Full Description
The legal profession is undergoing a significant transformation in how legal services are priced. The traditional billable hour model, which has dominated for decades, is increasingly being questioned by clients, firms, and legal professionals alike. The world of legal pricing is evolving rapidly, driven by shifts in client expectations, technological advancements, and new market dynamics. Law firms and legal professionals must adapt to these changes to stay competitive, ensure profitability, and meet the demands of a diverse and increasingly cost-conscious client base.
Mastering Legal Pricing: Strategies for Profit, Value, and Innovation explores the evolving landscape of legal pricing, addressing the challenges and opportunities that law firms face in adapting to modern economic demands. From the traditional billable hour to alternative models such as subscription-based services and value-based pricing, this book examines the impact of client expectations, technology, and evolving business strategies. It provides insight into the tools, frameworks, and strategies necessary to create more transparent and efficient pricing models that align with both client needs and law firm profitability.
Contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
About the editor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
About the authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
Chapter 1: The changing landscape of legal pricing . . . . . . . . . . . . . . . . . . . 1
By Michael Roster
Chapter 2: Rethinking legal pricing - from billable hours to value and profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
By James G. Perkins, Ph.D., chief operating officer and chief compliance officer, and Tiffany M. O'Neil, J.D., director of KM and technology innovation, Procopio, Cory, Hargreaves and Savitch LLP
Death of the billable hour - maybe? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
AI in action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The near future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Chapter 3: Aligning client expectations with value perception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
By Stéphanie Hamon, global head of legal external engagement, HSBC
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Value is outcome-driven and context-specific . . . . . . . . . . . . . . . . . . . . . . . 13
Pricing models must reflect value, not time . . . . . . . . . . . . . . . . . . . . . . . . . 15
Scoping as the foundation of value-based engagement . . . . . . . . . . . . . . 16
Communication and expectation management . . . . . . . . . . . . . . . . . . . . . 18
Performance metrics and accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Smart resourcing and panel management . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Governance and internal alignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Collaboration and relationship building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chapter 4: Applying value-related qualities for better fee arrangements and greater client satisfaction . . . . . . . . . . . . . . . . . . . . . 29
By Steven A. Lauer
The absence of a measure of"value"for what lawyers do for their corporate clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Recognizing and taking advantage of the utility of value-related qualities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Value-related qualities impact more than just fees, but all those effects relate to cost and value . . . . . . . . . . . . . . . . . . . . . . . 35
The parties also possess VRQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
The search for value and the question of fees . . . . . . . . . . . . . . . . . . . . . . . . 38
Chapter 5: The role of data and analytics in modern legal pricing . . . . 41
By Tanbir Jasimuddin, freelance finance and analytics transformation director
Client demand - the billable hour must die . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Data and analytics - the cornerstone of modern legal pricing . . . . . . . 42
Data-informed pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Pricing for uncertainty - the quantitative techniques . . . . . . . . . . . . . . . 46
Building the analytics stack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
The people side of pricing technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Measuring performance and profitability . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Into the AI-enabled future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Chapter 6: Behavioral economics and legal pricing - understanding client psychology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
By Richard Burcher, founder and managing director, Validatum®, and founder and CEO, Virtual Pricing Director®
Pricing as psychology, not just arithmetic . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Behavioral economics - a primer for legal professionals . . . . . . . . . . . . . 57
Understanding the client mindset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
The psychology of fee structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Choice architecture in legal pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Framing and narrative in price communication . . . . . . . . . . . . . . . . . . . . . 63
The psychology of discounts and concessions . . . . . . . . . . . . . . . . . . . . . . . 64
Client behavioral segmentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Practical applications in pricing conversations . . . . . . . . . . . . . . . . . . . . . . 67
Case studies and examples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Pricing as a strategic differentiator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Chapter 7: Transparency and trust in the legal industry . . . . . . . . . . . . . . 73
By Jack Kingston, account manager, BigHand
Building trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Is the billable hour getting in the way? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Transparency matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Empowering clients and increasing collections . . . . . . . . . . . . . . . . . . . . . . 75
Realization and increased collections for the law firm . . . . . . . . . . . . . . . 75
The power of utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Flat-fee services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Communication and process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Clear scope of work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Leveraging technology to improve client communication and transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Data visualization tools - keeping it simple(r) . . . . . . . . . . . . . . . . . . . . . . . 77
