At a workshop at the recent Marketing Partners Forum, attendees learned how a shift toward data-driven right pricing is impacting legal services price negotiations
This article was written by Wade Iverstine, Assistant General Counsel at Invenergy.
DANA POINT, Calif. — Purchasers of legal services have subtly changed their focus to the essential part of pricing: the human interests at stake. And this shift offers law firms and their clients an opportunity to not only get the right price for the right results but also to establish a new line of questioning for the mountains of data that sit largely unusable. With the right questions, that data should be powerful pricing tool.
In the workshop, titled O Pioneers! New Frontiers in Law Firm Pricing Strategy, at the Thomson Reuters Institute’s recent 28th Annual Marketing Partners Forum, attendees learned how this paradigm shift is happening day-to-day at the highest levels of legal services pricing and impacting legal services price negotiations. Susan Raridon Lambreth, Founding Principal at LawVision Group & Chair and Founder of the LPM Institute, moderated the workshop.
Panelists discussed how the use of alternative fee arrangements has, over the past few decades focused on a narrow set of queries that account for the cost of time. Thus, at almost any legal conference we’ve all just come to expect a lecture on “the death of the billable hour” (which is so 1998) or fitting a cap over a collar (so 2008) or some other trick to wriggle our way out of the billable hour routine that law firms have clung to. It never really works in practice, of course, because ultimately lawyers and clients can figure how to price the final matter invoice or else break up. But positional, walk-away tactics over price in a relationship business cannot be the right way to think about the fee discussion.
Without a long lecture on the mechanics and taxonomy fee arrangement options, the panelists shifted to focus on the humans involved in the matter. To do this, they first brought the discussion to life by guiding the audience through a mock initial interview, followed by a session of competitive fee arrangement pitches.
Accounting for human interests
Instead of probing the pitches on time and costs issues, the panelists revealed that if both the client and the attorney account for the individual human interests, the fee discussion can promote a longer-term and more efficient business relationship. For example, when presented with a “win-win” success fee proposal, panelist Aaron Boersma, Legal Operations and Strategic Pricing & Analysis Lead at Google, pushed back, looking for answers on how the law firm will account for their top talent getting dinged in compensation if they fail to achieve the success fee. Another panelist, Karen Lessick, Associate General Counsel at Invenergy, probed the pitches on how the new matter can allow the firm to train younger lawyers on the client’s business and develop a deeper bench of talent for the client use over the long term.
In the client’s interest, Chris Ochs, Director of Outside Counsel Management at Citigroup, reminded the participants that he is not in the business of cost engineering every legal engagement to find the lowest bidder. Instead, Ochs pointed out that there are individual managers and in-house lawyers on his team that need the engagement to work, work well, and avoid recurring discussions about task, scope, and billing.
Without saying it, the workshop revealed that the top consumers of legal services are employing the practice of interest-bargaining that were laid out by Rodger Fisher and William Ury in their book, Getting to Yes: Negotiating Agreement without Giving In. This change moves attorneys and clients away from old-timey, tit-for-tat bargaining over the price of attorney time like a commodity, and instead into a more expansive search for how the attorney can best achieve the results that the client needs.
As the discussion about fees expands the number of interests at stake, now the data concerning those interests — such as, law firm retention and promotion, in-house line attorney satisfaction, iterations of scope and billing discussions — can be more easily identified in the heap of data sitting on law firm and client servers.
For example, if the law firm knows that the client is more interested in using a matter as an opportunity to build a new internal process or a deeper bench of outside talent for similar issues, as opposed to a specific near-term result, the law firm can bring the client into the conversation about phasing costs over time and how that might affect their key talent’s success at the law firm. Each of those multiple factors have a historical data set sitting on the law firm’s and client’s servers, and looking forward, the expansive conversation can help inform how to continue honing those data sets.
As the workshop demonstrated, these more expansive discussions around mutual interests can ultimately help the industry probe the mountains of data on which it currently sits for more and more particular, useful questions about the price of legal representation and the human needs at stake.