At law firms, pricing managers are in demand

Matt Laws is not a lawyer, but he spends his days thinking about how lawyers charge their clients.

He knows, for example, how much it costs to interview 10 witnesses during preparation for a trial. He knows that a federal lawsuit filed in the Eastern District of Virginia — nicknamed the “rocket docket” — will probably take three-quarters of the time it would take to wind its way through another court. And he knows how much that will affect the price that his firm, Crowell & Moring, could charge a client to work on that case.

Laws, director of client services and pricing at Crowell & Moring, is the first person at the District-based law firm to serve as a pricing director, helping lawyers figure out how much to charge for legal work. His expertise, once a relatively obscure specialty, is a growing area within the industry as law firms continue to face pressure from their chief clients, in-house lawyers, to manage legal costs. Most of the time, that takes the form of what’s known as “alternative fee arrangements” — anything that is not hourly billing, including flat fees, success fees and contingency fees. They are typically less expensive than hourly fees.

Laws, who has an MBA and background in finance, manages a three-person team and works closely with Crowell’s director of legal project management, who is tasked with making sure attorneys work within the parameters set by Laws and his team.

“Lawyers are the first to say they’re not good at this,” Laws said. “They’re good at practicing law but they don’t want to do the analysis and financial piece of it. It falls to someone with expertise with a finance focus.”

Crowell was an early adopter of alternative fee arrangements — though the firm prefers the term “value-based billing” — and today, about a third of Crowell’s work is billed through some kind of alternative fee arrangement.

“A lot of people in this role, we live and breathe in spreadsheets,” said Toby Brown, chief practice officer at Akin Gump in charge of pricing and project management. “We have tools for profitability analysis. There are emerging tools on the monitoring side.”

Brown is in a relatively unique spot: He is part of the firm’s senior management, reporting to the chief operating officer. Brown gets called in by partners to meet with clients to discuss how many of the firm’s matters will be priced. He figures he gets involved in hundreds of matters each year.

“My go-to question [for clients] is, ‘A year from now, what will fee success look like for you?’” Brown said. “‘What are the pressures from your leadership to save money?’ It can come in many forms. What I’m really trying to find out is what are the driving factors with the client? Most say they want to save money but that can take many different shapes. I’m trying to uncover what the driver is.”

In 2011, Brown founded a group for professionals such as himself who do pricing and project management at law firms, called P3, which stands for pricing, practice innovation and project management. It has since grown from five to about 300 people, he said, and has been absorbed into the larger trade group Legal Marketing Association.

“It continues to evolve,” Brown said of the pricing function at law firms. “Different practices are in a different stages in terms of pricing pressures. Our labor practice was one of the first practices to come under pricing pressure, followed by litigation, patent litigation ... Nowadays I’m starting to see more pressure building on the transactional side.”

Brown joined Akin Gump in 2012, and before that served in a similar role at Vinson & Elkins. Since then, he has hired a pricing analyst — who later moved up to pricing manager — and, most recently, a director of innovation and project management. He is also looking to add at least one person on the project administration side and another one or two in project management.

“It’s a little fast and furious right now,” he said. “I see the pricing function as the tip of the sword, the catalyst for change in our industry right now.”

Catherine Ho covers law and lobbying for the Capital Business section of The Washington Post. She previously worked at the LA Daily Journal, the Los Angeles Times, the Detroit Free Press, the Wichita Eagle and the San Mateo County Times.
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