NEW YORK — The legal market has undoubtedly changed over the past decade, and nowhere is that clearer than in the area of billing and pricing. The downward pricing pressure that clients have enacted on their outside law firms has been ever-present since the end of the Great Recession. Unfortunately, that pressure has resulted in less than half of law firms making significant changes to their pricing models.
At the VANTAGE Executive Summit, part of the VANTAGE Worldwide Conference, being held this week in New York City, the topic of how best to conceive and execute winning pricing strategies was discussed in depth by a panel of pricing experts from law firms and corporate legal departments, offering attendees insight from both sides of the table. One panelist, Jeffrey Connor, Chief Financial Officer at McGuireWoods, spoke with Legal Executive Institute about the panel and the conference and what pricing strategies are working best for law firms and their clients.
Legal Executive Institute: Looking at some of the planned sessions at the VANTAGE Executive Summit and the conference as a whole, you see the concepts of innovation, pricing and technology are at the forefront. Why do these ideas reverberate with legal executives so much today?
Jeffrey Connor: That’s a good question. I think for some there’s probably a bit of frustration because it’s blurring on repetitive, but I think that’s so because we’re not reaching a point in relationships or technology with clients or internally where we don’t have to talk about it anymore.
I think talking about the concepts year after year and in sessions like this with clients and with law firm executives, helps find that level of communication where we can make meaningful progress. For the last five to seven years, I think we’ve been dancing around each other. We need to have sessions like this to make a leap and find that level of communication where we can really make progress.
From the law firm’s perspective, I think what is most important is the continued focus on understanding what you do well, how you can manage engagements efficiently, and then how you build desired skillsets among your different lawyer groups.
Legal Executive Institute: Part of law firms’ focus on pricing has led many to invest heavily in various strategies, like developing alternative pricing options to meet these new pressures that they’re feeling. How do you see the success rate of that focus, and how law firms are looking at it today?
Jeffrey Connor: From the law firm’s perspective, I think what is most important is the continued focus on understanding what you do well, how you can manage engagements efficiently, and then how you build desired skillsets among your different lawyer groups.
Firms have to continue to focus on the composition of their timekeeper pool; and how they’re structuring their firm to deliver efficiently on work that it’s good at, so the firm can make a healthy and growing profit while still delivering cost-efficiency to the client. I think in addition to technology changes and ideas around knowledge management, those firms who yet haven’t taken a really good look at the makeup of their timekeeper pool, should make that a priority.
Legal Executive Institute: Firms have moved into areas like pricing specialist staffing or investments in project management and technology to try to compete and bring value to clients. Do you see one of those strategies as clearly superior to the others, or is there a mix that’s vital to have?
Jeffrey Connor: As with most things at law firms, there isn’t one size that fits all. Each winning strategy probably has to have two or three things in the mix.
I think project management strategies — whether it’s in the form of training that you give to your lawyers to run their own engagements or whether you insert professional project managers into a deal team, litigation team or client team — can range from the logical and easy to the pretty aggressive. I think some firms have been successful at taking the more aggressive route, but some have shied away from doing it because it gets a little too much into the heart of the practice of law.
And unfortunately, some firms aren’t ready to embrace fully that the legal practice is every bit of a true business enterprise.
Legal Executive Institute: I think that may be true in some cases. What else is important to a pricing strategy?
I also think the concept of legal project management and how it’s deployed can be a little different, but you must have it. I think firms that are not tracking their time in a more granular way in terms of a phase- or a task-code on each time entry, are missing essential building blocks of understanding how long it takes them to do something, and therefore how to price properly.
A lot of firms have begrudgingly done phase- and task-codes because the client makes them do it, while some firms — McGuireWoods being one — track task-codes on all time entries for internal purposes whether the client requires it or not. We feel that’s an essential building block to understanding how long it takes us to do the kind of quality work we do. We can’t price well if we don’t actually know how long it takes us to deliver results to the client.
Legal Executive Institute: That makes sense. Are there other ingredients important in this mix?
The last piece that you clearly need to have is top-down support. A lot of large and midsize law firms have gone out and hired somebody and said, “Okay, you’re the pricing person. Go make this work.” However, if that person is out on an island, it’s not going to go well.
Pricing strategies and the tactics to execute on them really have to be communicated as a firm priority. Whether a firm chooses to “blame” clients for “making” them do it, or whether you’re doing it with strong face-forward confidence that this is where your firm should go, or some combination of that, firm management all the way down through practice leaders simply has to demonstrate their commitment through actions and attitudes.
At a bare minimum, they must not be impediments…but you’d sure like them to be cheerleaders.