Tuesday, April 19, 2016

Insights on the Journey to Value Pricing

For those who do not otherwise have access to it, the contribution I made to a recent eBook published by LegalTrek is extract below. The complete eBook that features among others Ron Baker, David Wells, John Chisholm and Ed Kless is available at the following link – https://legaltrek.com/afa-ebook/ Our legal services business has operated entirely on a fixed price basis since 2004.

This said, timesheets were not completely eliminated until 1 July 2013 (see photo attached!), shortly before founding our firm View.

There have been challenges, mostly unpredictable, however unsurprisingly no one in the team is likely to volunteer to fill a timesheet in ever again.

A key influence has been VeraSage, the international think-tank dedicated to eliminating hourly billing from the professions (see - http://www.verasage.com/). Consultant John Chisholm is the leading Australian based Fellow of VeraSage and is a fantastic mentor, as are the trail blazing firms associated with the group – see - http://www.verasage.com/thelist/

The key lessons we have learned in running a truly ‘timeless’ firm include:
  1. Parkinson's Law is a serious challenge even without timesheets – perhaps counterintuitively our key performance metric is still time related; that being – what is the duration between agreeing on a scope of work and delivering that scope to the customer.
  2. Communication both internally and with customers is vital. Many law firms only exist because of Murphy's Law (i.e. everything that can go wrong will go wrong). Successful fixed pricing almost entirely depends on carefully planning and agreeing a defined scope. If there is a legitimate change to scope that could not have been identified at the start of a project, there must be real time communication within the team and immediate engagement with the customer.
  3. Centralisation of all team learnings in a logical and easily accessible manner is critical. This includes (using VeraSage founder Ron Baker's language) ‘AARs’, being after action reviews (see – https://www.linkedin.com/today/post/article/20130303194245-38251380-replacing-the-performance-appraisal). This 'non-billable' concept is rarely, if ever, done in a time billing firm. In a fixed price firm it is a discipline that must become automatic.
  4. The Goldilocks Principle helps explain why we always provide the customer with alternatives in the level of service that is provided. The time billing professions remain essentially the only industry in the western world that do not empower their customers to choose service levels, and this one change to our approach has been vital.
  5. The Donkey Principle explains that the best performing lawyers in a time billing model are generally of least benefit in a fixed price model - the impact of this culturally cannot be underestimated.
There are numerous other impacts that we have seen, sometimes on an hourly basis (no pun intended).

Ultimately, the most important lesson is the depth of cultural change because what timesheets do (even when you are fixed pricing) is create a focus solely on what is billable.

Without timesheets, the focus is solely on what is valuable.

This one concept has an impact on every part of a professional services business. Increasingly we are finding customers get this, and are allocating their legal spend accordingly.

As I suspect is the case for everyone in the VeraSage community, we happily share our experiences with others contemplating changing their business model.

As mentioned previously, we began the journey to address many of the challenges of redefining the professional services firm business model over 10 years ago.

For many, the journey has started more recently and we believe it important to share our learnings. Our upcoming July roadshow will be a full day example of this.

Before then, our free webinar on 28 April will also share a number of insights (see - https://viewlegal.com.au/product/free-webinar-foundations-for-the-future-28-april-2016/)

Image credit: Brian Turner cc