Monday, June 10, 2013

American Lawyer Media Releases White Paper on the New "Hot Job" -- Pricing Professionals in Law Firms.

American Lawyer Media Just released a special report on "Pricing Professionals" in Law Firms: Here for Good -- Pricing Professional in Law firms and This Impact on Clients and Firm Business.
In the five years since the collapse of Lehman Brothers, both law firms and clients have been whipsawed by the economy. Corporations have interposed Procurement Officers between General Counsels and even long time outside counsel. Law firms have sought the advice of a new breed of internal pricing professional to help the firms respond effectively to the Procurement driven demand for high quality legal work at the best price.  Lawyers went from a century of  using the reliable hourly billing rate to facing a complex array of alternative fee arrangements, involving, discounts, caps, project management and performance metrics.  ALM released a report on AFAs in May.

According to the Pricing  survey, most lawyers don't have a strong interest in mastering the mechanics of pricing out an RFP. Enter the pricing professional!

Toby Brown a pioneer in the pricing arena, summarizes the problem in the Foreword to the report. He points to the lack of  information as the greatest challenge to pricing. "Too many decisions are made in a vacuum, with only intuition and anecdotal stories for guidance."

It is rare that we get to trace the development of a new niche profession in law firm management from its inception.The report does not focus on how firms are actually setting the prices. It is an peek at a "work in progress." There is no wide consensus on how to define the functions of the pricing professional  or where  the function should reside in the law firm. But we rarely see the emergence of a completely new role which is both so widespread and about which there is so little consensus.

67% of responding firms indicated that they had a pricing officer. 50% of the respondents report that this function is less than 2 years old. There is no template here.  31% of the pricing officers report to "other " which means that pricing professionals appear all over the org chart. But 29% report to the CFO. 23% are part of the Knowledge Management department.
When pricing has its own department, it is relatively small . 44% have no direct reports. 22% have 1 report and 34% have 2-5 direct reports.
Pricing officers work most closely with lawyers and only 27% report working closely with clients. The report raises the question about whether this should be a more external client facing position.

 The Question of Authority. It is not clear how much authority the pricing officer has. Partners want to "own" their relationship with their clients. I imagine that the pricing officer may have an easier time influencing the pricing for a new client via an RFP process than intervening in between a partner and an existing client. But consider the challenge of intervening in the prized partner-client relationship either way! Partners need to believe that this new role will in the long run strengthen their client relationships, but that may take time.
  • 43% regard financial analysis as the most important skill of the pricing officer.
  • 55% the % of RFPs referred to the pricing officer
  • 68% the pricing officer doesn't have defined performance metrics
  • 30% of Pricing Officers has been at their firms 10 years or more. Which means that they have evolved from another role into this recently created position.
  • 58% of Firms with pricing officers have project management function within the pricing department. But only 7%of pricing officers are responsible for project management. 
  • 11% of firms give the pricing officer final authority in pricing a matter.
Pricing "Officer?"

I recently reviewed "chief "titles In the AmLaw 200  and didn't find one "Chief Pricing Officer" yet this report repeatedly refers to the "pricing officer."
I like the word "officer" it lends an air of gravitas to any position. So I have to hope what when the ALM releases  it's Annual library survey in July, librarians and information professionals will also be  granted the  "officer" honorific and be referred to as information and knowledge "officers," regardless of their actual titles.

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