In 2022, law firm pricing and project management professionals once again demonstrated the need for service innovation, process improvement, and supportive technology as pressing investments to optimize client value and firm profitability. The Third Annual Legal Pricing and Project Management Survey questioned LPPMs and analyzed the results in context with those captured in the most recent Law Department Operations Survey, which polled in-house professionals.
Two challenges have continued to persist over the past few years: incorporating profitability metrics into decision-making and leveraging technologies to support profitability improvement efforts.
FOCUS ON PROFITABILITY
Profitability metrics provide directional guidance for firm leadership and LPPM professionals when deciding on practice area and firm strategic investments. Most firms are not applying AI or machine learning to inform profitability, matter strategies and AFAs. LDO and LPPM professionals are focused on identifying and steering adoption of technology to connect firms’ people, processes and data in support of efficient service delivery.
Survey results show that profitability is a component of partner compensation models for the majority of the respondents. Despite this incentive, firms continue to be challenged by engaging partners to understand and incorporate profitability metrics in decision-making. Most law firm partners have access to margin data, but LPPMs are still driving the adoption to inform pricing decisions.
The community respondents also ranked challenges facing the legal pricing and project management functions today and over the next three years. Firms struggle with increasing client resistance to accept rates and/or the increasing complexity of outside counsel guidelines. Given this reluctance, it’s not surprising the second top challenge for firms is their struggle to meet client demands for value while still achieving firm profitability targets. The rising costs of compensation and inflation can be difficult to pass on to clients, leaving firms with the challenge to innovate their service delivery models to operate more efficiently and reduce expenses.
A new top challenge has emerged: Firms realize more mistakes caused by a lack of collaboration and integration across the pricing, LPM and billing functions. The growing complexity of OCG requirements has made the business process of tracking, managing and enforcing those requirements more sophisticated. At Intapp, our clients have experienced a massive increase in e-billing use, and those complex processes and requirements put more pressure on the work-to-bill cycle. Firms with siloed data and processes will struggle to course correct.
On the horizon, firms are concerned with identifying and driving adoption of technology to support the more efficient delivery of legal services over the next three years. As firms move through the innovation cycle, profitability expectations command the application of new processes and technologies to improve service delivery.
The current survey showed a change in the future competitive landscape. Law firms view in-house law departments and automation/technology as the chief rivals to their ability to source and maintain business in the next five years. These trends point to the need for firms to solidify their client relationships through exceptional value offerings and to embrace technology to optimize processes and improve service delivery.
Intapp helps firms ensure client satisfaction through compliant time and billing solutions. We collaborate with law firms seeking creative ways to engage partners and to be innovative in developing solutions that manage the client engagement life cycle while improving profitability.
This article is an excerpt from the 3rd Annual Legal Pricing & Project Management Survey Report. Find your free copy >> It's the only resource that compares and contrasts the perspectives of law firm pricing and project management professionals and law department legal operations professionals on the topics of common priority and focus.