Originally recorded on the Pricing Matters Podcast by Digitory Legal. Digitory Legal is now BigHand Impact Analytics. Learn more here.

Aurelia Spivey, Marketing Consultant with BigHand, chats with Jim Foley, Pricing and Legal Project Management Director at Hunton Andrews Kurth LLP. Jim oversees the pricing, legal project management, matter analytics, business intake, and conflicts areas.

He has extensive experience in alternative fee arrangements (AFAs), legal project management (LPM), matter budgeting, law firm financial management, and financial analysis, and is a catalyst for change within the firm.

Jim joined the firm in 1995. Prior to his role as pricing and legal project management director, Jim was the firm’s controller and senior business manager. Previously he held roles as controller, accounting manager, and analyst at various manufacturing companies.

Jim was recently Mayor of the town of Ashland, Virginia. He is also very involved with many local community groups and has coached a number of youth basketball and softball teams.

Top three takeaways from this episode

• Incorporating profitability into the compensation system. Helps to create accountability and transparency for client matter profitability across the firm.

• Becoming multilingual. There is a huge benefit to the firm when pricing, project management, and analytics professionals understand each other’s language.

• Alternative fees may be leveling off. The growth in AFAs has slowed and appears to be plateauing around a third of all work.  

So my best advertising was other partners talking to one another and so that's been very effective. I think you have success and breeds success. 

Podcast Transcript:

Jim Foley
I got to tell you, I love my job. I have the best job in this firm and there are 2000 people here and I just love it. The survival and the success of the firm depends on getting revenue and getting profitability, and we're at the center of that.

Aurelia Spivey
Welcome to Pricing Matters, a podcast by Digitory Legal. Digitory is a data analytics and cost management platform and service, bringing data-driven, pricing and cost predictions to law. My name is Aurelia Spivey and I will be your host as we speak to leaders who are making an impact in legal pricing, discuss market trends, and find out from them why pricing matters. 

Good morning, our guest today is Jim Fody. Jim is the Pricing and Legal Project Management Director at Hunton Andrews Kurth. Good morning, Jim. 

Jim Foley
Good morning, Aurelia.

Aurelia Spivey
Well, thanks for being with us today. What I found is it's always really helpful to start at the beginning and for our listeners to hear a little bit about your story and what brought you to legal pricing. So let's take a little time to talk about that. 

Jim Foley
Sure thing. What's interesting, I think, for me is I came from manufacturing. I was actually a manufacturing cost expert and I was in the Washington DC area, and for personal reasons, wanted to move to the Richmond, Virginia area. I had a great manufacturing-type interview lined up and I just on a whim applied for this job in a law firm. It worked out perfectly because they scheduled me for the morning and then the other job I really wanted was in the afternoon. I came on down to Richmond and I really clicked with the CFO at the time, John Wilson, and we had a great conversation and then he even said, you're not really interested in this job, are you? And I said, no, I'm not and I was very honest. I said, this is practice for my interview this afternoon. But we had a great dialogue and I think he just saw that I have an MBA in finance, I'm a CPA, I'm naturally curious, and I think he saw something in me that would translate well to a law firm. So I changed half and came into law and I was the controller for about ten years and did basically everything the CFO does. Billing and payroll and taxes, the real operations part of accounting. And then there was an opportunity, a new role for a business manager in about 2005 for litigation practice and I said, that sounds like that would be fun. People were like, is that a lateral move? and I said, I don't know, but it just sounded like a great opportunity for me. And I did that and that involved staffing and some billing rates and trying to make the practice as efficient and profitable as possible and then the Great Recession hit. Then what we call the pricing now, but that's not what we called it then, and that's what we work on. I did it for the litigation team, and I did it for other teams as well and then I went to the firm and I said, hey, I heard this person with the pricing title, I think I should do that for the entire firm. And as a typical law firm, they agreed 18 months later.

So it took a little time, but that's how I got here. So a little bit of a different path, perhaps, than others. 

