Could a Pricing Officer Transform Your Firm?aderantuser
At larger law firms, pricing professionals—sometimes called Pricing Officers—are in high demand. According to Considine Legal Search, 76% of big firms now employ some sort of pricing officer, and 44% of these positions were created in the last two years. They also found that a bidding war for these positions is underway, with 28% reporting compensation packages of $250,000 or more.
In Considine’s view, this hiring spree “is a response by firms that recognize that they need help dealing with clients, many of whom not only want discounts but also proposals for non-billable hour pricing arrangements. Rather than composing as detailed an estimate as will fit on the back of an envelope, firms have turned to a new group of analysts who can sort through their internal data and practices.”
Understanding the cost of delivering the legal services a firm has to offer is often times one of initial goals of a pricing professional. Prism Legal recently transcribed a live webinar debate on the topic Should Law Firms Hire a Pricing Professional?. The case for hiring a pricing officer was compelling, and the legal expert on that side of the debate claimed that “A skilled pricing professional can dramatically increase profitability.” A skilled pricing professional must be able to “communicate effectively internally and externally (with partners and with clients).” The debater continued to say that, as expectations change, a Pricing Officer’s insight “can help firm leadership understand the market and profitability levers. Pricing professionals can focus on value. Pricing people can come from different backgrounds. Lawyers don’t have the right background; it’s more likely finance professionals do.”
With increased pressure from clients, among other factors, firms are reevaluating their pricing strategies. In his paper titled The State of Legal Pricing, Toby Brown, Chief Practice Officer at Akin Gump and thought leader on law firm pricing, says, “It is not surprising that firms faced with this new economic reality, would seek professional guidance, but there is a very broad range of pricing professionals across the sector. Some firms have entire dedicated staffs with broad ranging roles, while other firms are just beginning to consider creating such a function.” He also addresses the disparate responsibilities for pricing officers, noting that the job can include one or many of the following tasks:
- Client fee discussions and negotiations
- Partner coaching
- Budget building
- Pricing development
- Profit and scenario modeling
- Monitoring actual performance versus budgeted performance
- Process mapping, process improvement, project management and practice innovation
On his Geeklaw Blog, Toby Brown has emphasized the importance of the pricing role in firms in this new legal market reality. Just because your firm doesn’t have a pricing officer, he argues, be aware that firms you are competing against likely do. He has also noted that technology is key to the pricing role’s principal function—maximizing a firm’s profitability. And as firms adapt to the necessity of pricing officers, they are seeing a merging of the pricing role with advanced analytic technologies. To be effective, a pricing officer needs all of the key information at their fingertips, including billing rates, costs, staffing levels, past matters, client details, etc. Sophisticated pricing models in effect require sophisticated project management tools, and these tools are increasingly integrated into advanced legal technology applications.
In order to support the Pricing Officer, firms must adopt a strategic focus on technology and actionable data. This effort can be transformational for many firms. The side benefit of sophisticated pricing technology and data is often increased margins and profit growth. Does your firm have dedicated pricing professionals?