The number of pricing groups in law firms has been on the rise for a few years now. There is even a dedicated pricing conference (P3) which recently held its third annual event in 2015. The conference has roughly doubled in attendance each year. The number of firms with one or more dedicated pricing person is following the same trend. At the time this was drafted, around 40 percent of AmLaw 100 firms have at least one full-time Pricing Specialist/Manager/Director. Some have as many as five or six! (For a relatively complete list of such firms, see Patrick on Pricing's "roll call.")1 ALM Legal Intelligence's 2015 report on law firm pricing professionals reports even higher numbers; more than half of top U.S. firms have someone dedicated to pricing.2
That same report describes the characteristics of the "average" pricing professional. Most often known as the Director of Pricing & Project Management, he or she is working in a 500 to 1,000 attorney firm, is considered a member of the firm's senior leadership, sits in the finance department and reports to the CFO, and manages a team of two to five direct reports. This professional focuses on alternative fee arrangements (AFAs), but is also responsible for (in order of priority) profitability analysis, RFPs, budgeting, client fee discussions, and pricing training, and earns above $200,000, including salary and bonus.
Sounds pretty good to me! How do I sign up? In my quest to learn more about how Knowledge Management Professionals, who often naturally complement LPM programs, which naturally complement pricing initiatives, can support this new area of focus (see also "KM Professionals: a Natural Fit for LPM"),3 I sought more details on what pricing professionals do. What do they do all day? How did they get started? What skills do they have? What do they love about their jobs? And what do they struggle with? Many of the job functions are covered in an excellent read, Law Firm Pricing: Strategies, Roles and Responsibilities4 but what's it really like to be in this kind of role? What does the average day-in-a-life feel like? To better understand this, I spoke with three professionals from firms in different stages of formal pricing initiatives.
Matthew Laws, Senior Director of Practice Management, Crowell & Moring, LLP
Matt has worked at three large firms over the last ten years in ever increasing pricing-related roles. He has an MBA in finance and began in the finance department at Shook, Hardy & Bacon LLP, where he helped monitor and manage billing for a single, but very large, client with a multimillion-dollar yearly fixed-price arrangement to cover a docket of cases. In this role, he gained a deep understanding of the practice and the legal processes surrounding the work itself, which eventually led him to move from Finance to the Practice group. There, he continually analyzed the timekeepers and working teams, tracked budgets, etc., and utilized a Legal Project Management (LPM) tool to manage all case details. Those details, like how many complaints were filed, how quickly things seem to move in a jurisdiction, a history of decisions made on motions, etc., were used to help analyze and predict the likely direction of similar cases, which ultimately fed back into pricing.
Matt also holds a Master in Project Management. This background has undoubtedly allowed him to play both ends of the field (pricing on one end, LPM on the other). After the 2008 financial crisis, he moved to Reed Smith where there was a firm-wide effort to establish and manage alternative fees, including substantial fixed-fee projects. This gave him a chance to work with many large clients, although there he was focused primarily on pricing.
Pricing at Crowell
Most recently, Matt is the Senior Director of Practice Management at Crowell & Moring LLP, which is taking a holistic approach to pricing and LPM (his practice management group is responsible for both). On the project management side, the firm uses set criteria to determine which matters are likely to need active PMing. For instance, all AFA/value-based billed matters with significant risk are managed. Worth noting, around 15 percent of the firm's work is based on contingency fee or success-based models. Still another 15 percent of their business is fixed-fee. (This sum total of 30 percent is much higher than the industry average, based on various surveys.) Two lawyers and a paralegal that work on his team handle the project management role. Within the matter team itself, a project manager is assigned, most often a senior associate or counsel. They interface directly with the partner for the matter, as well as with clients, themselves, relying on Matt's LPM team for overall guidance.
On the pricing side, Matt has two financial analysts who monitor matter profitability and help define budgets. They also analyze financial data to identify emerging trends within a practice, for a client, etc. For instance if they start noticing heavy write-offs on hourly matters for a particular client, they will start digging into why. They may even limit the timekeepers who can bill to these matters. Crowell's CFO, with responsibility for reviewing and approving write-offs, engages Matt for input as it pertains to AFAs. Matt's team can provide such support such as additional LPM training or assigning one of his LPM attorneys to help out. Matt's team is also responsible for the continual revision of budget templates.
When I ask Matt to describe his typical day, he mentions that, while he reports directly to the managing partner lending a level of prestige to what he does, a little advertising still never hurts! To increase his team's utility, Matt spends time attending associate, partner and similar cohort lunches as well as practice group meetings, to advertise they are "here to help!" His approach is not to try to sell LPM but to focus on helping his colleagues create realistic budgets, using the many templates available. The project management aspects ultimately follow in time but without scaring off partners with more training or what may be perceived initially as overhead.
In broad strokes, he estimates spending 75 percent of his time working with partners on proposed budgets for existing clients with new matters, often under very short time frames. The other 25 percent falls into LPM, making sure profitability is good and meeting the client's budget expectations.
