The price is right?

31 01 2011

For a number of reasons, I’ve been thinking about price a lot this week.

The head of the dispute resolution team was unconvinced his business development director had got the price right on this bid

Firstly, the Holden Group’s excellent newsletter plopped through my virtual letter box with a leader on righting the wrongs of panic pricing. Next the Harvard Business Review had a very thought provoking article on adaptive pricing strategies, and finally, I went to an internal workshop with one of our group pricing specialists (looking at the link between product strategy and pricing).

Much is written about the death of the hourly rate and the new pricing models emerging in the legal profession, but there seems to be less material about the “why”, which to my mind is an important step before the “how”.

In the past, much law firm pricing often didn’t go much beyond volume based discount: If you spend £X (thousand/million – delete depending on size of account) with the firm in a year, we will discount our hourly rates by Y%.

The rationale presumably included a desire to make the pricing appear more competitive, to encourage a higher spend by the client, and to make the client feel “valued” (in reality of course, this strategy doesn’t do much to connect the firm’s activity to value delivered to the client at all, but that’s a subject for another post).

With law firm clients becoming more savvy purchasers these days, this type of model is likely to be met with questions about additional discounts for single sourcing, requests for further discounts coming from efficiency gains, and discussion about how the firm will provide an optimal team structure and resourcing model.

Now while it easy to find fault with what is a fairly unsophisticated model of discounts on hourly rates, I spoke to a general counsel of a listed company last year, who proudly told me how with one of his regular advisors, he regularly negotiates 50% discounts on his bills.

The idea of a notional discount (whether volume based or otherwise) clearly appealed to him, and he seemed genuinely surprised when I suggested that the law firm might be anticipating this conversation and factoring this into their pricing. I also made the point that negotiating bills every month might not be the best use of either his time or the partner at the (very well known!) law firm, but I began to wonder if he secretly enjoyed the process and the little victories it brought (I know, I know, I’m no Sigmund Freud).

When it comes to pricing strategies, the other other “old favourite” of the law firm tender is the “we’ll buy the work” approach – the idea that the firm will price very low (often at or even below cost) to win a significant piece of work, and then develop a relationship with a client which will allow the firm to secure an ongoing stream of more profitable work.

While of course penetration pricing is a proven strategy in plenty of other markets, my concern here is that many law firms don’t back this approach with the rigor needed to execute it successfully. Firstly, the scope of the project is often underestimated leading to higher costs than anticipated. Secondly, the price is set by reference to a figure that the law firm believes is needed to win the work. Rather than being based on real competitive intelligence, or with reference to a database of market prices, it is often just “gut feel” or based on informal signals from the client as to what will be needed. I’m a big believer in intuition in the right context (Blink by Malcolm Gladwell is well worth a read) but with a pricing decision, it should be one of many factors taken into account, rather than the only factor.

The post has meandered a little this week, but the key takeaway is before you start to build a pricing model, spend a few minutes to work out what you are trying to achieve. With that in mind you can then build a model that works, hopefully for you and the client, meaning that, as the game show says, everyone’s a winner…..

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Can you quit your job?

24 01 2011

I got an email from Linkedin last week, letting me know that 80+ people in my network had changed jobs last year. Now aside from the fact I love these type of analytics, the email made me stop and pause for a number of reasons, not least because I myself shifted jobs.

The revolving door at Thatchwick & Partners saw lots of action last year

The trend that most intrigued me when I looked more closely at the email, was that although lawyers are undoubtedly the biggest single group of contacts I have (having worked in the profession for almost 15 years), they represented a relatively small proportion of the 80 or so people that changed job.

Why is that?

I then started to mull over why people leave jobs and why they stay.

I’d love to find some attrition statistics for the legal profession, and find out if there is less mobility than within comparable industries.

Around ten years ago, I recall there was a huge demand for mid-qualified associates (with around 5 years of experience) because this group had been the target of much of the cost-cutting that had been a feature of the previous economic downturn. As the market picked up (particularly in corporate, driven by the dotcom boom) it seemed that wages shot upwards and opportunities for lawyers in this category were plentiful.

