pricing

Game: ‘Questions to ask your deal team about why your customer is happy to pay your fee?’

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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):
  1. Demonstrated an understanding of the customer’s business/industry throughout the deal
  2. Demonstrated an understanding of relevant law
  3. Responsiveness to customer’s requests – phone/email/meetings
  4. Built good rapport and a trusting relationship during the deal (was in the trenches with the customer)
  5. Used expertise to help save the customer money (either on the deal or fees)
  6. Used Legal Project Management techniques to stay within the deal scope and didn’t allow scope creep without first taking to the customers
  7. Used technology, AI, Legal Process Outsourcing and value adds to make the customer’s life easier during the deal
  8. Offered the customer a great discount
  9. Hourly rate was attractive to the customer
  10. 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.

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What is the biggest pricing problem law firms are facing today?

This week’s episode of the Impact Pricing podcast (episode 20 – ‘Mastering SaaS Pricing: How to Price and Package Your Service’) sees host Mark Stiving talking with Kyle Poyar, Vice President for Market Strategy at OpenView. By their own admission, Mark and Kyle geek-out over SaaS pricing theory and its KPIs, so this podcast is not for everyone.

What is interesting, however, is the response Kylie gives to a question Mark asks at the 23 minute 37 second mark.

Mark’s question:

What do you see as the biggest pricing problem that subscription companies are having today?

Kylie’s response:

…structurally speaking, companies are not spending enough time on pricing, they don’t take a scientific or rigorous enough approach to optimising their pricing and testing it and collecting data on it. And we have gotten smart about just about everything in technology and if you look at the level of sophistication of the operations of a technology company it’s like just so different from where we were a few years ago. But pricing hasn’t really changed and I’ve just started to hear of companies that are trying to bring on pricing talent and make their first dedicated pricing hire and have that happen earlier in their lifecycle; but then those companies are having trouble figuring out what’s the right profile to hire for, who is going to do a good job in this role, and then finding that talent and so I think like, structurally, their biggest challenge is just lack of great pricing skills…

In my opinion, that sums up pretty well the pricing problem that we have in law firms:- we’re in such a rush to show everyone how serious we are about the pricing issue/problem facing the industry (as in, alternatives to the billable hour, project management, process improvement etc), that we have hired Heads of Pricing by the boat loads, but a niggling issue remains – industry report after industry report that has sought feedback from clients indicates (some might even say, shows) that we haven’t gotten all that much more sophisticated or even better about how we price. If that’s the case, we have to ask: is there just a lack of great pricing skills in the industry?

As always, interested in your thoughts/views/feedback.

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NB: please ignore all comments Kylie makes about volume discounts prior to his comments above, as regular readers will know I don’t hold with those views!

“A lawyer’s time is the only commodity that we have to sell”

Earlier today I listened to a podcast on respected legal technologist expert/journalist/speaker Ari Kaplan’s Reinventing Professionals from May 2, 2019 in which he spoke with Josh Taylor, an attorney and the lead content strategist at Smokeball, a practice management software platform that started out life here in Australia and now appears to be mainly located in Chicago (although retains a presence in Sydney and Melbourne).

The first seven minutes (out of nine) I was entertained and thought were good.  But two minutes and twelve seconds from the end Ari throws out his last question (my transcript follows so sorry for any errors) to Josh:

Where do you see the use of technology in solo practices and small firms headed?

And Josh responds:

One thing that we struggle with so much, and I have saved it to the end here Ari instead of mentioning it as a pain-point upfront, the main part of the small law practice that we see people failing at day after day is accurately tracking their time and either on the the extreme cheating a client by over estimating, which is very rare, more likely and more often we see small law firms cheating themselves by under valuing every minute they have; when I go around speaking to bar associations around the country I always say “you know a lawyer’s time is the only commodity that we have to sell, we don’t make a thousand widgets in a minute that we can then sell for the same price, we have minutes in a day that is the only thing that we can sell out to our clients” because we cannot double bill people so to value and track time accurately I think is where legal tech is going to start leading the way…

Leaving aside the whole time-based billing versus value-based billing discussion, even if you only believe in time-based billing (cost-plus or however that looks) and never want to entertain the notion of any kind of alternative pricing method, to say:

a lawyer’s time is the only commodity that we have to sell

is so far removed from reality it’s not funny.