What surprises him the most about what he does is the breadth of legal understanding that his position requires. "You never know when the phone rings if it will be about a multi-district litigation case, a class action suit, an investigation, or some kind of transaction," he says. "Yet you need to be ready to ask the right questions regarding project scope. It takes time to learn the different processes, but our attorneys are usually understanding and good at guiding the conversation as needed."
When I ask what is one of the more interesting or challenging aspects of the job, Matt points to the assessing of software needs that complement this new area. "Off-the-shelf software typically doesn't meet the need," he says. "Building your own means you get to define the requirements, yet we are not a software company."
It's a double-edged sword, but they ultimately chose to build a custom solution. The first release of their tool is internally facing, although ultimately they want to make a client-facing version too. The system starts with the intake of new matters. If the matter possesses certain AFA criteria, then a matter plan is required and the system branches off into a matter-planning module. Once the plan is developed, it is reviewed for approval. Approved matters are then surfaced in a project management module to be used by the project manager and Matt's LPM team.
The responsibilities of Matt's team are constantly increasing, he said. "This is a really pivotal moment for the industry. Both clients and attorneys are interested in developing AFAs as a credible medium to provide high quality legal service at a value. I look forward to the continued growth of this space."
Kristina Lambert, Director of Strategic Pricing, Akin Gump Strauss Hauer & Feld
Kristina became Akin's Director of Strategic Pricing in 2015, after serving as a Strategic Pricing Manager and in other pricing roles for the past four years. "My background is primarily legal. I was a litigator for eight years and then obtained a Master's in Library and Information Science. My transition into pricing was actually a direct result of my moving towards a research/information services role." Kristina's knowledge of the legal process in general has helped in these roles. "As a litigator, I was required to submit budget estimates for the matters I was overseeing and for the department in general. There wasn't really a focus on 'strategic' pricing at the time, but it forced a closer look at matters and to be more thoughtful about the level of effort/cost involved."
Pricing at Akin
At Akin, the pricing function falls under a larger department, Pricing and Practice Management, headed by their Chief Practice Officer. Practice Management, Knowledge Services, Trial Service, and eDiscovery are also encompassed within the department. The pricing team includes Kristina, a legal project analyst and a pricing assistant. The CPO is also involved in pricing larger, more complex deals and in face-to-face client meetings. "Currently, the LPM function falls under the pricing role," she says. "The original goal was to have a full-scale LPM program, but as the needs of the firm became more apparent, the approach has shifted to more of an opportunistic one. As we move forward with the roll-out of our new pricing/practice management tool [Umbria], it is safe to assume that the requests for LPM will grow organically."
When I ask her what kinds of skills are required in this type of position, Kristina replies, "Budgeting and pricing go hand-in-hand. I think that pricing just takes it to the next level when you add in a profitability component. The ability to speak directly and candidly with partners about their matters is crucial in assisting them in crafting the appropriate pricing structure." She also says a certain level of mathematic proficiency is necessary.
So what does a typical day or week look like? "One thing I love about my job is that it varies from day to day," Kristina says. "My week typically includes a combination of fee conversations with partners, modeling potential pricing arrangements and providing content for pitches and proposals. The pricing group also handles the approvals for all write-offs firm wide, which includes analyzing the impact of write-offs on the profitability of a matter. Reviewing write-offs also helps us to highlight practice management issues."
When asked for aspects of the job she didn't expect to be dealing with, Kristina says she was surprised by the amount of time spent educating partners and others within the firm about the overall concept of profitability and the drivers of profitability. "I actually really enjoy the educational aspect of my job and have come to realize that this function is ongoing. I also didn't expect that within this role I would work with as many departments within the firm as I do." she said. "I anticipated working closely with financial services and the practice management team; however, I also work frequently with the business acceptance/risk management group, business development team, and the IT department."
Regarding the most unique aspects of the position, she says, "Most interesting to me is what I learn in speaking with partners and understanding the needs of their clients. Increasingly, clients are demanding different ways of pricing and managing matters. This presents an opportunity for our group to get involved and assist the partner in meeting those demands. I would have to say the most difficult aspect involves gathering information from multiple internal systems. We are currently implementing Umbria and have already seen how improved technology and data structuring can elevate the level of service we can provide."
Bart Gabler, Director of Pricing and Legal Project Management, K&L Gates LLP
K&L Gates hired its first Director of Pricing, Bart Gabler, in mid-2014. Bart has a JD as well as an MBA. In his consulting background, working for both McKinsey and PricewaterhouseCoopers for many years, he focused on a variety of management topics, including strategic planning, growth strategy and organizational transformation. He has experience in both client service as well as practice management that have been invaluable in his transition, which all started over a lunch with a senior partner of the firm who discussed a new role they were thinking about creating. Eventually, K&L's Global Managing Partner hired him for that position.