There was much talk about how the traditional law firm model of working your way up from trainee to partner was on its way out, and the market would never be the same again. Much has been said and written about the erosion of loyalty in the workplace and the changing nature of the “psychological contract” between employer and employee generally, and although lacking hard data, I’m sure lawyers do move around far more than they used to which seems to me to be following a basic social trend in the Western world.

But is this all relative? Compared to other industries, is the legal workforce still pretty stable?

It strikes me that there could be some sensible reasons why this might be the case. Firstly the partnership model, while constantly evolving, still maintains some fundamental differences from a corporate structure. With the owners of the business able to dictate who joins “the club”, assessing potential candidates in the workplace over a sustained period of time offers the partners a way of ensuring the culture and profitability of the firm are maintained, and provides an incentive for the senior assistants to stay at the firm.

If the assistant knows they are on the partnership track, the associated rewards (be that higher remuneration, the ability to have a say in decisions, or simple status and prestige) may provide a powerful incentive to see the process through. Moving firm could simply be a passport to start that process again, but at an earlier stage.

Moving also involves risks for all concerned. The lawyer may move firm and find the grass is not always greener and not settle in the new firm. The firm might find that a new lawyer is competent, but just doesn’t fit with the culture or values of the firm. While it is certainly an oversimplification to say that lawyers are risk averse, there’s no doubt that lawyers are often immersed in risk assessment and management (of a sort) as part of their job, and decisions like career changes will undoubtedly be well thought through before being finalised.

The other angle that I wondered about, was the degree to which specialisation in large law firms works against job mobility. My own personal experience (particularly the move from private practice to in-house) made me see how the transferable skills that lawyers develop can be used effectively in many different ways in a commercial environment.

However, in private practice, the trend to specialisation usually starts right after qualification (if not during the training contract) and I can certainly understand the reason for this. If for example you are an employment lawyer, the law is so broad and so fast moving, I for one would certainly have struggled to keep at the cutting edge of a practice if I was also trying to keep abreast of changes in other areas of law (like IT/IP for example).

A consequence of this is of course that when a lawyer has been doing one type of work for five years or more, they will tend to define themselves as a particular type of lawyer (rather than look at their skills and competencies) and look for similar roles. This doesn’t cause a problem if the lawyer is happy doing this type of job (and of course many have very fulfilling careers in a single specialism), but if not, I suspect it does hamper job mobility.

The credit crunch has led to firms showing much more flexibility in retraining staff to help retain and manage their workforces, which given the cost of recruitment and the investment in training lawyers, is understandable.  It will be interesting to see if this shift has any long term impact on lawyers moving firms – perhaps working in different areas will open up new career avenues for lawyers, both inside and outside their current workplace.

With the profession facing real change from deregulation, commoditsation and globalisation, law firms are going to change and new competitors will emerge. As a consequence, new legal roles will emerge and perhaps some existing ones will change or disappear.

For what it’s worth, I think that for most organisations, getting the right balance of stable, trusted employees, and new blood with new ideas is challenging. Too much of either causes problems. Mobility within a firm can help provide flexibility here, but will be more difficult for some organisations than others.

From an individual’s perspective, I’ve always taken the view that a person’s career is their own responsibility, and it is for them to find the roles that will both satisfy and grow them.

So with that in mind, what do you think you will be doing next year?





You are wrong. I am right.

16 01 2011

I read a great book recently called “The World Cafe; Shaping The Future Through Conversations That Matter” (by Brown and Isaacs). It’s all about a new form of dialogue that allows people to access a group’s collective intelligence, and was a fascinating read. If it all sounds a bit woolly, the principles are all heavily grounded in research and case studies, and I plan to try the approach out soon, and will let you know how I get on.

Andrew smiled at the World Cafe, safe in the knowledge he was absolutely, hundred percent, right

Anyway, one of the points that really made me stop and think was a passage around people fighting to prove they are right, and in particular pointing out that you may well win the argument, but in doing so, what has been the cost?

