JordanFurlong + pricing   500

SALI: Open legal industry standard formally launches | Legal IT Insider
As with any standard, SALI’s success or failure will depend upon adoption. “This new standard has the potential to bring forward many of legal procurement’s dreams about effectiveness and efficiency,” said Dr Silvia Hodges, CEO of Buying Legal Council, “Clients should quickly adopt the new standard and expect their firms to use it.”

The release follows the recent contribution by Bloomberg Law of several taxonomies to the SALI Alliance.  “Open legal standards like SALI are a critical component of providing transparency and accelerating innovation in the legal marketplace,” said Joe Breda, president of Bloomberg Law. “For this reason, Bloomberg Law is proud to not only serve as a member of SALI but to have contributed some of our proprietary taxonomy to the open standard.” Bloomberg Law has provided taxonomy codes for U.S. Governmental Bodies, U.S. federal statutes and international organizations.”

While much of the focus of SALI is currently in the US, the ambition is for the standard to be global.

“This draft of the standard is the collective work of many people and organizations. Notably, Bloomberg Law and the Free Law Foundation have made major contributions of codes for U.S. Governmental Bodies and U.S. Courts that are used in more than 5 million publicly available documents,” said Toby Brown, SALI Board president.

“The work SALI is doing to establish industry standards on matter types addresses two critical problems facing the legal industry: first our continuing quest for value-orientation and second, extreme inefficiency in the buying and selling of legal services,” said Jae Um, Director of Pricing Strategy at Baker McKenzie.
ops  standards  pricing 
10 weeks ago by JordanFurlong
Big Data May Be Making Portfolio Pricing Easier Than Ever | Legaltech News
First things first: Portfolio pricing is any kind of fee arrangement covering multiple matters, either under a retainer or a deal that assigns one fee per matter for every single matter that comes through the portfolio.

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So why bother? If you’re a corporate legal department dealing with a high volume of matters, chances are that you’d rather receive four bills over the course of the year than 1,200.

“It frees up our attorneys; it frees up our staff to do more strategic things,” said Alan Bryan.

For some clients, the portfolio pricing approach also can lend some much needed clarity regarding the annual budget. Negotiating the bulk of your matters under a single portfolio provides more predictability around the chances of hitting a targeted number at the end of the year than negotiating projects one by one.

If you don’t anticipate having a bulk of matters, then it’s possible that portfolio pricing isn’t the right option.

“There’s a point where you need a certain amount of volume to make this work on both sides,” Bryan said.

The demand for volume doesn’t just apply to the work involved. In order for both parties to ensure that a portfolio pricing deal is the right fit, they should ideally be sharing data that shows some consistency over the type of matters a company deals with year over year and how those costs might shape up on the law firm side.

Matthew Beekhuizen, chief pricing officer at Greenberg Traurig, said his firm typically tries to look at three years of history for a particular client. Some companies don’t maintain enough data themselves to paint a very robust picture, but assuming they have been involved with the firm for some time, that history can help fill in the gaps.

“The good part about hourly billing is we do have a lot of data that we can work with,” said Beekhuizen.

Firms can build upon this information to prepare for the work at hand, which in some cases includes going out and hiring new staff members to make sure that they can accommodate the demands of the matters they’ll be working on over the course of the portfolio agreement.
pricing 
may 2019 by JordanFurlong
Do Minimum Hourly Billing Requirements Lead to Overbilling? | Legaltech News
Minimum Hours Aren’t So Minimal
Yale Law School estimates meeting an annual billing requirement of 2,200 hours would require being “at work” 59 hours per week. This assumes that those 59 hours do not include taking personal calls, setting aside time to learn new software or business processes, improving those business processes, or doing unbillable pro bono work. Also, the above calculations do not include time spent flying to business meetings or your daily commute which, in many markets, is often over an hour each way.

In addition to being unrealistic, there’s a real question of how beneficial it is to work 2,200 hours a year. In fact, research suggests that they could actually hinder, rather than inspire, productivity and a positive work ethic. For example, survey data from legal consultancy Altman Weil indicates that the minimum billables at most firms are unrealistic enough that almost 50 percent of law firms fail to meet annual targets.  Other research indicates that “employees who feel compelled by ‘supervisory demands’ to exhibit the admirable qualities of a team player” come to feel that their sacrifices entitle them to act poorly later on.

In other words, requiring associates to bill 2,200 hours per year means putting them in exactly the kind of situation where they would be tempted to overbill for their services—something Harvard Business School concurred with in a 2016 study. For example, some attorneys may be inclined to “round up” their time to the nearest hour or half hour. They may even find it justifiable, at least in their own minds.
pricing  compensation 
april 2019 by JordanFurlong
The International Legal Pricing Academy | Legal Business World | Home
International legal pricing experts Validatum® and the international trade organization for legal procurement, Buying Legal Council®, have announced a ‘game-changing collaboration’ with the launch of the New York and London headquartered Legal Pricing Academy.

Responding to rapid growth in demand from law firms for senior professionals with demonstrated pricing knowledge, experience, and expertise, the Legal Pricing Academy offers three tiers of Legal Pricing qualification: Certified Legal Pricing Associate, Certified Legal Pricing Specialist, and Certified Legal Pricing Professional.

The professional development pathways will provide pricing, business development, finance and other professionals in law firms who are required to take a pricing leadership role in their firms, with frameworks for pricing innovation, pricing governance, academic and practical knowledge and skills, increased recognition of the importance and status of legal pricing professionals, and competitive employment advantage.
pricing 
march 2019 by JordanFurlong
Are Lawyers Ready to Be Managed by Metrics? | Legaltech News
But it likely wouldn’t stop there, the executive says. It is likely that, if such information existed, the company that owned it would serve as a marketplace for lawyers. It would match its knowledge of lawyers’ work and price history with clients’ desires.

“Take the Uber analysis and imagine ‘Lawber,’” the executive says. “That’s the way our clients will, in a few years from now, buy our legal services. They will say, ‘Here is my problem, and here are my levers: price, quality, safety.’ There is a mixture there that they can select, and then out comes a law firm or a legal team that is assigned the work.”

The executive suggests that consulting firms like the Big Four or billing technology providers are best positioned to serve this role in the market. The key is having a platform that has analyzed a vast enough swath of legal purchases and prices to set the market.
data  clients  firms  pricing  value  metrics 
february 2019 by JordanFurlong
Thomson Reuters Releases New Workflow Solution Panoramic With Law Firm Input | Legaltech News
The solution was designed to help firms to increase transparency and provide a more effective way to predict profitability, something that corporate clients are looking for as they aim to cut costs and do more with less.

“We know that clients continue to take more [work] in-house, and law firms across the globe for years have been forced to pivot towards efficiency more,” said Elisabet Hardy, vice president of financial and practice management at Thomson Reuters.
The initial release, scheduled for April 8, will target the United States and the United Kingdom, but Hardy said the company could explore other territories down the line. The product was built on top of Thomson Reuters’ financial management system 3E and received input from the law firms of LeClairRyan and K&L Gates during the development process.

Speaking of development, key to the architecture of the solution are “Matter Maps,” which break a given project down into phases and associated tasks. Practice areas that can be addressed in detail include corporate M&A, capital markets, litigation and finance.

Attorneys can use Panoramic to assign tasks to themselves or another lawyer, which come complete with due dates and billing codes. The nature or particulars of those assignments can then be adapted mid-process as the need arises.

Christopher Lange, an attorney at LeClairRyan and the liaison on the Panoramic project, said the solution can give lower-level attorneys a broader view (hence “Panoramic”) of a matter beyond the individual duties assigned to them. Clients will also be able to view in real-time how their projects are unfolding.

The ability to track that progress could be useful as corporations rethink the way their legal bills are calculated. Per Lange, clients are increasingly looking at other alternative fee arrangements to replace the traditional billable hours structure that has dominated the legal industry.

“And a law firm’s ability to both commit to the client to do that and then manage the work profitably is going to be a real key to success as we see the market moving more towards alternative fee arrangements and further away from only looking at rates times hours,” Lange said.
it  process  pricing 
february 2019 by JordanFurlong
Well hello, Project X! | Legal IT Insider
‘Panoramic’, as we now know the worst kept secret under the sun is called, has been designed to meet law firms’ complex needs on pricing; cost and process; project management; and knowledge and data. It leverages TR’s deep resources in everything from practice management to practice notes.

The brainchild of PLC editor David Rawson, Panoramic enables fee-earners to plan how a transaction or case will be resourced, how much it will cost and what it should be priced at.  Once those figures have been decided (the UI is impressive) the system will track and flag the impact of any changes down the line so that they can be revisited as a transaction or case twists and turns.

Created with heavy input and testing from law firms throughout its development, Panoramic includes brand new customisable matter maps created in conjunction with the PLC editorial team, which breaks down the stages it takes to execute a legal matter, with embedded guidance both in terms of practice notes and links to precedents – both PLC/TR’s and the firm’s own previous documents.

TR has invested a lot of time in creating out-of-the-box sequential matter map tiles, but firms can also switch tiles around and create their own maps from scratch.