Aurelia Spivey
Thank you for sharing that and I think everyone who's in the law firm world can relate to both of those things. Things take a long time, but also a lot of opportunities once you've proved yourself in a law firm, and there's something interesting to do. So I'm glad to hear it, and I'm glad to hear it worked 18 months later. You've obviously got a lot of experience in this area now and recently you and your chief financial officer co-authored a chapter in the Arc Group Publication, and you talk about the future of profitability models and analysis for law firms. I think that's available for people who want to purchase that. But I'd love for you to give us a few takeaways from that chapter on leveraging profitability, obviously without giving away the keys to the castle. 

Jim Foley 
Yeah, sure. So you have pricing where you're trying to get to work and you're trying to maximize the amount of money you get, but you really can't do that effectively unless you track the profitability of clients and matters. That was something no firm was doing ten years ago. We were doing it, but we kept it in a black box hidden from most people. Now over the last ten years the biggest change, I think, in the industry has been profitability is now pushed out there and the way it's calculated is kind of consistent and that's other chapters in the book. Then our chapter was the last one saying, well, how do you really use this? How do you make it effective? And the points we hit on were obviously educational. You have to go out to all the partners, explain how it's calculated, that there's no game playing and that they understand the levers to be successful because we're dealing with very smart lawyers who've been successful their entire lives and now you throw another metric at them, and it's kind of the rules of the game, where how do I be successful with this? So we make sure that they understand that this profitability measure is logical and it's right, it's smart. Then they say, okay, and they buy in. So education was key, and then we do outreach to individual partners. It's funny, some partners, I think we had 60% of them, came to our sessions as we rolled it out and some didn't until the next year when it starts showing up on their compensation. So when the compensation process comes along, we have these data sheets for each partner, and suddenly this profitability measure was on that sheet. It's not formulaic, but it was just another important measure and then suddenly my phone started ringing, even more, saying, hey, I know you came to my office and talked about that, Jim, but now I really need to understand it. That was about five years ago and now it's embedded in our culture. Everybody understands it and it's worked. Everybody understands that client meta-profitability is an important measure. We track it, it's pushed out there and it's on our intranet for each matter. You can see it. You can see the details of it and what drives it. So that, I think, has worked really well. The other thing we talk about in the book is, to make this an important measure it has to be part of the reward system, or aka compensation. And what I say, sometimes all roads eventually lead back to partner compensation. It's just a factor that's out there. And again, we're not formulaic, but it is a measure. If you have two people with a million dollars of practice, one's double the profitability of the other, all of the things being held the same, they should not be paid the same, and maybe in the old days, they were. So I think it's important to incorporate the profitability in the reward side. And then we have these opportunities and we have a new report that we just put out and it has all of the top clients and it has a profitability, but it has what are the write-offs, what are the discounts, what's the realization, and then what's the inventory? We have these important measures out there with colors, and if you're doing really well, it's green, and if it's medium it's yellow, if it's red it gets attention, and that's getting everyone's attention too. So you don't want to be in red. And it's great because when you have a conversation with a partner about a specific client, the other levers that drive the profitability, what's the discount structure, what's the fee arrangement, how many write-offs are we getting, what's the leverage? Those are all right there and we're having very robust conversations. So I think our partners are becoming extremely educated on that. So those are the main points we were covering in that chapter. 

Aurelia Spivey
That is really interesting and I'd love to dig a little bit more into this report and where that came from internally, or how you came to start putting that out there. And I love the competition aspect because it definitely helps in law firms for people to have something to aim for. 

Jim Foley 
Yeah, it's funny, you look back at some things and where they came from, it gets a little muddy. I was congratulating somebody for something and they said, no, that was your idea. As you're bouncing things back and forth and it evolves, it truly is a group effort. I would say that our CFO, he's great, he's always saying, think new, fresh ideas, look at it differently, push it out there, do something a few months, let's do something again. And so I think he's been an important catalyst for the evolution. We've dabbled with kind of scorecards in the past, but they haven't really worked, but this one does because it has the key things that a partner can control. What is the discount structure, what's the fee arrangement, what are the write-offs, the dollars, and the percentage, oh wow, look at the impact that has a profitability leverage, and so forth. So it has just a few of the key points for every client that's out there and behind every number is a story. So my staff divided up the whole firm and when someone has a question about it, most likely one of us has it on top of our head of what the story is and you were working on it. So it's not a report that you look at the report and you file it away, it's an action report. You look at it on screen, don't even print it out, and then let's dive into that number and how can we make that better. 