This seemed to resonate with me in my capacity as (former!) lawyer. It might be a stereotype, but lord knows lawyers do like to prove themselves right. Maybe it’s the type of people who are attracted to the law, maybe it’s the training and experiences that lawyers have, but if you put five lawyers in a room, I bet at least two of the five would argue black was white if the other three had already asserted that white was, in fact, white.

I started to think about this from two different angles. Firstly, developing the ideas in the book around the impact on relationships and individuals resulting from a dogmatic and “robust” approach to an argument. How many people have notionally “lost” an argument, and then (a) sat and simmered, wishing ill on the victor; and (b) not been convinced that they were in fact wrong anyway?

Given the turbulent nature of the legal market today, there are of course an increasing number of challenges that law firms and lawyers face, and if many of these end up in arguments and disagreements, what does this do to the web of relationships that underpins the organisation (which are of course critical in a knowledge-based organisation), as well as the morale and energy of those working there?

Often when a person expresses a point of view, if it is attacked, they will dig their heels in and defend their position more passionately, rather than take on board an alternative perspective.

Many of the classic negotiating texts (like “Getting to Yes“) are based on ways round this problem, and there is a heap of  research from the psychology of influence that can help explain this (Cialdini is one of my favourite authors here) – in essence society likes people to behave predictably. As a result many countries encourage people to behave consistently, and consequently once a point of view is stated, people will fight to defend it (and appear consistent) rather than change their mind.

This brings me on to my second stream of consciousness, which is based on a lot of Edward De Bono’s work around how people think in Western society. He aims a lot of criticism around our preference for “socratic argument”, where a selection between two competing ideas is made through knocking down the opposing viewpoint, rather than constructively exploring the issue and looking for alternatives.

In a law firm, where colleagues are often competing for resources, would it be possible to examine these challenges more collaboratively, or is that niave?

What if the disagreement is with a client? Or another team? Is the issue resolved with one party “right” and the other “wrong”? The dynamic is undoubtedly different from being across a negotiating table, but often the behaviour is very similar, and not everyone is a collaborative negotiator.

When working as an in-house counsel, when problems arose I was much less interested in pointing fingers, and more interested in sorting out the consequences quickly and effectively, working out how the problem arose (the framework in the book “Difficult Conversations” calls this assessing “contribution”) and then making sure we (collectively) avoided a re-run. I found this productive, and the external counsel took a similar problem-solving approach to drive a deeper relationship and more effective service delivery. I don’t pretend it was perfect, but I do believe it was an improvement on the blame game, even though I didn’t get as many opportunities to demonstrate I was right (which of course I was!).

I hope that has provoked some thinking and would be interested in any comments you may have. Please note however, that if you express a different opinion to me, you will be wrong and I will be right………





Top 5 sales FAILS (for lawyers)

9 01 2011

In a fit of New Year’s good intentions (see last week’s post on resolutions) I’ve been scouring the Internet to find out how to be a better blogger. All for your benefit my friendly reader…

Anyway, one of the suggestions I found (which I liked), was “write a list post”. I wondered what an earth a list post was, and found out that it was a post, that is based around (can you guess yet?) a list! Brilliant! So topped off with a sexy title (well I liked it), here goes…..

Although Sarah's sales figures weren't great, at least she was in the ballpark

5. No homework.

When I was in-house, I often used to start conversations with lawyers who were selling to me, with “what do you know about the company?”. This was not to be difficult (if I was being difficult, I would have asked “so, what do you think of our share price this week?”) but so I could provide some helpful context for the meeting.

The number of lawyers from well-regarded firms that crashed and burnt at this stage of the meeting was phenomenal. The smell of failure often used to be tangible, as I was faced with “I’ve, er, looked at your website” or “I think I have a high level view”……

To be honest, I didn’t expect anyone to know chapter and verse on the company (although those that were well briefed made a very good impression), but often those who had been on the website didn’t seem like they had got much further than the homepage. At that level it’s hard to see how they had started to think about our needs at all, let alone identify the current issues we were facing.

