really resonated with me in this post included:
Estimates make me think through a solution
“When I estimate I am forced to examine project details and technology and think through the deliverables at a detail level and how we would build them. This helps to identify issues early and give the team and client lead time to decide on a resolution. When you discover issues late in the game, your options are limited and client anger usually follows.”
Precisely the same reason why lawyers should be doing cost estimates before agreeing to undertake a matter. It makes you think through what the issue(s) is/are, how you are going to deliver the desired result to the client and what sort of resourcing you’ll need. You should also be able to determine at this time what you cannot deliver to the client.
Estimates create a shared understanding
“…the discussions that occur while estimating are invaluable. These discussions create a shared understanding throughout the entire team.”
Terry is absolutely spot on here. It should also allow you to assign what work the firm will do, and what work will be outsourced (to an LPO) or insourced (to the in-house team). It sets out a task management process from the offset and reduces the risk of scope creep or out of service work being done. QED, if you follow this process at the end of the day you are much less likely to have an upset client.
Estimates allow Clients to allocate post Minimum Viable Product budget to other initiatives
“Clients are not going to reserve large budgets just in case an Information Technology project needs it. Clients have a very limited budget and there are always more initiatives than budget. Allowing clients just to stop projects at any point does not recognize the lost opportunity cost by not starting additional initiatives that could have placed them ahead of their competitors.
Again Terry is right. While lawyers rarely want to get their hands dirty talking money upfront on a matter, it should be kept in mind that money is a limited resource to your client (as it is to your firm) and every dollar your client spends with you is an opportunity cost to the client’s business – vis-a-vis that dollar being spent elsewhere. It should therefore be incumbent upon you not only to ensure that your client understands how much they will likely be required to pay for the matter but also for you to reduce any likelihood of your firm either having to write down time or simply not be paid for out of scope work done by your team.
In short, as Terry writes: “Estimates matter” and going through a robust matter cost estimate process with your client before any instruction to act on a matter should be recommended and adopted as best practice by all lawyers.
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