Aurelia Spivey 
That is really interesting to hear and I like the piece about something that people can control that gives you more ability to use it and be more effective. This sort of leads me into my next question, which comes from in the 2019 peer monitor survey, there was some really positive information about the growing elevation of the pricing role at law firms. And what I'd love to hear from you is how have you seen the pricing function make an impact on the business of law?

Jim Foley
I do think it was a huge benefit for me, being in a homegrown talent and being here for over 20 years. So the partners knew me and I attend a lot of partner meetings and I'm very accepted and that really helped with the acceptance. In fact, you have wins and partners talk to each other and they say so many times they would be standing up and say, hey Jim and his group they help me with this and we got this result or this thing and people are like, oh great. So my best advertising was other partners talking to one another and so that's been very effective. I think you have success and breeds success. It's a little harder maybe coming from the outside and you're building, selling from scratch, getting to know people. But we just had a very large merger last year and so now we have another 120 new partners and so I've been spending a lot of time with them and the same thing, you get a couple of wins, and then they're talking to each other saying that's the guy you want to talk to. They didn't have a pricing function and so I was curious what the reaction would be and it was embracing with open arms like, thank you, thank you for helping me. So that's worked out really well. I think we've been accepted, we the pricing function, all along here, which has been very gratifying. 

Aurelia Spivey
That's great and I want to also sort of lead into talking about scoping as part of your pricing methodology. I'd love to hear a little bit from you about how you use scoping if you do, and how you get the lawyers to pause with you on that because it can take a little bit of work. So tell us about that. 

Jim Foley 
Yeah, I think the key there is listening. When someone calls me and I get calls every day, literally just coming from left field, and I ask probing questions but I'm listening and I'm trying to gather information and I'm not jumping to any kind of conclusion of what might be the better fee arrangement or anything else. What's the client saying? What do they want? What's the state of play? What's the matter? Is it a litigation? Is it transactional? How variable do you see the work being? This is very early on in a class action where they could go anywhere or, no, this is a small M&A deal and it's the fifth one we've done for this client in a row. I can tell you pretty closely how it's going to turn out. We know how many turns of the documents. So I just keep asking questions, questions, questions, and then that greatly informs how we do it. One of the guys in my group, Mitch Spratlan, another pricing guy, he's come up with a checklist for some of the other folks so that they can say, here are some of the questions you want to ask, and that's been helpful for people as well. So the scoping is critical. I had an RFP this week that started off, with give me a fixed fee for class action, and it's like, okay, you can't do that. But then as we had a conversation and we find out we did actually have a good answer for the client and made a good proposal. So we'll see what happens with that. 

Aurelia Spivey
Good luck. What I wanted to ask talking about RFPs now, I'm not sure if this one was particularly vague, but I think we're still in a place where unfortunately firms are getting some vague RFPs. How do you deal with that? How does your team work with the lawyers to get the right price on something like that? 

Jim Foley 
You see the range of our RFPs. Some are good and they're focused, and others, frankly, they're terrible. There's one where it's like, give us the range of all your associated billing rates, um okay, well, that's a $600 range, is that useful? Is that going to inform you at all? It was a worthless question. And then sometimes you get that, you get questions where they really, as you look at it, how is this going to be meaningful for you on the other side? And then I know there are consultants running around and they're trying to help and I've recently joined CLOC, the Corporate Legal Operations Consortium, and that's mostly clients and they have some kind of RFP best practices, and as someone on the law firm side, we're trying to help inform them to make the RFP process as efficient as possible because it doesn't do anybody any good to have a poor RFP. Then we had another one where they said, okay, we have this big RFP, it's for a whole firm, okay well, what's your spend in these categories? Well, we're not going to tell you. Well, that's less than helpful. If you told me that you spend in a certain area with this with all these caveats, I can get creative with an AFA, but if you say that there's nothing I can describe a generic AFA, but I really can't give you something that would be of interest, that would be more of interest to you. So the learning process with RFPS is still, I would still say in the early stages. 