2. A barely smouldering platform

It’s often said that one of the big problems law firms face when they sell services, is that they are often a distress purchase (litigation etc) and if the client doesn’t have an immediate need, they won’t buy. While there is undoubtedly some truth in that (although I think litigators can provide a wide variety of preventative services), even for non-contentious services, the client will invariably have to have a clear need before buying.

To highlight this need, sales professionals often talk about “the burning platform”, which to my mind suggests a dialogue when a need is uncovered and the consequences explored, to the point when the prospective client realises they need to act quickly. Talking to a number of corporate counsel, a fairly common experience is that a conversation with external lawyers who are selling identifies an issue that it seems like it needs addressing, but there’s no real need to do it right now, and it goes on the “must do later” list that all in-housers have. The platform is gently smouldering, but certainly not burning.

Hardcore sales professionals may shake their head and lament of that legendary ability to “close”, but to me I think it’s often both a failure to explore the issues fully, and also perhaps a lack of familiarity of the sales process as whole, rather than a particular skills gap.

3. Capability mismatch

Often a prospect or client will articulate a need, but for a variety of reasons, the law firm is unable to meet that need. It maybe capacity, it may be capability, but it becomes clear that the lawyers selling are not the right team for the job. I’ve seen it in a number of scenarios – a solid UK firm but didn’t have the European experience for a particular project; a great sole practitioner but without the resources to tackle a larger transaction; a small office from a global firm without the local capacity to manage a set of instructions in a timely fashion.

Personally, my own preference in these situations is for the firm to identify the challenge and hold their hands up. This allows us then to work around and find a solution (e.g. the firm could work with other advisors or maybe not get the work at all, but generate a stack of goodwill by finding an alternative). Surely this must be better than over-promising and under-delivering?

2. Disregarding the relationship status

This is another personal perspective, and of course many in-house counsel (often for sound reasons) take a much more transactional approach to instructing law firms, but for me sales conversations were usually part of a much wider relationship. If indeed that is the case (and the good firms were very savvy at using client review meetings to explore my current challenges), then the overall temperature of the relationship should be considered when working out whether a sales conversation is appropriate.

I always took a realistic approach to legal work, and never expected my external counsel to churn out flawless work time after time. No matter how good your standards and quality control, the practice of law involves human judgment, often significant pressure, and input from a variety of sources. What was important is how any issues were resolved – ideally, in a pragmatic, non-judgmental way that identifies the causes, deals with the consequences and puts in place a remedial plan to stop recurrence.

While that may sound idealistic, and to some perhaps a touch understanding (think tough on the problem, not the people), I did  however take a pretty dim view of being sold to in the aftermath of a real problem. I remember one particular challenge, where members of my business had repeatedly ignored the company’s outside counsel policy, and the firm involved had ignored the legal team’s request to notify us whenever they were contacted by our internal clients. I had asked for a face to face meeting with our account partner, which given the previous discussions on the subject, meant this really was the last chance saloon. To say I was surprised when he turned up with two colleagues, to tell me about the services their departments offered, was something of an understatement.

Sadly, that wasn’t the only time it happened, but each time it did I was surprised that the firms involved weren’t able to take the temperature of the relationship before making the call.

1. Talk, talk, talk, talk, talk….

Those that read this blog regularly know that I’m a big fan of the S.P.I.N. sales methodology. This is all about asking questions to uncover needs. I was always open to being sold to in this way (even though I was aware this sales method was being used) because to my mind if a genuine need was uncovered, and a law firm could help me with the need, then why wouldn’t I be interested?

The polar opposite of this is when a law firm tries to sell by talking. And boy do so firms talk……

This is how many offices we have (fascinating). This is how many partners in our Geneva office (great). This is what the directories said about us last year (really?). This is a really big we’ve recently done (which is not relevant here).

