Over the last few years, the legal pricing landscape has fundamentally changed. Increased competition, wage inflation, and rising costs have all impacted profitability. And while the global economy is now seeing signs of stabilization, the increased client demand for matter budgets and financial transparency is here to stay.

These were among the trends that were front and center of discussion at the BigHand Conference 2024, as were some of the initiatives firms are taking to address these – from building a culture of commercial awareness, investing in financial training for lawyers, hiring in-house expertise, and implementing dedicated pricing and budgeting technology. 

Findings from BigHand’s latest benchmark report: Trends Analysis for Legal Pricing and Budgeting reinforce the need (and opportunity) for law firms to act, with 48% of respondents citing rising client demand to show investment value and 33% reporting increased client demand for matter budgets last year. In addition, 73% of respondents said there is an opportunity to introduce more value-based pricing and 75% more alternative fee arrangements (AFAs) to meet client demand. 

So, what did the discussions at the BigHand Conference reveal?

The event brought together a number of financial and pricing experts, including James Markham, Consulting Director, Markham Consulting; Georgine Thorpe, Head of Pricing, Herbert Smith Freehills; Danny Costello, Financial Systems Lead, Matheson; Charlotte Hale, Project Specialist, Macfarlanes; and David Walsh, Head of Consultancy and Projects, Arthur Cox, for a number of panel debates on the topics of Financial Performance Metrics and Cultivating Profit-Oriented Mindsets through Technology. 

A point that our experts unanimously agreed upon was the extent to which the role of the partner has changed: above and beyond the provision of legal services, today’s law firm partners need to be mindful of profitability – both within the matters they are overseeing, but also across the business – and its knock-on effects on resourcing and utilization, realization, and client communication/relationships. There was also widespread recognition that data visibility is key in order for partners to be able to raise their commercial awareness, make better decisions regarding resourcing and rate increases, and provide that essential client transparency. 

This need for visibility itself raised further interesting points, including issues around data integrity and the importance of reporting customization; therefore, the role of technology in providing the right information (and the ability for lawyers to ‘self-serve’ and explore their own data sets); as well as the role of the pricing professional within the law firm. 

It was largely agreed that “old school”, manual data reporting processes are problematic. The need to request information from multiple teams, or source data from antiquated or sub-standard systems meant that reliability was low and information often out of date or incomplete when it was needed. Today’s advanced Business Intelligence tools can pull the latest data from systems across the firm and provide users with on-demand metrics or time-sensitive performance targets to inform decision-making and client transparency. The capability to explore vast datasets also allows for customized insight into the metrics that are most relevant from practice area to practice area, and by job function – from lawyer, to managing partner, budgeting and pricing, and finance specialists. 

That said, while there is undoubtedly a change afoot with regard to partners’ need and desire for greater financial acumen – with the consensus in the room being that feedback from partners is extremely positive - there is also recognition that partners are now being expected to embrace a range of such “softer” skills and that not every individual will be good at everything. 

It is therefore interesting that BigHand’s benchmark report found that only 33% of respondents provide dedicated training to associates on key financial metrics, and that 36% of firms have hired dedicated Finance Business Partners in the last 12 months. Is this perhaps indicative of a dichotomy of thought, where some firms are likely to invest more in upskilling their lawyers, while others take the route of bringing a new type of finance professional on board to assume the role of the trusted advisor on matters of profitability? 

This may well be a question we will explore more in next year’s BigHand Conference – but for now, with 45% of firms already using and reaping the rewards of a dedicated legal pricing and budgeting solution and a further 19% planning to introduce it in the next 12 months, it is a pretty safe conclusion – and indeed the conclusion our experts came to at the event – that it is the combination of technology, data and people that will make the difference in legal matter and firm profitability moving forward. 

Read the full report for more data insights to inform your legal pricing and budgeting strategies.