Aurelia Spivey
Yeah. I'm interested to hear a little bit more from you about, obviously, at CLOC there are a lot of legal operations teams. Are you having those conversations with legal ops and procurement teams to be able to start getting that better information from them for you to be able to provide better pricing information? 

Jim Foley 
Some, I'll meet with a client several times a year, but really only maybe six or eight in person and then some by email, maybe a little bit more frequently, but not nearly enough. So when we have some partners, they are meeting with a client and they have a list of the people, and I point out, hey, there's our operations folks up there. It might be helpful for me to be a wingman for you and just let them know that someone like us exists. And that helps. What I love about my group is it's not just me anymore. I used to be kind of a silo, but now I've got a whole team and we had a very large client, a company you would have heard of, and two of my folks went up there and one was pricing specialized, one was LPM, and the client loved it. And actually, the meeting had a bunch of lawyers, but they actually were most interested in talking to them, and apparently, the client was very impressed with what we were bringing to the table there. So there is some of that, but I think there needs to be a lot more in the future. 

Aurelia Spivey
Great. It's good to have lots of opportunities. And you talked a little bit about being perhaps yourself and one or two other people, I'd love to hear a little bit more about your team. How do you prioritize with a team, whatever size your team is, how do you get people to prioritize? Because the fact is most pricing teams are quite small. So I think everyone could benefit from some advice. 

Jim Foley
Yeah, so when I started doing pricing, I was not even within finance, I was just kind of a standalone entity. Then I was bought into finance and they were very instrumental in saying, we need to give you more resources, you are bringing in revenue, and so the whole Financial Analyst Analysis group came with me. The person who ran our client accounting then became my pricing guy. We hired legal project management. So I have three key managers, see all senior managers, analytics, pricing, and LPM, and then they have staff underneath them. It's great because we meet and talk daily, but we have our specialties, and we have to make sure that, and I call it multilingual, where we can all speak each other's language, and I could do LPM, but not nearly as well as Lincoln. We have these long-term projects that were really trying to advance the firm and then you have the daily and weekly opportunities and a lot of it is, this client is having write-offs, or they clearly need some help with the project management, or these discounts are really crazy, they obviously need a different fee arrangement, how can we help there? So we're doing short-term, medium, and long-term things at the same time. 

Aurelia Spivey
That's really interesting to hear and you said the word analytics. So that brings me to another one of my questions around leveraging data. And I'd love to hear how you're doing that, and any challenges you're facing because it's a big thing in the industry at the moment. 

Jim Foley
That's right and anybody you interview in my position will say the same thing, that our data is subpar. We use space scopes for about 60% to 65% of our matters, but even the ones that are used, the quality is not what it should be. So we're exploring a new timekeeping system to be a little more innovative in the next few months to help with the quality of that and make the lawyers' life easier and more effective. So the data is not great. We are working with one system and it actually goes through all your time entries and ignores the face dash code and just says, who worked on it, when they worked on it, what words are being used, and says, I think this is what the code should be. And it's coding it just from the raw narrative, and we're finding that's pretty helpful and we're using that a lot. When we get a class action or big M&A and someone says, hey, it's just like the other two, but these other two had wildly divergent fees or amounts of effort, we can then look at the data and say, oh, well, this one had this thing was different. It had a foreign party in the seminary. Oh yeah, that's why that was more this due diligence went crazy for this other reason. And so that intelligence that's in the data is doing a good job of informing our pricing going forward and then that's the cutting it and that's where we are right now. And that's kind of fun actually. 

Aurelia Spivey
Yes, it's exciting obviously from we have that experience as well when you start to be able to pull that information and use it more effectively. Because you're right, there's a lot of data and it's dirty but can be cleaned.

Now I wanted to switch it again back to the alternative fees situation. Obviously, we're still not in 100% alternative fees market, but I wanted to talk a little bit about the practice areas or types of work that you are seeing that are most suited to alternative fees and where they can really make an impact. 

