Research update: New staff positions in pricing, value, and LPM, Part 2 of 2
Using existing staff to perform these functions
Some firms have adopted a different approach, preferring to utilize the skills of people already on their staff to run project management and pricing:
Pricing has become a big part of our portfolio, but it’s done by an MBA who has been here for a long time, who studies pricing and speaks about it.
For some time, we’ve had a group within the firm that we refer to as our practice economics group. They have been tasked with serving as a resource to practices, client teams, relationship lawyers, and the like, to help with the kind of analysis that is important at the front end, figuring out how to respond to an RFP or to price a project. But as time has gone on, the services that the group provides have expanded to include various types of knowledge management and process management efforts as well. They can help design reporting systems, feedback loops, and the like, so that a team can stay current with real time data as the project proceeds, to know how they’re doing against a budget or a bid. We think that capacity has been extraordinarily valuable to us. More than 20% of our revenues at this point come from alternative fee arrangements, including some very large fixed fee engagements. Our comfort in moving more significantly into that arena, particularly taking on some of the engagements where clients have used fixed fees in conjunction with a very strong push to reduce costs, has been very much influenced by having not just the up-front analytical ability, but a team that can work with the client and engagement team to help successfully manage those types of projects.
We hired a new CFO within the past few years, with a focus on identifying someone who could really help us do this kind of stuff. So we haven’t really created a new position but we’ve begun to focus on that type of analysis.
Recognizing the need to do more in this area
Eighty-six percent of the firms that commented on this issue reported that they plan to do more in this area. The exact details vary from firm to firm:
We are thinking about making the process more formal, centralized around a pricing director. A lot of law firms, ours included, have administrators embedded in larger practices. But we need to recognize that if you have, say, a $200 million corporate practice by revenue, you should probably have someone acting like a CFO for a $200 million subsidiary of a $600 million enterprise. Therefore, you want someone who can help drive pricing, process efficiency, technology, and balance sheet management – the sorts of things that a CFO would do in a subsidiary in corporate America. I think that role needs to be morphed out of the general administrative function. The issue is that the skill sets are very different, and that leads to difficulty, because you’ve got long-tenured administrative staffs who have been very helpful over the years but who don’t necessarily have the skill set needed today. So then it can become a question of whether you add incremental cost to the enterprise to fill these new roles.
We haven’t added any new internal staff positions. What we’ve done in all of those areas is to have existing people engage as best they can on a catch-as-catch-can basis. The problem is time management and just getting it all done otherwise, but it is what it is.
I don’t think we’re where we want to be, because we’ve got to hire somebody. As much as I try to do it, I’m just too busy.
Clearly, this trend is growing and evolving quickly, especially in relation to pricing.