November 2015 marked the 7th anniversary of the passing of an amazing individual who not only had a profound effect on my life but who enriched the lives and changed the aspirations of many professionals world wide. This is not intended to be a belated eulogy but when I was reflecting on Paul O'Byrne's passing recently, I also reflected on some of the things he did in Australia in the relatively short period of time I was fortunate enough to know him.
I first met Paul at an ALPMA Summit in Sydney in late 2005.Paul was the key note speaker presenting on value based pricing-a term and concept I had not heard of until then.
It was like a fog had lifted for me.
For many years I had been brought up to believe that the only way any professional firm could be successful was by subscribing to the business model of leveraging people x time x hourly rate.Sure I understood that billing by time and more particularly the need to record time in 6 minute intervals had its drawbacks,among them:
- it rewarded the slow and the inefficient,
- the time spent on something often didn't reflect the value to the client,
- clients often suffered from "bill shock",
- it tempted and permitted otherwise ethical people to do unethical things,
- "fee earners" were being measured on performance to their monthly or even daily billable hour targets and little else,etc
but there seemed to be no alternatives and most of these considered just another "cost of doing business".
And after all, every law firm was adopting the same business model so it must be right.
Anyway back to Paul.Hearing not just how his accounting firm from Goffs Oak* London had made the transition from billing by time to pricing all of their services up front and how both their customers and their internal team loved it was interesting enough. To find out there were other professional firms around the world adopting this new model was truly exciting.
I flew to London a few weeks after hearing Paul in Sydney to find out first hand how and why this value based pricing model worked-spending time with Paul and his partner in crime Paul Kennedy,the O'Byrne & Kennedy team and many of their customers.
The rest, as they say, is history.
Paul & I regularly worked together from then on and Paul came back to Australia in 2006 and again in 2008-this last trip to essentially say goodbye to many of his Australian friends.During those visits Paul did several presentations for ALPMA as well as running workshops for more than 20 Australasian law firms on value based pricing, imploring them to move from being a Firm of the Past to a Firm of the Future.
Paul made recordings of most of his presentations and workshops in Australia.I have listened to those recordings several times over the years.And that really is the reason for this post.
I don't want to embarrass the law firms Paul ran workshops for by naming them (they know who they are) except to say that they included at the time many of the major Australian national firms, plus a host of mid tier and boutique firms.
It is very interesting listening to those recordings now, especially the questions being asked by attendees, the objections being raised and the reasons proffered why, although what Paul espoused all "sounds good in theory" it wouldn't work for them, their clients & their firms. I also particularly remember various partners saying to us that there is no way their firm would ever move to value based pricing.
Fast forward to 2015 and when I look at each of those law firms websites today I can't help but notice-alongside their proud claims of "innovation" and "thought leadership"-that they now profess to offer an array of billing models to their clients including "fixed fees" and "value billing" (whatever value billing is?).
After all this time,with most firms for many years thereafter at best showing apathy and at worst showing open hostility to anything other than the almighty billable hour,why has there now been this apparent change (maybe real, maybe superficial)?
- simply that it needed several years for the message to sink in and for the penny to drop? Maybe. After all most things work evolutionary rather than revolutionary in the legal profession
- changes in leadership at the top in some firms to progressives who realised the need for more innovative service delivery including more innovative pricing of their services? Maybe. In some firms and with some remarkable individuals,yes.The reality however is that for the vast majority of firms the "pricing revolution" has been nothing more than just a case of shifting the deck chairs.
- pressure from below where team members were saying "enough is enough we need a better business model to keep us engaged and motivated?" Maybe.But at the end of the day the law as a profession has tended to attract those that are either innately conservative and risk averse (and often they progress through the ranks of firms),those whose motivation is to see justice served (and most of those tend to leave the private profession anyway) or those that realise the profession is not going to change enough to provide them with what they need (and they become frustrated, leave their firms, a few start up their own practice but many leave the private profession).
- the law firms external advisors and commentators to the profession urging them to change? Maybe.But with a few notable exceptions, the best of those advisors only recommend incremental changes within the existing business model and the worst of them continue to promote outdated 20th century methodology to 21st century issues and bluntly promote scare tactics to much that is new.
- because the lawyers Guilds at last saw the light and implored their members to change their ways? Hardly.Law Societies often reflect the most conservative of the profession when it comes to management and the business of law.They are still heavily embedded into time based billing and retrospective pricing.
- due to firms now wanting to be seen to be different and stand out from the pack? Maybe for a minority but most professional firms say they want to be different but in reality they only want to be a little tiny wee bit different from their competitors.They see safety in numbers-and this is true in their pricing and billing mindsets.
- the GFC we eventually had to have in Australia? We are getting closer-at least indirectly.
- the plethora of mostly external disruptors and start ups with new business,service and pricing models?Now we are becoming warmer-again at least indirectly.
If none of the above factors provide the dominant answer,what then, in my view, is the main reason there has been of late the stirring of some real change to pricing and billing models in firms?
As a sad reflection of our profession (the handful of incumbent innovators and risk takers excused),it seems real change is only adopted by the majority of the legal profession when their customers demand it.
More and more customers are sick of waiting for their firms to change the pricing model so as to give them more certainty and predictability of legal fees.Others simply want their legal spend to be more aligned with the value they perceive they are getting rather than the time their lawyer spends on something.And it is these customers with market power,knowledge and/or the resources that are leading the change.
For many other clients of professional firms the change has been slower.They have put up with the time billing frustrations for so long (often due to ignorance of any alternatives) but now,here too, the call for change is picking up pace as those clients become more and more aware of what some of the more innovative and progressive firms are offering.
So if Paul was around today what might he make of all this?
Would he be pleased to see what the innovators, the risk takers, "the crazy ones", the disruptors are doing? You bet he would.
Would he be pleased to see most incumbent firms are at last starting to change their pricing models even if they are doing it under duress? I doubt it.I think he would be very disappointed that the majority of firms in the professions-including the legal profession-still operate reactionary rather than proactively and look to precedents to guide their future instead of creating immense opportunities in the future for them, their people and their customers.
Paul's personal motto was always Carpe Diem. I just think he would be a trifle disappointed that not enough in the professions think like this today in order to make the most out of tomorrow.
*Goffs Oak-birthplace of Victoria Beckham!
www.chisconsult.com @ChisConsult Influencing motivated professionals to make a difference.