What a lawyer’s ‘commodity’ is, is the knowledge they have acquired, the experience they acquired to be able to apply that knowledge to the situation their client is facing, and the insight to do this in a valuable and respectable way.

Regardless of how you bill – as a lawyer that is the only commodity you have to sell.

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Want to know how Microsoft’s legal team measure value?

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Value” – specially how we create and communicate it – is probably the hottest issue in legal pricing at the moment. So how much would you pay to find out how Microsoft’s legal team measure value?

If you’re smart – nothing.

Instead you will listen in to the ‘Business of Law Podcast‘ where Karen Kepler (Law Procurement Manager at Cargill) talks with Rebecca Benavides (Director of Legal Business at Microsoft Corporation) and Jason Barnwell (Assistant General Counsel of Legal Business, Operations, and Strategy at Microsoft Corporation) about the process of designing and building an outside counsel panel.

And after you have listened to the podcast (around 40 minutes of your time), download the show notes and take a look at the 4 page slide pack on ‘CELA Law Firm Engagement: Strategic Partner Selection Process‘ – because you’ll then be able to recognise where the image at the top of this post comes from.

Big lesson learnt here: Our clients want to talk to us about this, but are we really willing to listen?

As always interested in your thoughts, views, feedback.

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Survey: The 5 Biggest Challenges Facing Australian Law Firms in 2019

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Happy New Year and Welcome to 2019!

The recent (December 2018) Commonwealth Bank ‘Professional Services’ report highlights five challenges law firms in Australia are likely to experience further pressure on in 2019, which are:

  1. ‘Clients demanding more for less’
  2. ‘Downward pressure on fees’
  3. ‘Willingness to switch firms’
  4. ‘Clients in-housing work’
  5. ‘Clients directly using legal process and services outsourcing ‘

Each of these has it merits, while none is particularly new. So let’s take a quick look at each and assess them on their merit.

The call for ‘more for less’

It’s true, the call for ‘more for less’ continues. But I believe we may be misinterpreting the call a little here between what in-house really want (see Ann Klee, VP of Global Operations — Environment, Health & Safety, at General Electric Company – ‘less for less’) and what law firms believe they should be providing – a Rolls Royce service for a Toyota price tag.

My take: Neither client nor law firm are currently getting what they want and the net result is that nobody is happy with the relationship. Law firms need to get a better understanding of what is being asked of them. Scoping work properly – by experts – and then the subsequent professional project management of that is where the greatest return can come from here.

‘Downward pressure on fees’

Admission time!!:-

“I have never really understood the ‘downward pressure on fees’ argument”

Why?

Because, in order to be putting downward pressure on fees, surely you need to know upfront what that fee is – right?

However, if what you are saying is that this is actually a downward pressure on hourly rates argument, then I get where you are coming from.

But this is not the same thing as a downward pressure on fees argument, because there is little doubt in my mind that clients are willing to pay a premium on fees when the value of those fees have been fully explained and justified.

My take: despite the rhetoric, law firms still have a long way to go in understanding what in-house General Counsel are actually saying when they say “no surprises” on fee issues. And here’s a working reason why:- because while the GC can talk to legal issues the company faces, it’s the CFO who is responsible for explaining costs; and in more Australian companies than not, the GC reports to the CFO. A lesson in that for most private practice firms here.

A ‘Willingness to switch firms’

I often laugh when I see this one, because, really, ask yourself this: if most of your partners and lawyers are willing to switch to another firm, why shouldn’t your clients?

My take: if you want client stickiness, why not start with re-engaging with your own staff and get loyalty in your firm brand (something that hasn’t really happened since 2008 in Oz). Because while attrition will never be zero, if you can get your own staff on board as brand advocates you may find it a lot easier to convince your clients to hang-around.