Once a matter is planned, partners can assign tasks and there is a dashboard that gives them easy visibility into the projects currently on the go and where those projects sit against budget.

No wonder, then, that during our ahead-of-release demo, Elizabet Hardy, vice president of product management, told Legal IT Insider: “A lot of our clients, when they see Panoramic for the first time, say, ‘This is the holy grail’.”
it  process  pricing 
february 2019 by JordanFurlong
Big Law Should Raise Partner Billing Rates 10+ Percent Now | Law.com
The connection between delegation and partner billing rates isn’t entirely obvious but it’s real. Many partners recognize that much of the work they do is not true partner-level work. Hence, they are wary about charging full partner billing rates; but rather than delegating (as they should), they appease their conscience by shaving a little off their billing rates. Despite this back-pressure, the failure to delegate results in unnecessarily-increased client fees and also denies associates learning opportunities and disinclines partners from doing that which they should be doing, i.e. going out and finding more high-quality work. Raising partners’ billing rates assertively will push back on this dynamic, increase delegation, lower fees, and thus help stem the contraction in market demand.
On the issue of re-balancing where margin is generated, let’s again start with two observations. The first is that, over time, technology will continue to reduce the demand for junior lawyer time relative to that of senior lawyers. The second is that today’s billing rates generate higher margin on junior lawyer time than on senior lawyer time. To see this latter, take a look at the amount by which billing rates exceed compensation (converted to an hourly equivalent) by lawyer cohort. What you’ll find is that billing rates are 4.5 to 5.0 times compensation for junior associates and only 3.5 to 4.0 times compensation for senior associates and counsel. Again, linking the two observations: Big Law is on a path to see margins and profitability diminish as technology continues to erode the demand for junior lawyer time.

Big Law’s margin structure is befuddling. It is inverted relative to all other businesses—all others charge a higher mark up on their higher-value products—e.g. in the rag trade, the mark up on haute couture is much higher than that on prêt-à-porter (ready-to-wear). The inversion is the cumulative effect of many years of raising associate rates more than partner rates while being careful not to let senior associate and counsel rates come too close to junior partner rates. Clients are instinctively aware of the nonsense that associate billing rates have become; that’s why they say they see the value in partner billing rates but balk at the junior associate rates. The truly weird part is that Big Law’s wacky billing rate structure is entirely of its own making. Clients care greatly about the total fee charged; they care little about how that total is arrived at in the law firm’s billing system.
partners  pricing  compensation  clients 
november 2018 by JordanFurlong
Virtual Pricing Director - The experience.
One of the most time-consuming, challenging and often poorly executed aspects of opening a file and commencing a project for a client is the preparation of the budgeting and pricing information which we are required to provide to clients.

Virtual Pricing Director® is designed to use artificial intelligence, best in class templates and structured logic to help lawyers consistently produce high-quality pricing proposals in a fraction of the time it would normally take, irrespective of the level of seniority and experience of the lawyer involved in the project.

The product is being built in a way which is intuitively usable by any fee earner without any training. The standard we have set ourselves is that no matter their technical/digital capabilities, all fee earners will feel comfortable using it to its full capacity after nothing more than watching a five-minute online video instruction.
pricing  robo 
october 2018 by JordanFurlong
Law and Order – Kim R. Craig – Medium
To get to a budget, you must define scope. But lawyers had shied away from scoping conversations for decades because “scope creep” (which project managers fear but plan for) was a great thing from their point of view because that meant more work, more dollars. Telling lawyers scope creep was a bad thing was hard to get across. I believe, but for that client demand on pricing predictability, we wouldn’t be having this discussion. I wouldn’t have had the career I have had and I wouldn’t be writing this article. Project managers in legal would have remained within IT or doing operational back office projects where they continue to be much needed and contributing to organizational success.
process  pricing 
august 2018 by JordanFurlong
Moore Stephens offers accounting advice as a subscription | afr.com
Mid-tier accounting firm Moore Stephens is now offering a $1500 a year service that provides unlimited access to the firm's experts on financial reporting standards, amid a warning from the corporate regulator that "surprisingly few" companies are ready for a series of major new accounting standards ahead of this year's reporting season.

The Accounting Network, which had its soft launch last year and has 15 pilot clients, is aimed at small and medium-sized enterprises that need help ensuring they adhere to new and existing accounting standards when preparing financial reports.
accountants  pricing  subscription 
june 2018 by JordanFurlong
Amazon LLP – Ed Walters – Medium
Amazon LLP would post its prices for commodity work, and its billable rates for non-commodity work. At the beginning of an engagement, it would tell clients a distribution of prices for similar engagements, with means and median prices identified. During the RFP process, the firm would identify factors that add to cost or complicate the matter.

I used to work in a superb large law firm, and I recognize that transparent pricing of legal services sounds naïve. But now I work in a company that consumes legal services, and I can affirm that mystery pricing is a major source of risk for clients of law firms. Clients would rather pay more than be subject to unknown, open-ended pricing.

Imagine for a second that you were purchasing a book on Amazon. You could buy from Amazon at a fixed price, or a re-seller, for a limitless mystery price you would only know after the purchase was complete. Buyers would never, ever purchase at the mystery price.

Or imagine that you went to a nice restaurant with lobster on the menu at a market price not listed on the menu. When you asked the server about the market price, he told you that the price would depend on the time it took the fisherman to pull it from the water, the price of fuel for transport, and the time it took the chef to prepare it — and that you would find the price at the end of the meal when you got the check. Zero diners would order the lobster, no matter how good it was.

Do we really expect sophisticated purchasers of legal services to continue to order the lobster at a limitless, unknown market price?

Data Driven.
It’s hard to assess the price of legal services, but law firms have the most information about past engagements, and they are in the best position to price the risk of being wrong.
amazon  data  competitors  innovation  pricing 
april 2018 by JordanFurlong
The Law Firm Disrupted: The Most Bedeviling Aspect of Law Firm Change | Law.com
Um lays out a helpful response to this pit of frustration and confusion, which can be the feeling presented by a hype cycle. If you’re told everything is changing but you see that nothing is changing, why bother? Um points out that the challenges of innovation are not unique to lawyers and law firms. Change is difficult in almost all business environments.

Why? She says people are persistently bad at picturing the future—often underestimating long-term change as we overestimate short-term change. People are also wrong in repeatable and predictable ways. And that is further amplified by public discourse. Um’s final point is to acknowledge that change is hard.

But if you want to make it happen, stay the course. Don’t give in to cynicism.

That’s a good lens through which to view a survey put out this week by Buying Legal Council, a trade group for legal procurement professionals.

For anybody thinking there has been a massive change in legal spending, the report might be a damper. The biggest businesses still spend 82 percent of their overall legal budget on traditional law firms and only 5 percent on alternative legal services providers.

But the report also asked about individual experiences. What actions led to savings?

An interesting result on that question was the finding that the amount of time a company has pursued savings through procurement was the biggest indicator of success.

Companies with 10 or more years in legal procurement on average achieved 19 percent in savings, the most of any group.

“The biggest factor is time: Tenure in the legal category has significant effects on what procurement can achieve,” the report says.

So, as Um writes, the lesson might be to tune out the noise. If efficiency and savings are what your legal department or law firm are looking for, stay committed to making the changes in front of you. What does it matter that most others don’t view alternative legal service providers as worthy of their money? If you’re committed they would work for your problem, give it a shot.
change  firms  partners  pricing  procurement 
april 2018 by JordanFurlong
The Legal Industry Now Has a Standards Body: Announcing SALI | 3 Geeks and a Law Blog
The result is the SALI Alliance. SALI is short for Standards Advancement for the Legal Industry.

SALI was initially funded (graciously) by the LMA and the ALA. These two organizations saw the compelling need to establish a standards body and stepped up with seed money to get it started. These two organizations also present great opportunities to market standards via their existing membership outreach abilities. Going forward, SALI will be a member driven effort, involving those organizations that see the tremendous value in such an effort.

As noted above, the first standard will be on matter types (also known as area of law codes). From there, other standards can be proposed and driven through to published status. We already have a few ideas in the queue, and expect more to come as people think about various aspects of the profession that will benefit from standards.
standards  pricing 
april 2018 by JordanFurlong
2018 Survey | Legal Procurement | Buying Legal Council
The Survey examined the purchasing behavior of 153 legal procurement professionals, focusing on purchasing decisions, cost control, analyses, and trends.
We found:
With procurement’s involvement, companies save 14.6 percent of legal spend. When procurement is well aligned and works in partnership with the in-house law department, companies save 21 percent on average. For a Fortune 500 company incurring legal fees at 1 percent of revenues, this savings translates into millions of dollars of incremental earnings.
Now is the time to begin the legal procurement journey. It takes time to drive value: Quick stints in the legal category are insufficient. Legal procurement professionals contribute the most after five years of buying legal services.
The procurement professionals’ job is multifaceted. Procurement professionals negotiate discounts, issue RFPs and outside counsel billing guidelines, establish panels and lists of professional provisions, require eBilling, negotiate fee arrangements, and apply a tool chest of process improvements.
The top legal procurement goals for 2018 are (better) capturing and analyzing spend data as well as reducing legal spend.
procurement  pricing  clients 
april 2018 by JordanFurlong
Clifford Chance aims to break away from 'terribly unpredictable' pricing with new AI tool | Legal Week
New tech helps to work out how long lawyers should spend on tasks to better predict pricing



Clifford Chance (CC) is in the final stages of piloting new artificial intelligence (AI) software that will help work out how long lawyers should be spending on tasks in order to better predict pricing.
pricing  it 
april 2018 by JordanFurlong
The Role of Artificial Intelligence in Legal Operations | Legaltech News
AI is now revolutionizing the otherwise mundane and often very time-consuming legal bill review process. E-billing systems implement billing guidelines and identify basic compliance infractions, but are dependent on human invoice reviewers to identify and capture the more nuanced guideline violations. Internal review takes time and is not the reviewer’s only priority, and it is hard to audit effectively and accurately if unfamiliar with the underlying matter or guidelines. Additionally, when it comes to responding to non-compliance, most do not want to strain relationships with their firms and prefer to take a hands-off approach.