A Lean Approach
Bart jokes that his department, Pricing & Legal Project Management, is currently a "Party of 1." But he is part of the senior leadership team, and reporting directly to the GMP affords him the freedom and flexibility to work "across" the organization. "I have a close connection with other key departments, like Finance and Marketing, but also have the latitude to diagnose and assess things broadly across the organization," he said. "I'm able to meet with clients, the management committee, office leaders, practice leaders, etc., to help identify the agenda for pricing and LPM based on the pain points I hear about." Based on all of these meetings, Bart ultimately presented his ideas for the direction the firm should take to the management committee and firm partnership. After gaining their general agreement on priorities, he got to work.
"The good news is that I am starting from a solid platform but hoping to make constant improvement in what we do and how we serve clients. I'm initially focusing on matter planning and monitoring. This provides the foundation to address a range of other needs from more creative matter arrangements structures, more advanced budgeting, increased process improvement, etc. These efforts are not entirely new to the firm, so I'm trying to build some uniformity across the firm on these types of processes," Bart said. He has been in this role for one-and-a-half years. "The goal from the start was to be thoughtful about the change effort, to focus on acute pain points and create a longer-term transformation plan while fostering much of what the firm already does well."
Bart works with every single department from Business Development to IT to the PMO. He has a "virtual team" that includes partners, as well as project managers, analysts and program developers as he builds up the tools and best practices. Although he plans to keep a lean model and drive as much of the knowledge out to the timekeepers having daily client interactions, he is currently hoping to grow his centralized team to continue to support the growing demand. Some of the key roles Bart says he sees a larger team focused on include "data analytics and monitoring budgets, process improvement and mapping, supporting the rolling out of new tools, and working with client service teams on LPM activities like matter planning and budgeting."
I asked Bart about the skills needed for his role. He said, "I have to pull on lots of different levers, so a general business acumen that includes (1) an understanding of the legal business as well as the clients' businesses, (2) knowing the legal process and phases of work around different types of matters, (3) performing both financial and matter performance analysis, and (4) an ability to engage clients and colleagues in discussions around their business needs that necessitates clear, structured communication. But being a problem solver is what will ultimately get you a seat at the table. You need to be a creative thought partner—one who comes in with both open eyes and ears to hear the problems and talk through potential solutions. At times you need to be a change agent and help put vision into place, which is really exciting!"
He describes a typical week by the three roles he plays:
1. Client-Focused Work—Monitoring and communicating, reviewing ongoing matters for red flags and looking at pricing proposals, and working directly with client service teams.
2. Process-Oriented Work—Trying to establish a consistent process for the firm, so finding where in the process we are doing well so we can expand that effort, or where we are having some inefficiencies or pain points that we can address.
3. Problem-Solving Work—Looking internally for opportunities to improve and finding creative solutions to problems he encounters.
"One thing that has been quite interesting is the big impact that small changes bring," Bart says. "For instance, offering a client a few options in pricing instead of just hourly billing allows the client to engage in deeper discussions and ultimately fosters a better relationship. Focusing on a single pain point, like giving partners direct and easy access to matter performance data, provides clients with better, faster and more proactive service. Creating an automated process for the annual review of fee arrangements is another example. These were very discreet efforts that had huge impact on partners and clients."
On the most difficult aspects of his job, Bart notes, "There are an awful lot of stakeholders. Effecting change often requires a range of buy-in, and the vetting of ideas can be a bit cumbersome and time-consuming. However, I have benefited from those discussions, and it ultimately gets you to a better product, but debating with lawyers requires you bring your 'A game.' I really enjoy it and it helps protect us from mediocrity and ultimately leads to better adoption rates, as we move quickly once we get aligned." In short, "it is a challenging role, but I like the challenge and like the direction we are heading."
The demand for Pricing and LPM professionals to fill the expanding industry trend will be strong for a while. There are varying opinions about whether it is better to take a person with legal industry experience and provide the financial and/or project management skills they might need, or to take a person with those skills but from a different industry, and teach them about legal processes. Either way, there are many firms that are only now beginning to formalize their pricing strategy, so many opportunities are likely to be available. The unique combination of necessary skill sets can make it hard for firms to find the right talent. So, if you have some of the skills—and also find the above stories interesting—there may be a place for you in this developing area. The biggest challenge for firms will be implementation. Adopting a pricing strategy requires a huge change, and all change is hard. This is especially true for changes that challenge the way financials have been reviewed historically, focusing on profitability rather than simply billable hours.
1. Patrick Johansen. "Roll Call." Patrick on Pricing, 2015.
2. Chris Johnson. "Your Clients Want Alternative Fees: Is Your Firm Ready?" The American Lawyer. The American Lawyer, 24 Aug. 2015 (access required).
3. Lisa Gianakos. "Knowledge Management." Digital White Papers, July 2013.
4. Toby Brown and Vincent Cordo. "Law Firm Pricing: Strategies, Roles, and Responsibilities." Wilmington Plc., 2013.
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