We need to talk about money
Lawyers can no longer afford to avoid pricing conversations, writes Angela PriestleyIt's the great white elephant in a law firm's meeting room (one that has a harbour view of course). Clients
Lawyers can no longer afford to avoid pricing conversations, writes Angela Priestley
It's the great white elephant in a law firm's meeting room (one that has a harbour view of course). Clients know lawyers have it, lawyers know clients are willing to give it, but nobody seems willing to sit down and actually talk about it.
According to New Zealand pricing consultant and Validatum managing director Richard Burcher, such aversions need to stop.
Burcher, in Sydney last week to launch a joint Validatum/LexisNexis study on pricing, believes the successful law firm of the future is one that can successfully build a range of pricing strategies and develop the nous and confidence to talk about them.
"Pricing is going to move from an administrative, get a printout of a timesheet-like operation to something where law firms will have pricing managers who will be seriously skilled in pricing - which is a multidisciplinary role involving macro and micro economics, statistics, accounting, behavioural economics and psychology," says Burcher.
One firm ready to seriously discuss pricing is People & Culture Strategies, whose managing director Joydeep Hor last week declared he would be removing billable hours and timesheets in favour of client-tailored pricing packages - inclusive of document templates, education and seminars.
However, most Australian law firms are not experiencing pricing changes to the extent of billable hour extinction. According to the LexisNexis/Validatum research, 96 per cent of respondents indicated they are still using billable hours as at least one of their pricing strategies. Meanwhile, 85 per cent of law firms said they are using billable hours "most of the time".
So are lawyers unable, or simply unwilling, to seriously explore a range of pricing options? "Lawyers have always been historically embarrassed talking about money. It's not something that comes naturally to us. We're not trained for it and we don't like going there," says Burcher. "Consequently, the profession has never been particularly proactive or on the front foot when it comes to initiating a pricing discussion."
Still, although Burcher does not advocate the complete demise of billable hours, he does believe there is scope for the legal profession to recover from its mistakes of the past and make an effort to educate, innovate and discuss alternative pricing mechanisms.
"Lawyers are good at developing bespoke and customised technical solutions to the client's problems. They are very poor at delivering customised pricing solutions for the client," he says.
"Clients value, appreciate and need a diverse approach to pricing. You can't take a cookie-cutter, one-size-fits-all approach because everyone is different."
Burcher adds that lawyers need to develop a "toolbox" of pricing options - that may include billable hours - in order to improve law firm profitability, increase client satisfaction and minimise pricing complaints.
In order to get such a toolbox right, lawyers may have to extend into the uncomfortable realm of bringing "subjectivity" into their thinking on pricing.
"One of the reasons why there is this default position, and that lawyers are comfortable with hourly rates and timesheets, is that [time-based billing] is incredibly robust," he says. "Whereas when you start talking about discounts or premiums based on outcomes, urgency and other what I'd call 'soft, subjective criteria', that involves a level of judgment and subjectivity. I think the only way you can actually be good at that is to have had an extensive foundation in legal practice."
So despite the difficulties lawyers might have discussing money, Burcher still maintains they are the best individuals for law firms to look to when it comes to the art of pricing. "You could bring in people with accounting and MBA qualifications, but I think the results would be less than optimal," he says.