Using AI-enabled technology helps you more efficiently manage incoming legal invoices and improve cost management. AI can analyze millions of invoice line items submitted by law firms to corporate legal and claims departments, comparing invoices against outside counsel billing guidelines. The AI technology processes a huge amount of data very quickly. Machine learning also allows for improved performance on subsequent invoices.

Using AI, legal and claims departments see that compliance with their billing guidelines—an issue many companies struggle with—can be improved significantly across outside counsel relationships. Billing guidelines are an important component of ensuring law firms adhere to your requirements on staffing, process and legal practice, as well as invoicing. By applying machine learning across tens of thousands of invoices, you get better outcomes, additional cost control and savings, and improved productivity.
pricing  robo  clients 
march 2018 by JordanFurlong
Fee Structures in Professional Services Firms: Part 1
Whichever way you cut it, fixed fee clients are on average happier with their service than hourly rate clients. Our findings were comfortably statistically significant across all respondents at a 1% significance level, as well as when we segment the responses by Accounting and Law.[2]

When we drill down further into the type of client, whether Private or Business clients, we get the same overall story.[3] In both cases, in both Accountancy and Law, those receiving a fixed fee were demonstrably more satisfied.

For the purposes of this post, we will focus on average Value ratings from clients. Because Value correlates closely with clients’ willingness to recommend a firm, it is a good indicator of how firms are performing in their client service. Results for other outcome measures such as Propensity to Recommend and Overall Experience ratings are very similar. [5] 
pricing 
february 2018 by JordanFurlong
Resetting the Process: An inside look at the state of legal operations | In-House Ops
necdotally, I would estimate that most corporations in this industry, 60 percent or so, are at the foundational level in terms of building out their operations function. About 35 percent are at an advanced level. They’ve done some really good things, but they’ve got much room to improve. Only about 5 percent are at what we would consider a mature level, and even those have some significant areas left for improvement.

Brenton: Prior to operations, we had been solutioning in silos, and we have evidence that that doesn’t work. It might look good on paper, but when you go to implement, it just doesn’t work.

On Embracing Technology

Franke: When we look at the CLOC operations maturity model, a lot of companies have implemented or started to implement the basics. But if you look at a competency like dashboards and data analytics, a competency found in somewhat more mature ops functions, we see that this is an area that’s still beyond the grasp of many companies. So, while a percentage of companies may be moving down the path to operational maturity a bit quicker and may be a bit further along, in some cases having adopted a lot of tools and AI, many other companies are still near ground zero. Even a technology like contracts management has only been implemented by maybe 50 percent of corporations, and most don’t have robust implementations with comprehensive processes to support their tool.

Brenton: I think the tech companies have been much more collaborative and willing to share because we’re not regulated and have a culture that is different in terms of sharing information about processes.



On Billing Methods – and Market Forces

Franke: It’s not so much about getting away from the billable hour as it is about what things should cost. When you hire a contractor to do work on your house, they fix their bid based on the different resources that they have to bring to the table – plumbers, electricians – and what that’s going to cost them. There’s an underlying hourly rate there, but they know how many hours it’s going to take to install a new faucet or sink. They don’t try to figure it out for every job.



Law firms, however, start from scratch every time they do an M&A deal or a tech transaction or an employment contract. Good contractors know how to do a remodel and when to use tools rather than manual labor, and they know how to staff a job.

That’s not been the case with law firms. We’re getting away from that – firms are gathering data, figuring out optimal staffing models, determining when to outsource, etc. That allows them to offer AFAs that are win-win.
firms  ops  clients  metrics  data  pricing  process 
february 2018 by JordanFurlong
Changing Attitudes to Technology Starts with Incentives | Evolve the Law
Most analysis of the stymying effects and unintended consequences of the billable hour leads to the conclusion that we should eventually extinguish it and move on to alternative fee arrangements. Still, the billable hour model is ingrained in our culture and our business. What if we didn’t have to change everything? What if we only shifted something?

Consider shifting our focus to realization rates—a metric that most firms already calculate—instead. I posit that tying realization rates to compensation would align lawyer goals with client goals. Ultimately, it would encourage efficiency. This suggestion seems indirect and attenuated, but it’s non-threatening, and it just might work. It’s certainly worth investigating. And this change would open the door to a culture that values change.

Realization Rates and the Downward Trend
Realization rates are a key performance indicator for firms. They matter because, unlike billable hours, which reflect hours of effort regardless of value, realization rates reflect actual income to the firm. Currently, realization rates are falling.
pricing  compensation  clients  innovation  realization 
february 2018 by JordanFurlong
New Pricing Strategies Drive Revenue Gains at Hogan Lovells | The American Lawyer
To gain leverage with clients, Williams’ team develops data particular to each client that shows them the value they are getting from Hogan Lovells. The specifics may range from standard market rate breakdowns to efficiency savings projections; forecasting qualitative outcomes against projected risks; and client-specific historic legal hourly legal spend modeled against alternative fee proposals.

Dennis Tracey, head of litigation for the Americas at Hogan Lovells, says his department has established an ironclad rule: Any lawyer who wants to negotiate an alternative fee arrangement with a client “has to run it by Terry and his team,” Tracey said.

Tracey calculates that, as a direct result of the pricing team’s influence, his department’s domestic litigation revenues per lawyer rose 5.2 percent in 2017. The firm has entered into alternative fee arrangements with several major clients that have agreed to give Hogan Lovells all their domestic litigation matters in exchange for negotiated flat fees, generating $34 million in revenues, Tracey said.

But Green said it’s not just about smart pricing helping the firm secure a large volume of work. He said the pricing group has also given Hogan Lovells’ lawyers more confidence to negotiate higher fees, even with their most-cherished clients. Pre-Williams, he said, “we were afraid,” but being able to harness data-driven strategies has changed that.
pricing  data 
february 2018 by JordanFurlong
(24) Ten Year's Worth of Learnings About Pricing | LinkedIn
o figure out the right pricing strategy, it’s critical to determine what the buyer cares about. Do they care about cost or value? What is their core unit of their world: people, dollars, gigabytes? How predictable is the pricing plan? And can the buyer clearly articulate the pricing, advocate on your behalf and champion the purchase?

It’s also important to understand the seller’s needs. How does the pricing change the market size? The unit economics and cash flows associated with the sale? The competitive positioning?

All of these disciplines fall under product marketing. Well run product marketing teams develop these perspectives before product launch. By combining market research, interviews with prospective customers, conversations with the sales team, the product marketing team can develop a unified pricing strategy that is consistent with the company strategy and the sales tactics.
pricing  strategy 
january 2018 by JordanFurlong
Snapshot of the Legal Market, Missing Link, and Mystery Disconnect - Prism Legal
YET, Time Series Data Speak Otherwise. Since 2013, AW asked (page 21) CLOs to estimate the percent of spend by internal, law firm, and non-law firm vendor. As the graph below illustrates, spending on non-firm vendors, which includes alternative legal service providers, remains in the mid single digits with a shrinking share since 2014.
The Mystery. Many reports and commentators says ALSP is growing absolutely and taking share from law firms. Yet, the only time series data I have seen that asks about actual spending (not intent to spend) is what I graph below. So we have a mystery disconnect.
reports  metrics  competiton  innovation  clients  pricing 
january 2018 by JordanFurlong
The first rule of pricing is: you do not talk about pricing
People can’t tell you what they think about pricing, because they don’t think about pricing. They feel it.
pricing 
january 2018 by JordanFurlong
The perfect pricing storm; artificial intelligence and hourly billing - Validatum
Put simply, there is an opportunity for early adopters and innovators to preserve reasonable margins while the use of the technology remains relatively novel and sparsely distributed.

There is an important distinction between doing the same thing more efficiently versus using the technology to do new stuff. The technology will have to be reimagined so that old work is done faster and new revenue streams are opened.

In other words, simply doing the same jobs that have always been done but doing them faster and more efficiently will result in a substantial reduction in revenue. One way to address this is to move from low volume, high margin to high volume, low margin.
robo  pricing 
december 2017 by JordanFurlong
LSUC to consider changes to contingency fees | Canadian Lawyer Mag
cap on contingency fees is currently off the table for the Law Society of Upper Canada.

