Forward-thinking law firms are currently focused on how best to grow profitability in 2022 on the back of strong growth in 2021. The prioritisation of pricing analysis and pricing processes in recent years has driven a rise in dedicated Pricing Director roles to help firms succeed in an increasingly challenging environment. They are now a critical part of any modern law firm embracing the business of law.
In this article we look at the findings of law firm Pricing Directors from BigHand’s recent survey on Legal Pricing and Budgeting trends, and why matter budgeting and resourcing is a key priority alongside technology adoption for 2022 and beyond.
Matter Resourcing for Profitability
For many Pricing Directors, measuring and managing profitability is aligned to a greater emphasis on project management, starting with matter budgeting and resourcing. This should not be surprising, given that once a firm is committed to a fixed price or an hourly fee cap, the most important determinant of profitability is being able to meet the client’s needs within a predetermined budget.
Indeed, BigHand data shows that a massive 98% of North American and 92% of UK Pricing Directors have introduced more mandated matter budgeting in the last two years. Nonetheless, on average the report also showed that budgets are still used for only 39% (NA) and 36% (UK) of matters. Work must be done to improve this, and firms need the right tools in place to quickly and easily create informed matter budgets based on similar previous work.
Questions must also be asked of the effectiveness of this budgeting, and how it is impacted by the staffing of matters. Part of the budgeting process should include allocating the right resources. BigHand’s report found that on average, 22% (NA) and 24% (UK) of law firms believe that failing to use the right resource to complete phases and tasks is contributing to profit leakage.
With the increase in law firm lateral hiring and firms paying their lawyers more than ever before, the need to ensure that profitable resourcing is happening – and that this resourcing is tracked on a continual basis, is now critical.
Having matter budgets at the outset of an engagement builds client confidence, with more accuracy and insight into the breakdown at the start of the matter, as evidenced by the fact that 70% (UK) and 62% (NA) of Pricing Directors report that their firm has implemented greater visibility in this area. In an ever-competitive market, providing this upfront visibility of the pricing breakdown at the start of the matter is now a key part of client value.
Pricing Technology Adoption
In terms of technology, 92% (UK) and 80% (NA) of Pricing Directors plan on introducing a legal pricing solution in the next 24 months. They understand that cultural change cannot happen without lawyers being supported by dedicated, intuitive solutions that are designed for firms to manage their budgets financially, with bespoke dashboards designed for specific roles and functions across the organisation.
Just as the trend for law firms hiring dedicated pricing people has grown into a staple part of the finance function – so, it seems, that implementing dedicated legal pricing technology is now becoming a must-have for firms.
Following two years where firms went above and beyond to support clients, expectations have risen – and that includes expectations that law firms will embrace digital technologies at the same rate as clients. As Pricing Directors recognise, transparency, throughout the full lifecycle of a matter, changes the debate from fee arrangement to value delivered, now essential to client engagement, retention and loyalty.
Delivering new, effective processes for matter budgets that give consistent control across the firm, and investing in dedicated technology to support this change, is now pivotal to optimising profitability – and provides a platform for continuous innovation.
As Chris Oddy, Head of Pricing & Commercial Development for Womble Bond Dickinson summarises in BigHand’s case study: ‘Ultimately as a firm we are proud of our client service delivery, and we want to be able to give the best value. But we also need to run a business as well; it’s got to be right for us as well as the client, and you need the end-to-end insight.’
To request a demo of BigHand’s Pricing and Profitability Solution click here.
[ Artificial Lawyer is proud to bring you this sponsored article by BigHand. ]