For the third year in a row, ALM Legal Intelligence has investigated the pricing activities of law firms (mostly BigLaw). Like last year, the focus is again on pricing professionals. This year’s report, Pricing Officers: Some Firms Still Want to Make the Jump (May 2015), picks up where the 2014 survey left off, focusing on law firm pricing professionals.
Highlights. Of the report’s 15 main findings, ten (67%) highlight the people behind law firm pricing. Here are five:
◾98% of law firms reported hiring a pricing professional because of alternative fee arrangements (AFAs), followed by cost pressure from clients (77%)
◾82% of law firms with more than 1,000 attorneys reported having at least one dedicated pricing professional, 77% of law firms with more than 500 attorneys, and 39% with fewer than 500 attorneys.
◾69% of law firms reported that pricing professionals improved firm profitability
◾52% of law firms reported having at least one dedicated pricing professional (significantly higher than last year’s 38%)
◾53% of law firms anticipate growing their pricing teams
Responsibilities. Last year’s survey presented an initial glimpse into the job function of a law firm pricing professional. This year’s survey again asked respondents to rank nine core responsibilities. Profitability Analysis jumped to the top this year, bouncing last year’s #1 (Client Fee Discussions) down to #4.
1. Profitability Analysis (previously #4)
2. RFPs (previously #3)
3. Budgeting (previously #2)
4. Client Fee Discussion ( incl. Negotiation) (previously #1)
5. Pricing Training (no change)
6. Monitoring (previously #7)
7. Setting Standard Billing Rates (previously #8)
8. Process Improvement (previously #9)
9. Legal Project Management (previously #6)
Compensation. Our industry is still lacking in data regarding compensation. ALM’s 2014 was one of the first to collect and report salary data of law firm pricing professionals. (True Value Partnering Institute is another source: TVPI) Below is a two-year comparison. The average compensation appears to be $200,000, a slight gain from last year’s $190,000.
|$300k and above||16%||14%|
|$250k – $299k||21%||14%|
|200k – $249k||12%||18%|
|$150k – $199k||26%||25%|
|$100k – $149k||26%||22%|
N.B. A total of 68 respondents completed this year’s survey. The full report can be found here.