The provincial regulator released a number of proposed changes to contingency fee rules Friday morning in an attempt to make the fees more transparent, fair and reasonable, but a cap was not among the recommendations.

The law society’s Advertising and Fee Arrangements Issues working group had been looking at a possible cap on contingency fees, but it decided against it because of concerns it might deny some victims benefits and reduce claims in some cases.
pricing  ethics  regulation  access 
december 2017 by JordanFurlong
Altman Weil’s latest report: ‘Cost certainty trumps process efficiency’ | RWS_01's B[D]log
Following on from my post last week that the ‘Billable hour remains the pricing method of choice for Australian law firms’, Altman Weil’s ‘2017 Chief Legal Officer Survey’, published later in the week – and now in its eighteenth year – throws a different light on this debate.

The big take-out for me can be found on page vi of the Executive Summary – namely that in-house lawyers now see ‘cost certainty‘ as being more important to them than ‘process efficiency‘.

Specifically, page vi states:



“Costs over process”.

Think about that for a second – because it’s massive if you happen to be in private practice.

Crucially, though, is this comment (also on page vi of the Executive Summary):-

It is easier for law departments to demand cost reductions from providers and let them determine how to achieve lower fees.

So what do we have here?:-

cost certainty over process efficiency, and
private practice being allowed to determine how to achieve lower fees.
QED: If you’re in private practice and don’t have, (a) a robust Legal Project Management system/program, plus (b) data and analysis on the profitability of fixed fees that you can/should be offering…
pricing  process  clients  firms 
november 2017 by JordanFurlong
Why Efficient Legal Departments are Not Rocket Science: A Conversation with GSK’s Justin Ergler – Big Law Business
Justin Ergler is not a lawyer by training, but, as he would tell you, “It’s NOT rocket science.” “It” refers to running an efficient legal department in 2017, something Ergler has made his mission at pharmaceutical giant GSK where he is Director of Alternative Fee Intelligence and Analytics. I met Justin earlier this year at the CLOC Institute in Las Vegas where experts like him had come to share their experience and discuss best practices.

What is GSK doing to create a next-generation legal department and how can other companies replicate their success? Starting Thursday October 26, eDiscovery software company Relativity will be sponsoring a conversation with Ergler that will unfold live on Big Law Business? To follow along like a fly on the wall as the conversations unfolds, enter your email in the box below.
pricing  process  client  innovation 
november 2017 by JordanFurlong
Alternative fee arrangements have plateaued, survey author says
The use of alternative fee arrangements has plateaued, according to Saul Perloff, a partner with Norton Rose Fulbright who worked on the law firm’s 2017 Litigation Trends Annual Survey. He spoke with Bloomberg Big Law Business about the findings.

Many cases “simply don’t lend themselves to the use of an AFA,” Perloff told Bloomberg. The use of alternative fees could increase once again, he said, if people begin to experiment with fees in novel ways.

Fifty-six percent of corporate counsel surveyed by Norton Rose said they used alternative fee arrangements, and 96 percent said they were satisfied with those arrangements, according to a press release and report, which can be downloaded here.

But the percentage of companies using such arrangements has remained below 60 percent since 2011, Perloff told Bloomberg. The study is based on a poll of more than 300 corporate counsel, primarily representing U.S.-based organizations.

The most common type of alternative fees were fixed fees, used by 77 percent of the respondents, and capped fees, used by 53 percent.

Another study of corporate legal departments by Thomson Reuters found use of alternative fee arrangements remains at low levels. The study found that 83 percent of legal department use alternative fee arrangements, but 55 percent use them for less than 20 percent of their legal spend. A press release is here and the study can be downloaded here.

Corporate legal departments reported their most effective cost controls are enforcement of billing guidelines, reductions on invoice expenses, and working with law firms that show their value.
pricing 
october 2017 by JordanFurlong
Read This Before You Set Your 2018 Billing Rates | The American Lawyer
The reason to look at profitability in this way is to allow us to assess what happens if leverage declines. Table 3(a) presents this assessment. For illustrative purposes, it models a decline in associate hours deployed in our model partner's practice that reduces leverage from 3 to 2. Billing rates, and hence hourly margin, are unchanged. The margin generated by the partner's practice falls to $3.3 million, an 18 percent decline. The percentage hit to firm profit is sharper, about 23 percent, because there is no change in the office and firm costs that have to be subtracted from this margin to define the partner profit pool.
Table 3(b) looks at what would happen if the same decline in leverage were accompanied by restructured billing rates. The associate billing rates shown are those that result from applying a constant 4.5 times markup on compensation costs; the partner rate is increased 20 percent. This billing rate structure restores the margin on the partner's practice to the original $4 million; the higher margin, relative to today, on the partner and senior associate hours recoups the margin lost on the eliminated midlevel and junior associate time.
pricing 
october 2017 by JordanFurlong
A Conversation With Six General Counsel | Corporate Counsel
What is a hypothesis we’re testing that you find interesting?
Brian Levey, Upwork: The honeymoon period hypothesis is interesting to me.  Clients become the ‘bright shiny object’ upon engaging a firm, but what happens to performance over time?  I’d be interested to know what works in staying a priority at the firm.
Lee Reichert, Molson Coors: I’m interested to see how the performance of firms in the biggest cities compares to that of firms elsewhere – on things like quality, responsiveness, outcomes, and expertise.  Are there differences?  Given the breadth of our business, this finding can influence how we make counsel selection decisions.
Josh Sherbin, TriMas: The discussion on alternative fee arrangements seems to be all about cost and negotiating down to the dollar.  It would be nice to see from the data whether and how non-hourly fee arrangements fit with satisfying, strategic client-firm relationships.
Damien Atkins, Panasonic: I’d like to stress-test flat fees and success fees.  Since they affect partner compensation, often creating financial uncertainty, they’re likely to change behavior and may impact work product and client service.  I’m curious to see what the data will show.
Bill Deckelman, DXC Technology: As we just worked with you in selecting our panel of strategic partner firms, I would like to see what the data says about law firm panels.
Brian Chevlin, Pernod Ricard: I’d like to test that out as well.  My belief is that having a preferred set of firms – once we’ve identified the highest-performers – is the ideal state, as the firms get to know our business.  Related, what can we do to make panels especially valuable for us and the firms?
clients  data  analytics  firms  pricing  convergence 
august 2017 by JordanFurlong
Oracle's Legal Ops Chief Offers Tips on Spend Management
As an example, Coats pointed to the cost savings departments can achieve by focusing on e-billing, where typically "you're going to get the biggest bang for the buck," she said.

"Every time you look at something and you measure it, you should automatically be able to save 10 percent, whether it's 10 percent of the time [or] 10 percent of the total dollar amount," according to Coats. Hypothetically, she said, "if you're spending $100 million in your legal department and your outside counsel is half of that, which typically it usually is 40-60 percent … you should be able to save 10 percent easily." 

She also cited preferred firm consolidation, "where you actually talk to your outside firms and you get that partnership with them," Coats said. "So you actually say, 'I've been looking at the rates, I've been looking at the discounting structure, now how can we be better partners with each other?'"

Coats suggested focusing on accrual automation and matter management as well. On the latter, she said: "Your top vice presidents and your GC want to always have that information at their finger tips, with the status of the matter, how's it going, what's the cost, the budget." Having that rolled into one solution, she said, "just makes everything more efficient for the legal team."

Then there is what Coats called "soft cost savings," such as ensuring there's a focus on diversity, not just for the in-house legal department, but also with outside counsel.

"Diversity brings employee productivity and engagement. You get a diverse talent pool, it also helps with employee retention, and it also helps with our public image and branding," Coats said. "All of these things are good things for the department and [that] makes the department run more efficiently and [makes it] more creative and more innovative and ultimately saves cost."
ops  pricing  clients 
august 2017 by JordanFurlong
3 Geeks and a Law Blog: Convergence Initiatives and Panel Programs — What If The Data Says We're Wrong?
Regardless, I’ve long believed most convergence initiatives waste considerable time for limited benefit despite the fact that I regularly consult on convergence initiatives.

[For those who are unfamiliar with the term, “convergence” is the prelude to a preferred provider, or panel, program. It is the consolidation process by which a law department selects their preferred providers. These initiatives can often reduce the number of firms used by 60% or more. While a few win big, hundreds of firms can lose a client in the process.]

I am saying this now because AdvanceLaw and 25 of their GC’s have forced my hand (see here, here, here, and here for more details on this fantastic undertaking; see here for my initial encounter with AdvanceLaw).

AdvanceLaw is publicly conducting a study of what works and what doesn’t with respect to outside counsel management. This includes convergence initiatives, which are part of my consulting business. I therefore feel compelled to lay down a marker.

AdvanceLaw is performing a mitzvah. I could not be more in on their bringing data-driven decision making to the retention and management of outside counsel. Yet I am moderately confident that their findings will not bolster my sales pitch (another instance where I would be ecstatic to be proven wrong).