You get the picture.

I’m perhaps being overly harsh. There are of course times when it’s useful to find out some details about the law firm, but please (1) remember the client can ask if he/she wants to know more; (2) I can read, and may well have done some research on your firm – perhaps that’s the reason you are having the meeting? (3) many in-house lawyers will have been in private practice for a long time, and will know many of the firms well.

That said, one meeting sticks in my mind as the biggest sales fail of my in-house career. City firm had a meeting with me at their request. Talked constantly for about 45 minutes about their firm and how wonderful they were (I was feeling charitable, and let them use the allotted hour as they wished). At this point I asked what they knew about my company. “Very little” was the unspoken answer. I spent ten minutes outlining the company, what it did, how the legal team was structured, when we used outside counsel and what type of firms we tended to use for particular types of work, and why we valued long-term relationships with our advisors. The meeting concluded with the lead partner cheerfully saying “so, I suppose you’ll just look for a piece of work to give us a try, and then we’ll take it from there?”.

FAIL.





Meaningful New Year’s resolutions

3 01 2011

I know it’s a cliché, but it’s that time of year when all the talk is of resolutions. So take a break from diets, exercise and learning to play the ukulele/starting a salsa class/swimming the channel, and take the next ten minutes to think about some simple  steps you can take over the next 12 months to transform your practice.

The Head of Litigation's resolution to run the 20 miles to work everyday caused concern among the management team

Before I offer some suggestions (you knew that was coming didn’t you!), let me caveat them by saying that while none of the suggestions are rocket science, implementing them regularly will require behaviour change (if of course you are not doing them already), and behaviour change is hard. There is, however, a growing body of research-backed literature on how to establish new behaviour patterns, so help is at hand if you want it.

When I jotted this list of suggestions down, I tried to get a list that built on the piece I wrote at the end of 2010 on value disciplines (which is here) and in the spirit of that piece I hope you find something of value to try, adapt or play with…..

(Really) love your clients

Identify your five best clients. Best might mean different things to different lawyers – maybe they are the organisations you want to work with most (either external clients or departments/subsidiaries if you are inhouse counsel), maybe they are the organisations that provide you with the most revenue and/or profit, perhaps they are the clients which stretch and grow you most. Whatever the reason, make the resolution to really get to know them and their business over the next 12 months. Become intimately acquainted with their challenges. Read around their industries. Understand their job.  Know what their competitors are doing. Anticipate their legal needs before they do. Tailor your service for them. Get to know them as human beings. Make sure that every week, you are doing something like this to deepen and strengthen the relationship. Score the relationship every quarter (if appropriate, ask the client to score it). Ask for nothing extra from the client yet see the benefits unfold with the months of the year.

Investigate how you work

Take a piece of work that you or your team do regularly. It can be a piece of client work (whether in a law firm or in a law department) or a process that supports the work  (administrative, knowledge management, business development). Next put a couple of hours aside, and lock the main participants in a room with a flip chart, some big markers and a stack of post-it notes. First list the key clients for the process (this can be inside or outside the organisation) and then work out what are the key objectives of the process – what is it designed to achieve and what are the best metrics for success. Next draw the process on a large bit of paper. This doesn’t have to be complex – put each step on a separate post-it note, arrange the steps in order (showing decision points and variations if required) and then use the pen to link them up. It might be that this step in itself takes some time, particularly if several people perform the task in different ways. However, don’t spend more than an hour on this step.

Once you have a visual view of the process, think about how you can improve it. Think back to the people you identified as clients of the service – what does “better” feel  like for them? Is it faster? cheaper? in a different place? with fewer errors? in a different format? including different information? Once you have established what better means, work how how the task could be done differently to achieve it. A useful question is “if we were a new organisation looking to do this job optimally for the first time, how would we do it?”.

When you have some ideas for improvements, identify the top three (tip – to rank them think about the impact the change would have versus the ease of implementing it) and then set yourself a timetable for implementation. Aim for one of these two hour workshops a quarter – you could either choose a new task each time, or stick with the same task but look to continuously improve it.

