During the first week of January, I was fortunate enough to be invited to attend the True Value Partnering Institute’s (TVPI) annual meeting in Miami. Being able to spend even a small part of the winter in Miami rather than Minneapolis should have been reward enough, but the best part of the trip was the caliber of the discussions I was able to participate in.
TVPI bills itself as “the definitive legal pricing and project management community.” Members are all high-level, active pricing and project management professionals from law firms and corporate law departments. Which means when they get together, the discussions are not rudimentary.
One of the first orders of business was to brainstorm the list of issues to address. It was not a short list.
Some law firms are quite refined in their approach to pricing of legal services, as are some clients. But the discipline as a whole is still very much in its juvenile stages. Law firms struggle with how to best communicate value. Clients struggle to understand how they prefer to see matters priced. Both sides face challenges in understanding exactly what the client expects to receive. Creating these disciplines requires the development of new skill sets within the legal industry, straining traditional models and making recruiting difficult.
One of the first issues raised by the group was how to work with partners and clients to better communicate about pricing. In my mind, this is largely a matter of training and expectations.
Prepping Lawyers for “The Pricing Talk”
I’m born and raised in the upper Midwest where it’s considered bad form to talk about money, whether it’s how much you make or how much something costs. We go to great lengths to avoid the subject. It surprises me how pervasive this same attitude is in the legal profession. According to the 2018 Law Firms in Transition survey from Altman Weil, nearly 96% of respondents believe that greater price competition will be a permanent feature of the legal market. About 85% of respondents are attempting to address this change by proactively initiating conversations about pricing and budgets. That is a good start.
Where the problem comes in, however, is in how the lawyers are being prepped for these conversations. Only 39% of respondents to the same survey said that they were training their lawyers to talk with clients about pricing — that is a massive disconnect. And while the numbers have changed slightly, this general trend has been present for a number of years in this survey.
Imagine a slightly different scenario. We all know that depositions are a fact of life for attorneys, and we’d get 100% agreement that they are a permanent part of the practice of law. Now imagine if less than 40% of law firms said they were actively training their attorneys in how to conduct a deposition, leaving the majority of their lawyers having to make do with their own trial and error experiences.
Clearly no law firm would do this. And yet, we routinely send lawyers — professionals for whom it is a mantra to never ask a question to which they don’t know the answer — out to discuss pricing for matters without giving them the proper background in why the prices look the way they do or how they should approach the client on the subject.
If a lawyer is properly prepped for these kinds of conversations, the benefits will also manifest themselves elsewhere, beyond just the pricing sphere.
Getting Partners to the Table
The participants at the TVPI meeting identified challenges involved with getting partners to work to collect their fees. If the partner better understands what that fee represents and feels more comfortable defending it, they may be more likely to work harder to recover it.
There is also an argument to be made that better training around how to discuss pricing can also help attorneys have better conversations around what else the client values. I’m sure many people reading this post are familiar with the book Getting to Yes: Negotiating Agreement Without Giving In, which spends a good deal of time discussing the difference between an interest and a position. If the lawyer in a pricing negotiation is better equipped to understand both the firm’s position on price, as well as the interest underlying that position, they are also in a better position to begin to understand the client’s interests, rather than just hearing the client’s position on a cheaper price.
And finally, law firms need to not only provide the training, they need to communicate the expectation to lawyers that they will put pricing discussions into practice. Law firms have not pursued more robust pricing disciplines for their own sake; they do it because it drives better client relationships and better financial outcomes for the firm. Lawyers are notoriously autonomous. But if they understand the what and the why behind a given priority, they’re more likely to put it into practice.
There are more issues to address around pricing that deserve consideration on their own. If you haven’t already, subscribe to our weekly newsletter to make sure you don’t miss out on future content highlighting other solutions to improve law firm pricing.