The Rise of the Pricing Officer - The Business of Law Takes Center Stage
They are a smart, passionate and focused group. They are a part of a slow but steady change in how the business of law is conducted. They are the pricing officers — a growing cadre of professionals being hired by law firms to establish a more analytical approach to pricing legal services.
The pricing officer and his or her team has been part of the corporate world for decades. But in law, they are, for the most part, the new kids on the block. Their new role in law firms is a response to a number of key market pressures. At the top of the list are clients’ demand for alternatives to the billable hour and greater accountability on how their law firms manage and staff their matters. Another factor is the ever-increasing role of corporate procurement. Many RFPs issued by large companies (especially the Fortune 100) for legal services include the procurement team as part of the evaluation panel. Some companies have a procurement team within the legal department. Lastly, as more law firms adopt the rigor of project management and other process-driven disciplines, the role of the pricing officer becomes important as a strategy of differentiation and competitive advantage.
Experience and Scope of Role
The experience level, responsibility and reporting lines of pricing professionals differ widely amongst law firms who have added this role. At the senior level, a few earned their chops in law firms in the finance or business development departments. Others are seasoned veterans from consulting and accounting firms. Some pricing officers report to the executive committee or managing partner, while others report to the chief financial, chief operating or chief marketing officers. At the other end of the spectrum are newly minted MBAs and other finance-trained newbies who are part of the accounting group and serve more traditional back-office support. The focus of this article is on the senior pricing role.
“Pricing is not just about pricing. It’s about win/win solutions that enhance relationships.” - Steve Manton
It should not come as a surprise that the role of the pricing officer in law firms — manager to director level — is not about determining the lowest price for providing legal services. As Steve Manton, strategic pricing leader at Debevoise & Plimpton, explained, “Pricing is not just about pricing. It’s about win/win solutions that enhance relationships.” In analyzing a new business opportunity, Manton works closely with the law firm’s relationship partner, practice management leader and increasingly with his counterpart in the in-house legal department to fashion these solutions. Purvi Sanghvi, director of strategic pricing at Paul Hastings, echoes this approach. “I help connect the dots to bring about client-specific solutions,” she said. “Pricing options come about after analysis of the specific matter or portfolio of matters.” Sanghvi also works closely with her firm’s relationship partner and practice management leaders. Similar to Manton, she negotiates pricing approaches with her counterpart in the in-house legal department. But not all senior pricing leaders negotiate with outside counsel.
All senior legal pricing officers are involved with significant request for proposals (RFPs). Keith Maziarek, senior project manager of pricing and strategic initiatives at DLA Piper, works closely with his firm’s marketing and business development department, specifically with the proposal team. “From firsthand experience, I understand the synergy between my role and those of my colleagues,” Maziarek said. It makes perfect sense that he is attuned to the need for this collaboration. He began his career at DLA in 2006 in a marketing and business development role, left to get his MBA and returned to DLA to work on the firm’s project management and pricing initiatives.
“I help connect the dots to bring about client-specific solutions.” - Purvi Sanghvi
Law firms that hire or plan to hire pricing professionals need to have legal project management initiatives in place or underway. Why? Because an integral part of these professionals’ value is their experience in using project management tools to determine the “manner and cost” of delivering the services. It’s the latter that is so key. Indeed, apart from individual skills, a pricing officer’s success is in no so small measure dependent on the investment their law firm has made in the area of project management. This is reflected in many of the titles at the director level: director of pricing and project management; director of project management and strategic client services; director of strategic pricing and project management. The project management piece is important in that its purpose is to bring planning and monitoring into play. The game changer is its significance in setting a budget and tracking profitability. Budget predictability is huge for law firm clients. Profitability is becoming increasingly important to law firms (a constant is the importance of gross revenue/hours). What’s exciting is that done right, it’s the secret sauce for win-win solutions.
Another area that should be underscored as a critical component to success is the support of the law firm leadership. Matthew Laws, director of client services and pricing at Crowell & Moring, reports to the managing partner. As part of the onboarding process, he was introduced to the leadership in an all partners meeting. “From my first interview to today, the commitment of the law firm to the success of its project management and pricing initiatives has been unwavering,” he said.
What Says the Crystal Ball?
The evidence supports a bright future for pricing officers in law firms. Here are just a few reasons why:
These client-triggered forces have created an environment where a historically innovation-phobic profession is changing. In June this year, the ALM Legal Intelligencer’s press release marketing its second annual pricing professionals survey report, announced “Three in Four Large Law Firms Now Employ Pricing Officers.” Specifically, the report showed that 76 percent of large firms now employ a “pricing officer” inside the firm, up from 67 percent in 2013. The survey was sent primarily to large law firms in the Am Law 200 and NLJ 350. All other data points in the survey showed that the trend has staying power. As Amanda Brady, global practice leader of law firm management at Major, Lindsey & Africa succinctly noted, the trend supports both the market realities and the acceptance by many law firm managing partner and executive committees that, “We need to do something.”
The influence pricing officers will ultimately attain is an open question. The answer is outside the scope of this article, but two books on legal pricing penned by some of the community’s elder statespersons make a compelling case for the strategic role of the position — Law Firm Pricing: Strategies, Roles, and Responsibilities (2013) and Smarter Pricing, Smarter Profit (2014). The former was written by Toby Brown, chief practice officer at Akin Gump Strauss Hauer Feld, and Vincent Cordo, global director of client value at Reed Smith. Smarter Pricing, Smarter Profit was written by Stuart J. T. Dodds, Baker & McKenzie's director of global pricing and legal project management. All three veterans agree that their roles and those of this burgeoning profession in law firms have the power to both increase business and profitability, and enhance client relationships. Dodds further explained that at the core of what he does is help change attitudes and, more importantly, behavior — “the kind of behavior that will result in quantifiable, bottom-line results and happier clients.”
While the addition of the pricing officer in law firms is increasing, the fact that they are still a relatively small group has led to a few close communities. LMA’s Client Value Shared Interest Group comprises legal professionals who work in the areas of pricing, practice innovation and project management. The first annual conference for the group was held in October 2013 and again in 2014. Plans are already underway for the 2015 conference.
Another legal pricing and project management network is The True Value Partnering Institute, a virtual hub and think tank connecting legal industry thought leaders and those responsible for driving value in their organizations. Members meet monthly via one hour conference calls to discuss issues impacting the legal industry, including the challenges of defining and measuring value.
At a fundamental level, having a pricing officer in the law firm is a cultural change, not just the addition of a new competency. How the role of the pricing officer matures is a developing story. Although the role is still in its infancy, the fact that it exists, to say nothing of the clip in which it’s growing is no small fact. The excitement of those who are already in these law firm roles is palpable. They know they are riding a wave of change that is significant. By Rose Ors
Epilogue: In May 2015, Vincent Cordo became Global Sourcing Officer at Shell.
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