I predict that they will find little-to-no correlation between convergence initiatives and satisfaction with outside counsel. That is, when AdvanceLaw comes out with a data-supported list of the approaches that drive the most perceived value for in-house counsel, convergence initiatives will not rank near the top.

And that is because convergence initiatives, in isolation, do not accomplish much. They are a stage-setting exercise. They are a precursor. To me, a finding that convergence does not deliver high independent value is like finding that the mere purchase of home exercise equipment or gym membership does not result in physical fitness.
convergence  clients  data  pricing  firms 
august 2017 by JordanFurlong
Microsoft Announces Plans to Nearly Phase Out Billable Hour | Big Law Business
David Howard, a corporate vice president and deputy general counsel at the company, wrote online Friday that Microsoft wants to establish a “new type of relationship” with the law firms handling its most important work.

During the past year, Microsoft has been re-evaluating how it works with law firms, Howard wrote. It made several key decisions in the process, including to hire more law firms on a retainer basis and to work more closely with them on their diversity. He also said the company is rapidly moving away from the billable hour, and named a dozen law firms that have embraced alternative fee arrangements, such as fixed fees, that Microsoft views as its strategic partners.

“We’ve learned that simply comparing the billing rates of different firms doesn’t tell us very much,” Howard wrote. “Firms which work less efficiently usually cost us more, even if their billing rates are lower. Competing on the basis of a fixed fee or similar alternative fee permits a true apples-to-apples comparison.”

He added that Microsoft will have a “competition” among firms for its most important matters, and the law firms most closely aligned with its goals — though not necessarily the lowest bidders — will be retained.

One of the goals mentioned in the blog post is diversity. Microsoft’s legal department has long been outspoken about its preference for law firms that display gender, racial and other forms of diversity. In the last two fiscal years, the litigation group has hired a firm with a “diverse first or second chair in 35 of the 38 matters large enough to be subject to bidding,” Howard wrote.
pricing  clients  innovation 
august 2017 by JordanFurlong
Innovation in Organizations, Part II (016) | Legal Evolution
[Query: Why is linking AFAs to staffing and service delivery so innovative? Because the real value of alternative fees is to incentivize a re-design of workflow that (i) increases quality, (ii) speeds up delivery, and (iii) decreases cost. Otherwise, alternative fees become either a price discount or a gamble with poor or unknown odds. Stated another way, there is no point in hiring a pricing specialist unless you’re also going to hire specialists in project management and process improvement.]
innovation  pricing  process 
july 2017 by JordanFurlong
GC Data Sharing Plan Is 'Wake-Up Call' for Law Firms | The American Lawyer
“There are going to be winners and losers here,” said William Henderson, an Indiana University Maurer School of Law professor who studies the business of law. “If you understand how this works and build your business around the right answers to these empirical questions, you will get more work. If you choose to ignore this, you will be cut out of work.”
The project is being run by a consultancy called AdvanceLaw, which includes general counsel and invited law firms.
The data the GCs are sharing includes firm names, billing rates, billing arrangements, matter types, practice areas, relationship length with outside firms, if a firm is a preferred provider and frequent performance reviews from in-house counsel. Every month, a different general counsel will write a report answering a new question based on the data.
Outside Counsel React
Law firm leaders reacted to the project with a mix of excitement and angst.
The excitement was borne out of a desire to please clients and an acknowledgement that law firms could use more input from clients on how to do that.
“I’d love to see the results of what they learn and be able to communicate that to people here to help us be better at what we’re doing,” said Timothy Mohan, chief executive partner at Chapman and Cutler, a finance-focused Am Law 150 firm with $196.5 million in revenue last year.
data  clients  analytics  pricing  firms 
july 2017 by JordanFurlong
A New Era for Managing and Finding Experience in Large Law Firms | ILTA KM
Recently, a new class of software has come on the market designed to manage experience. These tools collect important details about lawyers and matters, offer flexible reporting, integrate with other law firm systems, and have simple-to-use interfaces. Furthermore, they offer a single, enterprise system that can power marketing, KM, finance, and other functions.

However, software alone is not enough; someone must populate the data. Reluctance to hire staff to do this has fallen as firms respond to the need to pitch, price, and analyze profitability. Many Marketing Departments already invest heavily in capturing this type of data. Finance and new business intakes often contribute and KM departments happily contribute given that they can ride on the experience system’s coattails.

These systems rest on more accurate matter typing. Depending on the nature of the legal work, accurately characterizing matters may be possible only well into the life of the matter. Marketing or KM typically chases down the information at suitable points in the matter, which can be days, weeks, or months after inception. Some leading firms, however, are building tools based on role and time entry with phase and task codes as triggers that add a controlled workflow component to capturing information over the lifecycle of a matter. That lifecycle integration holds real promise.
km  xm  knowledge  marketing  pricing  it  robo  innovation 
june 2017 by JordanFurlong
Highest Rates Clients Pay Hit a Wall — BTI Consulting Group
“At this rate I expect my attorney to walk on water, not get their feet wet, and be thinking only about me while they do it. I only needed to hear ‘you’re next on my list’ once and I knew it was over,” says one CLO at a large global consumer products company.

“I expect this attorney to be thinking about things I haven’t ever thought of and bring the strategies to deal with them before I bring it up,” says another top-level client.

“This attorney is excellent but is a step or 2 from amazing. So we will be parting ways when this is over,” indicates a top legal decision maker at a large financial institution, with some level of resignation in his voice.

When You Are Worth More Than the Top of the Market

But, there is some good news—just about half of the clients paying these top rates think this hourly fee is worthwhile. The half who report receiving the highest value at the highest rates talk about 4 key attributes:

Total command of the situation—a deep and penetrating understanding of goals and what needs to be done to get there
The top rate earner is backed by a team where every single person is equally impressive—not a weak link to be seen or heard
Seemingly never having to ask questions—attorneys at the top end of the market always look ahead, make sure their clients are in the know, and are 2 steps ahead of client questions
Timely invoices with updates and explanations of what it’s for and what the next invoice might look like
value  clients  pricing 
june 2017 by JordanFurlong
Can ‘Value’ Pricing Replace the Billable Hour? (Perspective) | Big Law Business
In practice, how would this work? Baker sketched out an eight-step model:

Start with the customers and what they value. Then move to price and finally to managing cost. This means having a robust conversation with clients to understand, among other things, what they are trying to achieve and how much risk they are willing to absorb.
The next step is internal. Baker recommends that firms establish Value Councils to set pricing and enforce uniformity. For individual matters, the Council, after conferring with the relationship partner, would attempt to “price the customer.” That’s jargon for determining what the customer might be willing to pay. These are subjective decisions but then in Baker’s view, all value is subjective.
The Council would recommend three options for the client that would offer varying levels of, among other things, service and speed. He says this is akin to American Express offering green, gold, and platinum cards, or airlines offering coach, business, and first class seats.
Either a Council member or the responsible partner would present the three options to the client.
The client makes a choice and the deal is “codified into a “Fixed Price Agreement (FPA).” The FPA would typically include information about the scope of the assignment, the staffing, and timelines.
The law firm would apply state-of-the-art project management. For Baker, that’s a different skill than setting or negotiating a price. The purpose here is to manage the job and stay within budget. “This is important, no matter how you set the price,” he said.
If the firm encounters extra work beyond what was agreed to — the dreaded “scope creep,” — the firm may ask for more money. Discussions will follow and if the client wants the firm to perform the additional work, a change order will be issued. This is crucial Baker says. Change orders are “communications tools. And they’re a reminder that work always must be authorized in advance.”
After the work is completed, the firm performs an After Action Review. This helps the firm gauge its performance, learn more about its pricing, and build ties with its clients. This is standard operating procedure for the U.S. Army, Baker says. “If (AARs) can transform the military, they can transform a law firm.”
pricing  clients 
may 2017 by JordanFurlong
It’s the Service Model, Stupid – rethinking.legal
If firms were really interested in service, then:
Lawyers would know how to price their work and make money, no matter the pricing mechanism. Most pricing done by even big firm lawyers is accomplished by tweaking standard rates and multiplying by actual or expected hours. Even working with something as simple as the billable hour, most lawyers have no idea where break-even points fall. Indeed, most really don’t understand the basics of how their firms make money.
But a firm committed to answering client requests for pricing flexibility and certainty would insure that all their lawyers had command over these most basic of business skills. People making day-to-day pricing decisions need to know how to price, and have the tools and support to do it well. It’s as simple as that.
Fixed pricing and other Alternative Fee Arrangements would be menu items for any client. When asked by clients to provide fixed fee alternatives to hourly billing, most firms protest that they cannot possibly project all of the variables that might affect the cost of doing a deal, or litigation, or other legal matter. But the lie is given to that by firms who already use fixed fee pricing for even complex matters — complex litigation, for example. Bartlit Beck is a leading litigation firm that uses only fixed fees and performance bonuses; no work is billed by the hour. And it does just fine.
service  standards  client  firms  pricing  process 
may 2017 by JordanFurlong
4 Tech Tips for Law Firms with Negotiated Pricing | Legaltech News
Lawyers have been moving away from "I'm billing you for this" for almost a decade now. "Most firms of any size today are accustomed to using fee structures that are not controlled by billable hours," according to the Georgetown Law's 2016 " Report on the State of the Legal Market. " A trend since the Great Recession, law firms have made the transition to negotiated pricing models.
Clients and law firms now enter into an agreement and determine a budget up front. Legal workers are now responsible for more precise time management as they no longer have the ability to send unrestricted invoices.
Forecasting price to clients also means projecting profitability, as well as factors that may impact those profits. According to a 2015 report from University of California Hastings College of Law, new models are increasing efficiency through unique structuring and use of technology. Managing expenses and optimizing efficiency are paramount to law firms with negotiated pricing models, and adopting technology to enhance the ability to control costs and boost productivity will ensure economic viability for law firms and their clients.
pricing 
may 2017 by JordanFurlong
Is Deutsche Bank’s Refusal to Pay Junior Lawyers Misguided? | Big Law Business
General counsels have long bemoaned paying for work performed by first-year associates at law firms. But what happens if a company doesn’t pay for those lawyers altogether? The result will likely have some unwelcome consequences, said one lawyer.

