New HBS case study: “Riverview Law: Applying Business Sense to the Legal Market”

Interested in new model law firms? Read our latest Harvard Business School case study “Riverview Law: Applying Business Sense to the Legal Market.”
Riverview Law is a legal services firm run like a business rather than a traditional law firm. Our case study guides you through Riverview wanting to expand its unconventional concept to the U.S. You will follow Heather Larson, a (fictional) U.S. lawyer Riverview is trying to recruit and learn about the firm’s unusual approach:
  • Performing legal work for annual fixed-price contracts
  • Using data and analytics to advise clients’ on ways to reduce their legal problems (and spend)
  • Evaluating lawyers’ performance based on client satisfaction surveys rather than traditional metrics like billed revenues.
With detailed information on the firm’s financial performance, service teams, pricing, culture, and business model, you can make up your mind about how big of a threat Riverview and similar new model firms pose to traditional law firms. More generally, this case can can be used to discuss “disruptive innovation” in the high-end services sector.
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Fluent in metrics, analytics, and value: Meet the Pricing Director

76% of big firms -and counting-  employ a pricing officer according to an ALM Legal Intelligence survey.  More and more firms recognize that they need help pricing their services: Clients today not only want discounts but other non-hourly fee arrangements.

Pricing experts are analysts who sort through the firm’s internal data and practices. They are tasked to determine the actual cost of delivering a particular legal service and calculating a price that reflects the value to the client and a healthy profit for the firm.

Unfortunately, many firms’ billing systems were not set up to knowing their own costs – a highly questionable practice from a business point of view. The goal was to collect money “for services rendered,” not necessarily to capture information. The big challenge for pricing offers is hence retrospective analysis, being able to put price tags on past matters. 

Going forward, says Aric Press in his write-up of the survey, this is changing: many firms have (some) metrics in place. They are diligent about collecting time and task records so that they know how, where and when their lawyers spent their time.

Aric Press reminds that “the value of work can’t simply be measured by hourly rates, that profit margins are a function of costs and not tradition, lawyers will end (OK, diminish) their obsession with the top line.” He predicts a change in the power, pay, and portability of partners, and an increased focus on what constitutes value for the client.

It is already happening: more and more firms impose discipline on their partners’ billing rate. This practice practically kicks some partners out of the firms as their clients are not willing to accept the new higher rates. What’s more, partners appear to have less influence on pricing in general: According to the ALM survey, only 32% of firms reported that the lead attorneys on a matter has one of the “final says” on its pricing. The bigger the firm, the less likely the lead partner on the matter had a final say on pricing.

Pricing directors also increasingly negotiate directly on price. For many firms, this is a defensive move to client who brought in their procurement specialists. Negotiating with procurement on price is an uphill battle for anyone not fluent in metrics and analytics.

Aric Press also reminds that it’s not just about what partners charge, but about how they do their work. Project management along with new pricing policies is hence du jour for the majority of the responding firms. Partners will have to conform their work to firm-normed processes and understand what the client sees as value.

To get the complete survey results, click here.

 

 

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Corporate Counsel’s Best Legal Departments: NetApp

NetApp was named Corporate Counsel magazine’s Best Legal Department. GC Matthew Fawcett and Connie Brenton, chief of staff and director of legal operations, use data analytics, metrics, project management, partnering with outside counsel and service providers, as well as technology, such as legal spend management software, to transform their department.

NetApp regularly measures outside counsel on the quality of their advice and results achieved. They look at how efficient outside counsel are: how many high-priced lawyers are on a case? How do their fees compare with those of similar firms?

NetApp also shows outside counsel ways to improve and integrate the project management strategies and techniques into their practice. A project manager takes care of some tasks previously handled by a highly paid lawyer.

Budgeting is done through an automated program that enables an attorney to project how much will be spent in a month, tracks that spending in real time and informs outside counsel and the client at the end of the month where the budget stands. This gives NetApp insight into the practices of their law firms, adds predictability, and helps outside counsel be responsive.

NetApp applies technology to free up its legal staff from routine but time-consuming tasks, such as negotiating nondisclosure agreements. For example, NetApp’s sales reps can pull up a nondisclosure agreement form on a smartphone and send it via email. A nondisclosure agreement can now be completed in five minutes instead of five days.

Read more about NetApp’s great management here.

 

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