Take a product to market

Now while at first sight this might seem irrelevant for corporate law departments, while the terminology might not seem as appropriate as for a law firm with an external market, the process itself can devliver real value to corporate counsel and their clients. As for law firms – well, some firms are already well practised in product development, while others are dabbling their toes, but if you haven’t thought about it, perhaps this is the resolution for you….

Firstly, start with a particular group of clients you think you can help. Work out what are the characteristics that define this market (is it an internal department, a particular group of colleagues, a set of organisations in a particular vertical, a group of clients or prospects in a particular geographic area etc etc). Then focus on their needs – this is absolutely critical. To be successful I absolutely subscribe to the theory of “outside-in” thinking in the book “Tuned-in”, which stresses the need for a new product to meet a defined market need.

Once you have a target audience for your product (and don’t get stressed out about the word “product”, a service is just fine) and have worked out a need, then work out how you can meet that need and help the clients (be they internal or external). Identifying what is different about your solution from what is already available is a useful step to begin to formulate your value proposition (see previous posts for discussions on this, or even better have a look at Jill Konrath‘s book “selling to big companies”).

The next step is to work out how to build and deliver the service, and validate the financial model behind it. If this sounds intimidating, it doesn’t have to be. At i’s most simplistic, work out the cost (which for lawyers is likely to be largely based around the cost of people’s time, both in developing and then delivering the product) and then work out the revenue (for an inhouse service the benefits may be expressed other than in revenue terms). This is no more complex than the price (see Mark Burton’s great book Pricing with Confidence for help here) multiplied by the amount you think you can sell.

If the business case stacks up, then get it built and out there. If this is the first product you’ve ever developed, my suggestion is to start with a low cost, low visibility offering to allow yourself to learn as you go through the process. There is certainly something to be said for getting to market quickly and then revising a product, rather than getting it perfect and missing the moment (of course the validity of this rule depends on the circumstances).

So what has this done for you? Well, if you’d not taken a product to market before, hopefully you’ve learnt something and will be inspired to learn more and do it again. For newbies or old hands, hopefully in engaging with your target market you have learnt something more about their needs and had dialogue that has created value for all involved. And finally, if you’ve done a good job with your product development, then hopefully the revenue (or other value) from the product is rolling in!

Happy New Year

There are of course lots of other resolutions we could make as members of the legal profession – I’m very interested in others you want to share. Suggestions for this blog are always welcome too, and to sign off this week, let me wish you all a happy, healthy and successful 2011.





2010 The blog in review (thanks readers)

2 01 2011

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

Healthy blog!

The Blog-Health-o-Meter™ reads Wow.

Crunchy numbers

Featured image

A Boeing 747-400 passenger jet can apparently hold 416 passengers. This blog was viewed over  8,000 times in 2010. That’s nearly 20 full 747s.

In 2010, there were 45 new posts, growing the total archive of to 54 posts.

The busiest day of the year was November 9th with 170 views. The most popular post that day was When good people leave.

Where did they come from?

The top referring sites in 2010 were linkedin.com, wordpress.com,the law society gazette’s website, law.com, and the careerist, which largely corresponds to the web discussions on which I am most active.

Many visitors from search engines came after searching for intelligent challenge, the curse of knowledge, intelligent-challenge.info, intelligentchallenge, and oliver drennan (Oliver Drennan, if you’re reading this, your invoice for advertising is in the mail!).

Attractions in 2010

These are the posts and pages that got the most views in 2010.

1

When good people leave November 2010
2 comments

2

About Intelligent Challenge November 2009

3

Expand your mind October 2010

4

Your training was useless. Discuss. August 2010
8 comments

5

The insidious side of hourly rate billing November 2010
4 comments

So finally, a big thank you to (1) all my readers – I appreciate each and every one of you; and (2) WordPress for creating an awesome platform!

Watch for the first “proper” post of 2011 in the next couple of days.