“In my view, it creates some disincentives,” said Brackett Denniston, the lawyer who ran General Electric’s law department for 11 years before retiring in 2015.

“If training first-year associates by giving them work is uncompensated, firms will try to make it up in other rates. Getting good associates is vital to firm performance, so it’s not like you can make costs go away… At bottom, this is a fundamental problem with the hourly rate — and better pricing is the way to address it.”

Steve Reich, general counsel of Deutsche Bank, declined to comment through a bank spokesman.

It’s not the first time that an in-house corporate law department has refused to pay for junior legal talent. A 2011 survey by the Associate of Corporate Counsel, as noted by Legal Week, found that more than 20 percent of 366 in-house law departments had at one point refused to pay for the work of first- or second-year associates
clients  firms  pricing  laterals 
march 2017 by JordanFurlong
Before you can kill the billable hour, you first need to get rid of utilisation | RWS_01's B[D]log
A lot has been written about a need to kill the billable hour. Some of it has merit. Lots of it doesn’t. Some of it has been written with the client’s benefit in mind, most of it hasn’t – in the it is written with law firm survival in mind.

Crucially, pretty much all of it is irrelevant.

How can I be allowed to say such a thing?

Because the reality is that under most law firm’s current performance regimes, we actively encourage the survival of the billable hour, even while we advocate for its death.

What do I mean by this?

Well, as I alluded to in my post last week, what consistently surprises me is that while many advocate for the death of the billable hour, with few exceptions most of these advocates fail to look at one of the principal underlying issues that makes its death – overnight or otherwise – near impossible:- utilisation.

‘Utilisation‘ refers to the metric by which we determine how busy fee earners are. In most firms (although not all), to ascertain ‘utilisation’ we look at the annual budget of hours the firm has set the relevant fee earner (typically starting at 1,400 hours and going north) and we measure that against the amount of billable time they have put on their time-sheets (daily, weekly, monthly or annually). From this, we then decide how “busy” that fee earner has been.

But, it’s actually a crock of shit as a metric of measurement.
utilization  pricing  firms  metrics 
march 2017 by JordanFurlong
Legal's Relationship With Procurement Experts Is Growing, Survey Says | Legaltech News
A joint survey by Bloomberg Law and The Buying Legal Council found a projected in-house savings of 11 percent using procurement in legal.
procurement  clients  pricing 
march 2017 by JordanFurlong
Family law firms finding ways to help clients afford their services - Legal Futures
Researchers found that 85% of firms offered unbundled services and 88% fixed fees. The most popular solution to help customers having difficulty paying for legal support was agreeing a (typically monthly) payment plan (93%). But the plans tended to be at the discretion of individual solicitors rather than a firm-wide strategy.

Although over a quarter of the consumers surveyed availed themselves of unbundled services – such as self-representation in court while the solicitor conducted the initial part of the case, including negotiating with the other party, and preparing documents or filing proceedings – firms themselves pointed to problems with unbundling in a family law context.

Some four in five firms said unbundling caused problems for cases and just over half said it caused issues for the firm. Many felt it was risky as there was potentially nobody with legal expertise having an overview of the case. However, firms that had successfully provided unbundling were more positive about its benefits.

Just under two-thirds of consumers in the survey (64%) said their solicitor’s costs were affordable. But the researchers stressed the high stakes nature of family law as a reason underlying this finding.

While 84% were able to find the money to pay their solicitor and 85% said cost was not a hindrance to the continuation of their case, almost half regarded the bill as more than they expected.
family  unbundling  pricing  access 
march 2017 by JordanFurlong
2017 LEGAL PROCUREMENT SURVEY by Bloomberg Law & Buying Legal Council | Silvia Hodges Silverstein | Pulse | LinkedIn
Following top management’s mandate to reduce spend, legal procurement has clearly demonstrated its value contribution:

Procurement professionals are having substantial success in reducing their employers’ legal spending—we found that legal procurement professionals claim responsibility for an 11 percent reduction in legal spending on average.

That 11 percent reduction is only the beginning:

The 11 percent reduction is the result of the average of all the respondents, including companies that deliver substantially higher numbers and companies that are just beginning and that are yet to have an impact.

Legal spend is under professional procurement review:
procurement  pricing 
march 2017 by JordanFurlong
Billable hour pricing is effectively dead because of budget caps, report says
argely because of budgets and caps imposed by clients, 80 to 90 percent of law firm work is done outside of the traditional billable hour model, according to the 2017 Report on the State of the Legal Market. The report (PDF) was released by Georgetown Law’s Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute, according to this press release.

“One of the most potentially significant, though rarely acknowledged, changes of the past decade has been the effective death of the traditional billable hour pricing model in most law firms,” the report says. “Plainly, the imposition of budget discipline on law firm matters forces firms to a very different pricing model than the traditional approach of simply recording time and passing the associated ‘costs’ through to the client on a billable-hour basis.”

The capped-fee model forces firms to “earn their way up” to the fixed price through recorded billable hours that may already be deeply discounted, which is in some ways worse for law firms than using alternative fees, according to the report.

The demise of the billable hour was largely overlooked because of a definitional problem, the report says. Pricing models that used billable hours were considered business as usual, and different from alternative fee arrangements based on fixed-price or cost-plus models.

Capped billing is one of several challenges faced by law firms since the recession. The report notes stagnation in demand growth for law firm services, a decline in productivity for most categories of lawyers, growing pressure on rates, and declining profit margins. Clients, meanwhile, are demanding greater efficiency, outsourcing some work to legal service providers, and reducing use of newbie associates.
pricing 
january 2017 by JordanFurlong
Six Pricing Action Items from Buying Legal Council Procurement event | In Search of Perfect Client Service
Anyone who sells legal services to corporate America knows the important role procurement professionals play in the acquisition of legal services.  Dr. Silvia Hodges Silverstein leads the premier group for legal procurement, Buying Legal Council. The group allows procurement professionals to learn, from each other and from outsiders Silvia brings into group discussions.  The group also allows law firms to “listen in” on the procurement dialogue. Smart firms join so their proposals can reflect insights learned from the group.  In November, my partner Nicole Auerbach and I had the pleasure of leading a session at most recent Pricing Bootcamp.  We left the group with six pricing action items, and with Silvia’s approval, I wanted to share the list.
pricing 
january 2017 by JordanFurlong
3 Geeks and a Law Blog: Comp on the Client Side: Living in a Glass House
The billable hour has been trashed repeatedly over how it motivates bad behavior in law firms. The reasoning goes that rewarding hours billed motivates lawyers (associates and partners) to spend more time on tasks than necessary, resulting in inefficiencies. My personal opinion is that rewarding hard work is not the problem, but instead poor management over the efforts of workers is the real problem.
pricing  clients 
november 2016 by JordanFurlong
Most Lawyers Work Less Than They Say, Collect Less Than They're Owed - Strategist
Lawyers aren't as productive as they often claim, according to the report. In LexisNexis's 2012 "Law Firm Billable Hours Survey Report," for example, attorneys said they worked an average of 8.9 hours a day and billed for 6.9 percent of that. But when Clio looked at the aggregate, anonymized data from Clio's own customers, covering 40,000 users and $60 million in billing, the picture changes. Drastically.

The typical lawyer is logging only 2.2 billable hours per day, according to Clio's report. That's 28 percent of an eight-hour day and about a quarter of what lawyers had self-reported in LexisNexis's "Billable Hours Survey."

Out of those 2.2 hours, attorneys bill for only 1.8 hours on average, 19% less than what they worked. And when it comes time for clients to pay up, lawyers collect on 1.5 hours from that 1.8, or 86 percent of hours billed.

