We discussed this issue back in September and, looking at the discussion going on over on LinkedIn, it seems as though the debate isn’t going to abate.
The American author Ron Baker has written at least five books on the subject of pricing – although you don't need to read every word of every book. He demonstrates that you can make real money out of fixed prices if you take the trouble to know the client, and to set up the pricing conversation properly. This is a question of demonstrating value to individual clients.
We personally know an accountant who runs a small (4 fee earner) firm doing largely one-off project work who claims that by using these pricing techniques he has earned over £1million in additional fees over the past 5 years - compared to his standard hourly charges. I have no reason to disbelieve him.
Can it be done in legal work? In many cases, the answer is yes. But it is not as simple as thinking up a number and sticking to it. And sadly, many lawyers (encouraged by their performance measurement systems) are unwilling to put in the upfront effort, either in learning the techniques or getting to know the clients.
In work where the price is externally determined, the focus has to be on identifying and improving cost of production. This will be the focus of an article we have appearing in the Gazette’s In Business section in the spring. Any thoughts would be much appreciated.
Monday, 25 January 2010
Wednesday, 20 January 2010
Lawyers, Newspapers and the Future of Law
We have been involved in a discussion recently about the impact of the internet on the provision of legal services – and specifically whether law firms will face the same problems as newspapers, i.e. strategic confusion, and how to adapt their business model to continue adding value.
Most law firms outside the top 50 or so create enough confusion of their own already by resolutely adhering to a partnership model which precludes the successful implementation of strategy. That, however, does not mean that things won’t get a lot more complicated in the next few years.
David Maister, in his book Strategy and the Fat Smoker, has a chapter called "Strategy Means saying No" - and eloquently explains why most Law firms (and other PSF's) find it almost impossible to say “No” to potential work.
To paraphrase Larry Ribstein (Professor of Law at the University of Illinois, who has described law firms as "Thinly Capitalised Workers' Co-operatives"), many firms are coalitions of jobbing lawyers who will take any work which earns a crust. As a result they have none of the advantages that an incumbent should have as the market deregulates.
One significant theme emerging is the “problem of free” – that in a market where two competitors provide a largely commoditised product, the price rapidly falls to zero. It has been suggested that this could occur in the provision of legal services, with the emergence of free or low cost online documents that would be ‘self-built’, with advice also provided online.
However, it is my contention that the Legal services Act and the intrusion of truly focused Legal Businesses funded and managed by non-lawyers will put paid to many smaller firms before the internet and the "problem of free" gets the chance to.
In the end, people buy results – those lawyers who use their skills to deliver quicker, better or more certain results to people who are prepared to pay for speed, quality or certainty will still prosper.
The trick is to find people or organisations who have those needs and who recognise that whilst it can sometimes cost a lot to get things right, it can cost much more to get them wrong!
Most law firms outside the top 50 or so create enough confusion of their own already by resolutely adhering to a partnership model which precludes the successful implementation of strategy. That, however, does not mean that things won’t get a lot more complicated in the next few years.
David Maister, in his book Strategy and the Fat Smoker, has a chapter called "Strategy Means saying No" - and eloquently explains why most Law firms (and other PSF's) find it almost impossible to say “No” to potential work.
To paraphrase Larry Ribstein (Professor of Law at the University of Illinois, who has described law firms as "Thinly Capitalised Workers' Co-operatives"), many firms are coalitions of jobbing lawyers who will take any work which earns a crust. As a result they have none of the advantages that an incumbent should have as the market deregulates.
One significant theme emerging is the “problem of free” – that in a market where two competitors provide a largely commoditised product, the price rapidly falls to zero. It has been suggested that this could occur in the provision of legal services, with the emergence of free or low cost online documents that would be ‘self-built’, with advice also provided online.
However, it is my contention that the Legal services Act and the intrusion of truly focused Legal Businesses funded and managed by non-lawyers will put paid to many smaller firms before the internet and the "problem of free" gets the chance to.
In the end, people buy results – those lawyers who use their skills to deliver quicker, better or more certain results to people who are prepared to pay for speed, quality or certainty will still prosper.
The trick is to find people or organisations who have those needs and who recognise that whilst it can sometimes cost a lot to get things right, it can cost much more to get them wrong!
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