As the Billable Hour Model Fades Away, Senior Pricing Execs Emerge as Legal Industry Profitability Czars | The Alexander Group

Senior pricing executives come from many developmental paths–from FP&A/technical finance backgrounds to MBA/strategy, business development, practice management, and even senior partners with extensive experience in key client negotiations and profitability analysis. Whatever the profile, the individual must have the credibility and capability such that they are viewed by the partnership as a trusted senior advisor, expert colleague, and an appropriately representative member of business leadership to clients.

Technological savvy and proficiency in the “next generation” of data analytics, reporting tools, and systems have substantially increased in importance in the pricing function as well. Effectively capturing data, developing realistic economic models, accurately (and consistently) producing excellent forecasts and driving variance analysis on the back-end are all essential components of operational pricing infrastructure.

In addition to managing these areas, senior pricing executives must also possess the communication skills to synthesize and articulate technical pricing and profitability information in clear, actionable, business language for lawyers who may be leading experts in their fields of practice, but not well-versed in pricing minutiae.

The 10-year anniversary of the Great Recession is a fitting reminder that the resultant change in law firm economics is here to stay–and the next iteration of law firm transformation could center on lawyer compensation. “Even if a firm determines the appropriate pricing for a given matter using sensitivity analysis to maximize profitability, the chances are (at least at most firms) that the performance of the partner in charge of the matter will, at the end of the year, be evaluated primarily on the basis of the number of billable hours recorded in respect of the matter.”

The disconnect between utilizing precise profitability tools in pricing matters, and the blunt tool of the billable hour in determining compensation, may not be sustainable long-term. At present, however, there is no disputing the major evolution of the senior pricing executive role and the necessary increase in sophistication and importance of a competitive law firm’s strategic pricing capabilities.

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As the Billable Hour Model Fades Away, Senior Pricing Execs Emerge as Legal Industry Profitability Czars The Alexander Group.