Predictability prevents pain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
People, process, and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
The evolution of the pricing director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
What about AI? Will it help or hinder communication? . . . . . . . . . . . . . . 79
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Chapter 8: Fixed fees and predictability - meeting modern client demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
By Richard Burcher, founder and managing director, Validatum®, and founder and CEO, Virtual Pricing Director®
The predictability imperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
The evolution of client demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Myths and misconceptions about fixed fees . . . . . . . . . . . . . . . . . . . . . . . . . 84
The economics of fixed fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Benefits for law firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Risks and challenges for law firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Scoping discipline and model design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Communicating and defending the fixed fee . . . . . . . . . . . . . . . . . . . . . . . . 89
Technology and data analytics as enablers . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Culture, mindset, and capability building . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Case studies, competitive advantage, and future outlook . . . . . . . . . . . . 93
Why technology solutions have emerged . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Chapter 9: Partner compensation and its impact on pricing strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
By Tim Corcoran, Corcoran Consulting Group
Following the R.U.L.E.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
The price of misguided metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Cost plus is a minus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Options for realigning incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Chapter 10: Aligning compensation with value . . . . . . . . . . . . . . . . . . . . . . . 113
By Benjamin Viney, practice lead GB and Ireland - Work, Rewards, and Careers, WTW
The psychology of pay and value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Increasing levels of transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Valuing and compensating the contributions of associates and partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
How has partner compensation changed over the last 40 years? . . . . 117
Valuing and compensating leadership roles . . . . . . . . . . . . . . . . . . . . . . . . . 120
Some practical suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Chapter 11: The intersection of technology and legal pricing . . . . . . . . . 125
By Richard Burcher, founder and managing director, Validatum®, and founder and CEO, Virtual Pricing Director®
Introduction - a pricing inflection point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
The hybrid legal service model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
The pricing conundrum of AI-enhanced services . . . . . . . . . . . . . . . . . . . . 127
Key challenges and issues in pricing hybrid legal services . . . . . . . . . . . 128
Behavioral and psychological dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Emerging models and approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
The productization of legal services - technology as a scalable asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
The inadequacy of traditional tools (Excel and beyond) . . . . . . . . . . . . . 131
From pain point to strategic asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
A strategic shift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Embracing the new pricing paradigm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Chapter 12: Navigating legal procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
By Steph Hogg, director of procurement consulting, Validatum
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Understanding legal procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Preparation starts long before the RFP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Preparation is a long game, not an event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Pre-positioning content and narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Winning is about preparedness, not just responsiveness . . . . . . . . . . . . 143
Strategic withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Clarify to win . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Beware round-number discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Turning loss into win . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Procurement as partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Chapter 13: Measuring success - metrics and KPIs for legal pricing models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
By Tanbir Jasimuddin, freelance finance and analytics transformation director
The importance of measuring performance - "what gets measured, gets done" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
KPIs vs metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Value drivers and the business model of a law firm . . . . . . . . . . . . . . . . . . 150
Defining the measures of performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Joining the dots . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 155
Embedding governance and discipline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Chapter 14: The future of legal services pricing - what do the next five years hold? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
By Richard Burcher, founder and managing director, Validatum®, and founder and CEO, Virtual Pricing Director®
Pricing at a crossroads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
The next five years - from safe bets to stretch bets . . . . . . . . . . . . . . . . . . 162
Horizon one - the obvious and overdue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Horizon two - structural and cultural rewiring . . . . . . . . . . . . . . . . . . . . . . 166
Horizon three - radical innovation and imaginative disruption . . . . . 169
Implications for law firms - adapting to a new commercial reality . . 172
Implications for clients - becoming co-architects of value . . . . . . . . . . . 175
The human element - mindsets, habits, and resistance . . . . . . . . . . . . . . 178
From theory to practice - what progressive firms should do now . . . 181
An optimistic future for those willing to lead . . . . . . . . . . . . . . . . . . . . . . . . 184
About Globe Law and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