Jim Foley 
Yes, my mantra has been alternative fees can be used in any practice. Eight years ago that was met with a great deal of skepticism but I don't think that's true anymore. Now I think people recognize it can be in any practice and our AFA volume is pretty high. We're about 30% a little bit over, which I think is about double the law 100 average. So we do a fair bit of it and it can fit in any practice. It could be a very bespoke type of practice, you can say, well, you have success beyond that, or you can have a retainer that covers x hours or a fixed fee with this kind of collar. No one tells me that anymore because I think I get on my soapbox. Any practice could benefit from anything. Now that's not to say that it's always the best solution. The hourly model is not going to go away and I think it makes perfect sense in many, if not most situations, but in many, it doesn't make sense. Partners will come to me and say well, what's your favorite? And I am completely agnostic. What's the client's favorite? That's my favorite and then we'll make it work. I definitely don't want to impose what I would think on them. 

Aurelia Spivey 
I'd love to hear a little bit more about the piece on how you make it work because I think that's really important and I'm going to guess that draws a little bit on your legal practice management team. But give us a little bit more information on that because you're set up with an alternative or an hourly arrangement. How do you then come back to the piece we were talking about at the beginning, profitability? 

Jim Foley 
Yeah, exactly. Profitability is always on the side. We're always looking at that as we're doing everything else. Just this week, we were working on a fixed fee by phase for some smaller matters and Lynne Maher, a senior LPM manager, was great, and she's a former practicing lawyer, and so she was just so helpful and really defining this fee is for this, with the exact right terminology, and this fee is for this, and these items are specifically excluded and laid it out very logically, very clearly. So then when lawyers are talking to lawyers, it was absolutely crystal clear what was in or not. And then from looking at the analytics of other work we've done with this client, we know that the profitability on average will be good. We'll win some, we will lose some, but they're giving us a nice volume of work, and that's very helpful. And that's the point to make too, a one-off AFA for a client is never going to be great, even if it's a good result because if you really want to take some risk and put it out there, you really want to get enough volume coming in, knowing that with some you'll be over, some of you will be lower, but at the end, overall, we should be right on with a good result. And more importantly, the clients feeling like they're getting the predictability and the value and the quality that they need.

Aurelia Spivey
That's fantastic, and that sort of brings me to back the clients, and are there any specific trends that you're seeing from clients in terms of pricing?

Jim Foley
I think I've seen it leveling off, the amount of AFAs. For a while, we kept proposing it and clients said, oh great, now we stick with our way. And they said, give me an AFA and we give it to them, and then they will stick with their way. Then for the next few years, they were finally accepting them and it was really growing. But I would say in the last two years or so, it's leveled off and clients are still asking for it, but not at a growing rate. At least for us, our volume of AFAs is kind of plateaued. For us, it's a third of our work. Is that the status that firms will reach? I don't know. That'll be interesting to see. 

Aurelia Spivey
We'll keep an eye on that for the next ten years. So coming back to the team and skill sets that you and your team bring to the firm, and you described your background, obviously very interesting, very different background and your team has varied backgrounds as well. What do you think are the most important skills that are needed to be in the role that you're in? 

Jim Foley 
So you need financial acumen. You really obviously need to be very comfortable with numbers, very comfortable with Excel, and really understanding the bigger picture of the realization and how all those leads you bought in a conversation, but it's not popular now, but emotional intelligence. You need really strong interpersonal skills and you have to have the right motive. We are trying to make partner a and partner b successful and that makes the firm successful. So we are completely on their side, but we're advocating for the firm, of course, but that should make the partner successful as well. We had a young lady who was in the lawyer development group and she was good with numbers, but she didn't know anything about our accounting system. And so she came over and joined us and there was a learning curve where she was learning at the adrenaline. There are all these fields, there's all this, much more metrics than you can possibly imagine in that world. Then she is thriving, but she brings another level of creativity to the group, that's wonderful. So the main thing is someone who is smart, you got to really care. We have had really good fortune with s lack of turnover because these are people who enjoy their jobs. You give them room to run, but we're all going in the same direction and just being smart, giving them the right tools, and increasing their education on an ongoing basis. I think those are the skills and really, truly caring and not just it's not a job, it's something that I really care about every day. 

