Global pricing thinker, Ron Baker, has his sites firmly set on the elimination of the billable hour as the key to ensuring legal services are valued from the perspective of intellectual capital, rather than the restraints of timesheets.
Speaking at the opening session today of the Australian Legal Practice Management Association (ALPMA) Summit on the Gold Coast, the thought leader and founder of the think tank the Verasage Institute said, quite literally, that he sees himself as the prosecutor of the billable hour on a mission to send it to the electric chair.
He will need innovative law firms to assist in this mission, but Baker believes only 17 per cent of firms need to participate in developing new pricing strategies in order to commence a tipping point that will see the entire landscape of the business of law transformed - and consequently, the billable hour destroyed.
Baker believes that intellectual capital will drive the firm of the future, where effectiveness counts for much more than efficiency, and legal services will be judged by the value they offer a client, rather than the mere time they took to undertake. He believes in order to successfully price on effectiveness over efficiency, law firms need to have a complete understanding of the value their clients are hoping to obtain from their legal spend. "Comprehending a client's (need for) value is key, it moves you to have a conversation before the work is undertaken," he said.
And although clients are seemingly dissatisfied with the time-based billing models of their firms - a 2008 survey by ACLA found that only 3 per cent said hourly billing is the best pricing method - Baker does not believe the drive to alternative pricing methods will emerge from clients. "Buyers do not lead pricing changes, sellers do," said Baker. "Why would we want to most important thing that drives our profits to be determined by our clients?"
Meanwhile Baker believes that in order to get pricing right, and ensure that clients are charged for just what value they harness from their legal spend, firms need to make appropriate investments in pricing strategies, as well as capable and intelligent pricing professionals within the firm.
- Angela Priestley