That seems to indicate that lawyers can up their revenue by not just getting more work (as if it was that simple!), but also by leaving less billable time on the table and improving their collections practices.
solos  pricing  realization 
november 2016 by JordanFurlong
Legal Departments Are Decreasing Outside Counsel Spend, Study Finds | Corporate Counsel
General counsel are more focused than ever on finding the right resources to do legal work at the right price, according to a just-released global survey of in-house legal departments.
The 13th annual law department survey by HBR Consulting, which advises corporate legal departments, professional services and law firms, included 275 law departments. They were part of 22 industries located in 10 countries. The detailed benchmarking report is for sale, but HBR shared some of the numbers.
The survey shows a slight 1 percent increase in legal spend year over year, HBR says. That includes a 2 percent increase in spending on technology to handle increased legal demands, especially for document management, legal spend analytics and contract management, the survey says.
Lauren Chung, HBR managing director and survey editor, said in a statement that general counsel are "investing in new technology to increase the automation of routine tasks, enhance work processes and support data analytics that allow improved decision-making on outside counsel fee arrangements. All of these efforts are having a direct impact on legal spending and operational effectiveness."
In addition, 47 percent of companies reported increasing the total number of in-house lawyers.
But the news was not so good for outside counsel. The survey shows corporate spending on outside counsel decreased by 2 percent, as 85 percent of responders reported using alternative fee arrangements. That's up 5 percent over last year's numbers, confirming a trend spotted by others.
pricing  clients  firmsd 
november 2016 by JordanFurlong
A look at how one firm is trying alternative fee arrangements for litigation – Slaw
“We started to dig down into our statistics using practice management software. We gathered data reports including the average shelf life of a certain kind of file from opening to closing. Take a lower level personal injury file – we could look at hundreds of files and tell you, on average, the defence costs, the time it took to resolve, and how much was paid out. And we can do this down to the last dollar.”
With the data in tow, the firm was able to calculate the average fee that was charged per month per file based on a number of categories such as reserve limits. “We show the client the data. They know exactly how much a certain file cost over the span of hundreds of files and decades of experience. We then charge them a flat fee per month for a file of a certain type that is in line with the average data.”
Clients appreciate the open approach. “We can generate these reports based on virtually any set of criteria, and clients are confident the number is accurate. And potential clients love that we can quote them a fee based on hard data. Our fee isn’t just an approximation or a guess about how much a file is worth. It’s based on precisely what files have cost in the past and what they’re costing now.”
pricing  litigation 
october 2016 by JordanFurlong
Lawyers are only billing a fraction of their time; how can they be more efficient?
During his opening address Monday at the Radisson Blu Aqua Hotel in Chicago, Clio CEO Jack Newton unveiled the “Legal Trends Report,” which delivers benchmark data on subjects like average hourly rates among the company’s users. He shocked many in the audience after revealing that, among Clio’s 150,000 daily active users, lawyers were only billing 28 percent of their available work hours (approximately 2.24 hours of an 8-hour work day). That number, according to Newton, was closer to 22 percent for solo practices.
pricing  productivity 
september 2016 by JordanFurlong
Government and judges urge lawyers to innovate as era of online justice and fixed fees approaches - Legal Futures
“Low-value cases or those of modest social significance should be dealt with quickly. Victims of crime and vulnerable witnesses should be supported by clear and effective processes. Unnecessary escalation of disputes should be emphatically discouraged and kept out of court wherever possible.”

The statement said that over time, the work of the courts and tribunals would use online, virtual and traditional hearings as best meets the circumstances of the case.

“As new technologies bed down, we anticipate that more and more cases or parts of cases will be carried out virtually or online. In certain circumstances, of course, justice will require that parties, their advisers and judges conduct hearings in physical courtrooms. Meanwhile, those who use our courts and tribunals – including legal professionals – should expect two significant developments.

“The first is our aim for all cases to be started online, whether or not they are scheduled for the traditional system or for online resolution. The second will be the completion of some cases entirely online, which will be much more convenient for everyone involved.

“Suitable cases – initially lower-value debt and damages claims and appeals to the Social Security and Child Support Tribunal – will be able to be managed through affordable and simple online services, specifically designed to meet user needs.”
access  innovation  courts  pricing  it 
september 2016 by JordanFurlong
At BASF, It’s Alt-Fees or Firms May Not Get the Work | Corporate Counsel
Alternative fee arrangements were in use at BASF before he arrived, said Matthew Lepore, senior vice president, general counsel and chief compliance officer at BASF, whose North American headquarters is in Florham Park, New Jersey. However, since his arrival in January 2014, a lot has changed when it comes to fee arrangements. "There were some AFAs in place before I arrived. But now it's required that I always have an AFA to review along with an hourly arrangement," he said. "I have a policy that I've put in place since I joined the company that requires every matter that we open to have an alternative fee arrangement presented to me."
pricing  clients 
september 2016 by JordanFurlong
Prism Legal The Coming Changes in How Lawyers Practice - Prism Legal
In this century we have seen dramatic changes in the legal market. From a period of plenty, we moved to one of seeming scarcity. Many commentators suggest that the legal market has been, is being, or will be disrupted. I have a different point of view: if the 2007-10 economic crisis did not “disrupt” the legal market, I am not sure what would.
firms  innovation  disruption  process  pricing  profitability 
august 2016 by JordanFurlong
When GCs Hire Law Firms Instead of Keeping Legal Work In-House
The traditional law firm model has been in turmoil for years and there’s no slowing down the pace of change. A contributing factor to the turbulence, or the result of which, is the evolving role of general counsels and corporate legal departments.

Instead of blindly continuing law firm spend for the same issue or farming out consistent work streams in particular areas, general counsels (GCs) are bringing the work in-house where it can be done more cost-effectively. And, for a growing number of legal departments, even complex issues previously handled by outside experts are being brought in-house.

The pendulum has swung, but GCs still need to hire outside counsel for some of the work. In this new environment, what are some of the factors that go into the GC’s decision to hire law firms vs. keeping the work in-house?
clients  insourcing  talent  admissions  pricing 
july 2016 by JordanFurlong
Riley Safer founders left Schiff Hardin to chart their own legal course - In Other News - Crain's Chicago Business
“When I started, there was no billable-hour requirement,” Safer says. “(The partners) were worried about developing my ability to service the firm's clients, and they felt the rest would take care of itself. . . .That went away somewhere along the line.”
pricing  boutiques 
june 2016 by JordanFurlong
The 22 Law Firms Best at AFAs — BTI Consulting Group
These are the firms corporate counsel find are best at making AFAs the successful cost control tool they were intended to be—bringing improved client focus, predictability in budgets, a more streamlined approach to the work, and double-digit savings.

You can download a complimentary copy of BTI State of Alternative Fee Arrangements 2016 here for the complete list of law firms best at AFAs, as well as data detailing corporate counsel spending on AFAs.
pricing  firms 
april 2016 by JordanFurlong
Lost in Translation: BigLaw’s Communication (and Trust) Issues — Rethink the Practice — Medium
So, what gives? The foreword by David Cambria, the Global Director of Operations for Law, Compliance and Government Relations at Archer Daniels Midland, gives some insight into why new methods of measuring and pricing legal services may be eluding law departments as well as law firms: “We decide it’s too hard to figure out, it’s too risky, it isn’t the right matter or we’re not clear on what qualifies as a win.”
This rare display of candor may unsettle some, but I think candor is exactly what we need in our industry to drive meaningful progress toward measurements of value rather than inputs and costs.
The truth is that no single player in the legal supply chain has the wherewithal to flip a switch to undo decades of ingrained reliance on the billable hour. Creating the necessary clarity around what qualifies as a win is a shared responsibility across buyer and seller, one that requires commitment, perseverance, and the willingness to experiment.
metrics  clients  trust  firms  innovation  pricing  value 
march 2016 by JordanFurlong
2015 Law Department Benchmark - Consilio.com
On average, law departments increased their spending, but at a lower rate than last year. The average increase in legal spending from 2014 to 2015 was 1.7%, as compared to 2.2% from 2013 to 2014. While the majority of respondents reported an increase, 28% reported a decrease in legal spending.
data  clients  pricing 
february 2016 by JordanFurlong
The Dirty Little Secret of Law Firm Billing | The American Lawyer
It gets worse. In bankruptcy, no one forces attorneys into the discounting that produces the current 83 percent overall average collections rate. Remember the infamous “Churn that bill, baby” email involving DLA Piper a few years ago? That was a bankruptcy case. Traditional mechanisms of accountability are ineffective. Unlike a solvent corporate client, a company in trouble has little leverage in dealing with its outside counsel. Until it emerges from a Chapter 11 reorganization, the days of minimizing legal expenses to maximize shareholder value are suspended. If the company winds up in Chapter 7 liquidation, those days are gone forever.
At the same, time, the lawyers handling the bankruptcy have little risk. They get paid ahead of everyone else. Lawyers for creditor committees are a theoretical check only. They too get paid first, and debtor’s counsel in one bankruptcy may be creditors’ attorney in another and the liquidating trustee’s lawyer in yet another. In none of those capacities is there any incentive to rock the long-term, “paid-in-full hourly rate” boat.
bankruptcy  ethics  pricing  firms 
february 2016 by JordanFurlong
The Billable Hour: BigLaw’s Headless Chicken — Rethink the Practice — Medium
Note that I did not say “How we should price.” I said “How we should measure value.” Value does not have to equate to time, but we have relied for too long on measurements of how long we work rather than the results we deliver.
This is the fundamental disconnect where we miss the jugular and the brain stem: In relying exclusively on the “body shop” model, we have come to conflate the concept of time as a unit of measurement and time as a unit of value.