‘Client in-housing work’

Without a doubt the biggest change in my working life has been the increase in in-house practitioners. A career in-house is now a very viable option for someone leaving university, something that was never even thought of in my day!

My take: the biggest competitors most law firms are not other law firms. It’s not even the #Big4. Don’t get me wrong, these are competitors, but nothing compared to the CFO of your major client working out its cheaper to hire a new lawyer in-house than pay your fees (see here for more on my views on your in-house competitors).

‘Clients directly using legal process and services outsourcing’

Not 100% sure what is meant by ‘outsourcing’ here. If this includes ‘on-shoring’, then I agree it’s a real threat.

My take: law firms in Australia will face a number of challenges over the next 12 to 24 months. Outsourcing, on-shoring will be among them, but I’m not sure I give them the same weight as the Commonwealth Bank Report does.

Some of the other issues I believe law firms here need to be aware of include further consolidation of the market (it remains too big for such a small market), staff retention issues, profit squeezes, technology and process improvements (and how, through change management champions, these are being handled within law firms because currently we are failing badly).

And finally, some 750 words into this post, we can mention the “innovation” word 🙂 .

Anyhow, guess you get the gist of where I am going with these so best of luck for 2019!

As always, would be interested in your views.

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My comments on today’s Lawyers Weekly article: ‘Observations on NewLaw in Australia in 2018’

Today (28 December 2018), Lawyers Weekly in Australia published an article by Lachlan McKnight, CEO of LegalVision in which Lachlan comments on his ‘Observations on NewLaw in Australia in 2018‘.  At the outset I should state that I don’t know Lachlan, and this post is no way directed at him, but is just a numbered-point muse on the interesting observations he makes in his article.

  1. ‘NewLaw’ (which is as meaningless a term as ‘Mid-tier’) is now an ‘industry’ – now that’s interesting.
  2. Agree with Lachlan’s comment in #1.
  3. While I agree with Lachlan’s comments in #2, I also believe the attitude here is changing within the more ProgressiveLaw firms. ProgressiveLaw firms realise that with greater risk (which fixed fees actually are), there should be a premium (much as there is with any insurance premium). EvolutionaryLaw firms go one step further and start to have a conversation about ‘value’ pricing.
  4. Three is an interesting comment: aren’t LegalVision in part owned by G&T  – as an aside (re #3 above), didn’t Danny Gilbert recently state that he thinks that clients don’t want move away from the #BillableHour?. Nevertheless, I agree with a lot of what Lachlan says in #3 but would probably set the bar at $75 million (we still only have a population of 25 million and IBISWorld still only puts the WHOLE legal industry revenue in Australia at $20bn [NB: the top 30 law firms in Australia make over $50m a year – in an industry this small!]).
  5. I would totally disagree with Lachlan’s comments in 4 and in my opinion you only need to look at the stuff MinterEllison and KWM are doing (with whom I have no association) to see this point – to me – is misplaced. In fact I would go 180 and say many BigLaw firms are going through their Arthur Andersen/Accenture moment (the original ‘child eat parent’?).
  6. The biggest challenge NewLaw (and Mid-tier law if such a thing exists) has to #5 isn’t OldLaw, it’s the #Big4.
  7. Number 6 is a point I have tried raising several times this year – scale. Law (Old and New) see ‘scale’ as being bodies (in part because of time-based billing). If it ever was it not longer is and any law firm, new or old, that get’s the right answer to scale will have a point of difference and in such a competitive market this is crucial. The reality is that potentially the biggest winners here should be the so-called Mid-tier (who have a lot of the grey haired industry knowledge without, currently, the scale – but I fear they have missed the boat because of lack of investment).
  8. For #7, see my comment in #3 re G&T.

As always, would be interested in your views.

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Okay you can keep the ‘Legal’ tag; but it’s just Project Management!

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:

  1. What makes projects succeed (and by implication, fail)
  2. The essential project management philosophy
  3. The project life cycle
  4. Project planning – project definition and scoping
  5. Project planning – creating the WBS & schedule
  6. Project planning – estimating
  7. Project risk
  8. Project execution & control
  9. 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!

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