Mastering Legal Pricing

What emerges most strongly is how often firms talk about growth, innovation and transformation while overlooking the fundamentals of pricing. This book challenges that blind spot. It shows that pricing is not an administrative afterthought, but a strategic capability that directly shapes profitability, client relationships and long-term sustainability...If there is one criticism, it is simply that I wanted more. When a book leaves you wishing the conversation had gone on longer, that is perhaps the strongest endorsement of all.

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