In other words, the persistence of the billable hour is merely symptomatic of deeper ills in our industry: firstly, a lack of clarity in how we think and talk about the mechanics of value creation and subsequently, a failure to establish meaningful measurements around the key activities that drive value.
The call for alternative pricing paradigms, then, fails to gain the type of traction we expect because it does not address the root cause. The key lies in developing meaningful measurements of value to enable better dialogue between buyer and seller — and better pricing paradigms will follow.
pricing  value 
february 2016 by JordanFurlong
Avvo Begins Offering Fixed-Fee Legal Services in Certain Locations - Robert Ambrogi's LawSites
The service, Avvo Legal Services, offers a variety of limited-scope legal services at a fixed fee. The services range from review of legal documents such as business contracts and non-disclosure agreements to more involved matters such as uncontested divorces and citizenship applications.

Last year, Avvo launched Avvo Advisor, a service that provides on-demand legal advice by phone for a fixed fee of $39 for 15 minutes.

Avvo is currently offering the new Avvo Legal Services in Atlanta, Chicago, Dallas, Houston and Phoenix, according to an FAQ on Avvo’s website. According to an email I received from Avvo inviting me to enroll, the service will launch in my state of Massachusetts in mid-February. The Avvo website says that the service will be expanding to new areas quickly.

Avvo sets the services to be provided and the prices. Attorneys who sign up for the service can choose which services they want to offer. When a client buys the service, Avvo sends the client’s information to the attorney. The attorney then contacts the client directly and completes the service.

Clients will be within the attorney’s geographic area and are able to choose the attorney they want to work with. They pay the full price for the service up front.

After the service is completed, Avvo sends the attorney the full legal fee. (Fees are paid once a month.) As a separate transaction, the attorney pays Avvo a per-service marketing fee. This is done as a separate transaction to avoid fee-splitting.

The email provided these examples of services and fees:

Document review services: $199 client payment, $50 marketing fee.
Start a single-member LLC: $595 client payment, $125 marketing fee.
Uncontested divorce: $995 client payment, $200 marketing fee.
Green card application: $2,995 client payment, $400 marketing fee.
The terms of the service require attorneys to contact a new client within one business day for a 30-minute introductory call. If the attorney determines the client is not the right fit, the attorney can decline the representation.

There is no cost for attorneys to participate except for the per-case marketing fee.
solo  access  franchise  pricing  innovation 
january 2016 by JordanFurlong
Introducing Guesstimate, a Spreadsheet for Things That Aren’t Certain — The Guesstimate Blog — Medium
This is why I’ve made Guesstimate, a spreadsheet that’s as easy to use as existing spreadsheets, but works for uncertain values. For any cell you can enter confidence intervals (lower and upper bounds) that can represent full probability distributions. 5000 Monte Carlo simulations are performed to find the output interval for each equation, all in the browser.
pricing  risk 
january 2016 by JordanFurlong
Can Legal Ops Overcome the Persistence of the Billable Hour? | Big Law Business
This observation goes to the crux of the industry’s problem.  To arrive at a clear articulation of what qualifies as a win, each company must develop clarity about its business objectives as well as the cross-functional collaboration to translate those business objectives into law department targets.

Quantifying such targets into functional metrics on legal outcomes is a challenge that must be addressed on a per-organization basis. Because there is no easy one-size-fits-all solution for measurement, it means that the industry as a whole will mature more slowly than disruption rhetoric would have us believe.

As a general proposition, we are not an industry prepared to take a leap into the unknown. As we develop the data models to support better analysis, however, the movement away from traditional pricing models will become considerably less risky. Over time, the pace of adoption will quicken.  In the meantime, we wait for both law firms and law departments to reach the tipping point.

On the bright side, the survey indicates that legal ops professionals are hard at work building foundational capabilities in data analytics and data mining.  More than half of the respondents reported having a formalized metrics program (up from 34.4 percent in the prior year).  Of even more interest, the survey reported on a number of companies (specifically noted were Ford Motor and Lincoln Financial) beginning to develop metrics around law firm performance in delivering case outcomes and utilizing data modeling to measure the performance of the legal supply chain. As these models mature and as law departments become increasingly sophisticated in the use of emerging technologies, the ability of the legal operations function to effectively measure and evaluate change will only improve.
ops  metrics  value  clients  pricing 
december 2015 by JordanFurlong
LSB to probe whether competition has brought down cost of legal services
The Legal Services Board said that understanding changes in prices over time was one of the “key measures of the impacts of regulatory reforms designed to promote competition”.
competition  clementi  pricing 
november 2015 by JordanFurlong
Law Firm Leaders Forum: A Call to Professionalism
Ralph Baxter, Chairman of Thomson Reuters’ Legal Executive Institute which hosted the Forum, began the first panel looking at the state of the legal marketplace, which is estimated to represent about $437 billion in annual legal spend. The pressures law firms are now under was demonstrated in the first slide shown to the audience — of that legal spend, about one-third of it, $160 billion is represented by in-house law firms, and that share is growing. Also growing, by an amazing 30% annually, is the now-sliver ($1 billion) of the market taken by alternative legal process outsourcers (LPOs). “Over the next decade, you can imagine where that growth is going to take that portion of the industry,” Baxter said.
clients  firms  pricing 
october 2015 by JordanFurlong
The Future of Buying Legal Services | StephenMayson
What is clear is that not all types of procurement are appropriate to all types of services. The real issue, as I see it, lies in the potential disconnects among cost, price, value and relationship. There is an inevitable tension between short-term procurement wins and longer-term legal or relationship consequences. There are times or circumstances when cost-cutting just isn’t worth it. Consider by analogy last week’s furore over the prescription of the cheaper anti-malarial drug mefloquine to members of the UK armed forces serving overseas. At a time when they need to be in first-rate health, we appear to be penny-pinching and using drugs that since 2008 have led to a thousand of them being treated in psychiatric hospitals and mental health clinics.
procurement  pricing  value 
october 2015 by JordanFurlong
Prism Legal Can Big Law Learn from Hotel Room Design + Airline Pricing? - Prism Legal
The lesson from Marriott is that appealing to customers and delivering what they want takes time, effort, research, iteration, and risk-taking. The company does not just assume it magically knows what will work. It does deep research. How many large law firms can say the same, at least with respect to how they deliver service.

The airline piece tell us that unclear information about what you are buying and confusing pricing pisses off passengers. Sadly, some lawyers will argue that hourly billing gives rise to no confusion. I will not grace that point of view with a reply. My guess is that many law firm clients feel that their purchases from law firms are about as clear as buying First or Business class seats. Any time you can be compared to an airline, I’d say that is bad news and leaves ample room to improve.

Regular readers see that I periodically write posts that cite news from unrelated markets. Indeed, the lessons of these articles do not apply one-for-one to law firms. But it takes only a bit of imagination – and interest in other markets – to see how their approaches can inform how we run law firms and deliver client service.
pricing  compintell  clients  firms 
october 2015 by JordanFurlong
Irwin Mitchell promises “absolute certainty” with fixed-fee commercial litigation scheme
Jonathan Sachs, the firm’s London head of commercial litigation, said: “The obvious benefit of this product to a claimant is that he/she will have absolute certainty as to what it will cost to bring legal proceedings, and seek recovery of losses suffered. No extra costs above and beyond that which has been proposed will be charged.
pricing  litigation 
october 2015 by JordanFurlong
Firm abolishes billable hours
The McCullough Robertson banking and finance team has introduced fixed fee billing for all work they take on.

While there is nothing entirely new new about the fixed pricing model, the team is determined to make an attitudinal change and remove timesheets from remaining the pinnacle of legal practice.

Banking and finance partner Peter Stewart believes that timesheets are now redundant.  He said that removing the billable hour entirely from the equation results in better work.
pricing 
july 2015 by JordanFurlong
The Predictability and Perils of Over-Monetization | Timothy Corcoran - JDSupra
I don’t know when I first learned that money could become a verb and monetize and monetization were a thing. But as a young corporate guy moving up the ladder, these words were ideal additions to my vocabulary. If there was one thing I was good at, it was making money for my organization. But in my perpetual quest to close sales, develop new products, defeat the competition, and win awards, I never lost sight of the client’s needs. In fact, it was this laser focus on long-term client satisfaction that formed the basis for my success year after year.
firms  partners  finances  pricing  clients 
july 2015 by JordanFurlong
Why clients of BigLaw firms value cost consciousness - Beaton Capital
Research by Beaton continues to show why clients of BigLaw firms value cost consciousness. If you understand what cost conscious really means to clients, this may not surprise you. But, did you also know that being well rated on cost consciousness by clients allows a firm to exercise price-setting discretion? In other words, you can raise your price – at least to some degree depending on the circumstances – and the clients perception of the value you deliver stays the same. Or even goes up.  
pricing 
july 2015 by JordanFurlong
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