Law firms would be wise to see their pricing function as less about money and more about how they define their value as a firm to their clients
During my first semester of university, I distinctly recall a professor who asked me to read My Kinsman, Major Molineux. I returned to class puzzled, wondering why in the world anyone cared about how an 18-year old was observing all manner of chaos in colonial Massachusetts.
I then read the words on the page, purely for the utility, and my professor bluntly made sure my entire class knew it. What I took away lacked any substance. Simply, I had missed the point.
The way that we understand literature should be the same way that we understand how teams across law firms and corporate law departments add value. They help tell the story.
When price is not pricing
For any engagement, when a client asks about price, it is very easy for our focus to stay there. Price is about money, which is tangible and quantifiable, which seems straightforward. It is consistent, which makes it a utility. Yet, this is where pricing misses the mark. When we start to define the prices of legal services as a utility, the teams that manage prices will start to be defined the same way.
Pricing teams within law firms, all too often, are held to discrete tasks like rate setting, flat fee pricing, and efficiency, with one mission in mind: boosting profitability. This is a worthy endeavor, of course, as firms see a clear cause and effect that ends in a much larger pile of cash at the end of the day, which partnerships love.
However, any price for law firm services represents what that firm is today and how that firm will deliver value to clients. That said, then the role of the team that sets and manages price has to be deeply ingrained in how the law firm competes and executes its strategy on a day-to-day basis. More importantly, the role of a pricing team has to start with clients in mind.
Pricing is strategy
The law firm of the future will (and should) launch every team and every project by asking the question “How does this help our clients?” This means that empowering a pricing team requires a law firm culture that does not define them as a utility or function, but as a differentiator to advance a firm’s strategy.
How law firms ensure that their pricing professionals become integral to strategy development at the firm, especially at the client and matter level? They should consider three approaches:
1. Empower them — If pricing is purely considered to be a function, then it will be viewed as administrative and, consequently, either as an afterthought or operational task. If instead, pricing professionals are empowered by firm leadership to evaluate, recommend, and implement pricing arrangements then they will be better equipped to determine how pricing scenarios can be aligned with the broader client or matter strategy.
2. Involve them — Including pricing team leaders in firm discussions related to growth opportunities, areas of focus, client relationships, lateral hires, and strategic planning sessions goes a long way to ensuring their involvement. Even if price isn’t a leading consideration at the particular time of these meetings, pricing professionals will be better positioned to provide recommendations when appropriate, as they will understand the bigger picture and their input will be informed through broader considerations.
3. Educate others — Consider all of the business professionals that directly support the practices as an extension of the firm’s pricing team. Familiarize those individuals with how price is a critical part of firm strategy and how it functions as an enabler of business growth.
The goal of these education efforts is to have business professionals consulting the pricing team on a variety of practice efforts, including such areas as:
- new business pursuits (business development);
- market positioning and brand building or awareness activities (marketing);
- lateral hiring (attorney recruitment);
- business planning (practice group professionals); and
- legal project management, knowledge management, and the implementation of new practice technologies that enable the attorneys to practice more efficiently and increase value for clients.
Business professionals from these particular areas within the firm are well positioned to bring in pricing professionals, promote their capabilities, and recommend attorneys to discuss strategy with them. Additionally, as business professionals often lead initiatives that are aligned with the firm’s strategic plan, they must have a deeper understanding of how price is interwoven in all aspects of client strategy.
Consider this: If price is a part of a firm’s brand, shouldn’t that require pricing professionals be included in firm brand strategy discussions and go-to-market plans?
My Kinsman, Major Impact
The law firm of the future will allow all of their teams, not just pricing, to be a critical part of their strategy. This is not just a view that puts clients first, but one that will demonstrate how a law firm delivers value for years to come. This should challenge how we think about our pricing teams.
That day, a university literature professor gave me a masterclass that focusing on the pure utility of words on a page; yet, the lesson led to something simple and fleeting. When I took a step back and observed how all of the pieces fit together, I saw a work of art. The law firm of tomorrow will be doing just that.