Aurelia Spivey
Yes, I can hear that and I think from my experience of working in law firms, we all do. There's a special culture about working in firms. It's very special. One question I have is around any challenges. What kind of challenges do you face as a pricing professional and how do you overcome them or how is your team overcoming them? 

Jim Foley
Data is a challenge and we're trying to overcome that, but it's still not what you would want it to be. Software is a bit of a challenge and I think part of the problem is the legal industry is not huge. You're not going to have Microsoft or Google coming and saying, here's this great product, so you're going to have some niche products, some of which are really good, but you have limited development and so you have to work with them. And so we've got some good relationships where you do want to work with the vendors and get them along. Then you have to arm us with like, our CIO, you want the best of breed? Well, this is the best matter budgeting system, and this is the best matter analytics system. And he's trying to push us to, well, let's get one vendor to do all of these and that vendor doesn't exist. So there's a little bit of that back and forth, the same thing with the business intake side of the world. Systems are evolving with us, but that's a little bit of a challenge because we're not quite there yet. But again, that's just part of the fun as we go along that journey. 

Aurelia Spivey
Again, that's another thing to watch for the next ten years. So in terms of people looking to have a career in legal pricing, what advice would you give to someone who's thinking about it after hearing this podcast or talking to colleagues about it? 

Jim Foley
So, definitely getting exposed to anything on the financial side, understanding the metrics, even as basic as a realization, and then how can I help? Whatever form you're in, how can I help move the ball forward? Just a quick story. We have a huge rainmaker and I had a close relationship with him and he would talk about other partners coming to him saying hey, can you get me some work? And he would be very dismissive. Then you have someone else come up and they say I can help you with this and then they were embraced. I think it's the same way in any relationship where you've got to come forward and say how can I bring something to the firm and help? So if they're working on any kind of project just to be a foot soldier and getting involved and knowing the people in the firm who are involved with these things, get to know them and just how can I help you and how can I make your life better? And then that benefit, though of course will come to that person. But it's led by what can I do for the firm? 

Aurelia Spivey
Yeah, and just looking for those opportunities and as you said when you talked about your career, the opportunities are there. It's just about keeping your eye out and putting your hands out, as well.

Jim Foley
You knock on the door and sometimes you can't just give up and I think you have to be a little bit persistent. I'm an advocate for longevity within the firm and establishing those relationships and keep knocking on the door and knocking on and suddenly the door is open. It could be anything. Even at the macro level of working with a particular client, with a partner with a client where their performance is not great and you're trying to help and they're not interested in your help. But you keep knocking on the door, knocking, and then suddenly it's like the door opens and for whatever reason and you go through it and then you're ready to help. But you have to be gently persistent. 

Aurelia Spivey
I love that gently persistent. So rounding things up. The podcast is called Pricing Matters and I'd like to ask you, Jim, why is pricing matter to you? 

Jim Foley
I got to tell you, I love my job. I have the best job in this firm and there are 2000 people here and I just love it. The survival and the success of the firm depends on getting revenue and getting profitability and we're at the center of that. We can see tangible results. We deal with really interesting long-term projects of data and software and moving things forward. Then the real funding is the phone rings every day with something from left field and sometimes it's like hey, I got something due next week, I'm just spit-blowing some ideas. Other times it's oh my gosh, I don't know what happened, but this is due in 2 hours and I'm desperate to help me and then you help them. To me, that's awesome. You can. That's the funnest thing in the world. 

Aurelia Spivey
That is fantastic. I've interviewed a few people on this podcast so far and when I asked this question, I'm jealous, I want a job in pricing. Everyone seems to love their job. 

Thank you so much for taking the time to speak to me today. 

Jim Foley
Thank you so much for having me. 

Aurelia Spivey
You are welcome. 

Thank you for listening to Pricing Matters, a podcast by Digitory Legal. To find out more about our guests. Please visit our podcast page at digitorylegal.com/pricingmatters. If you have any feedback or any guests that you think we should feature, please reach out to me. Thank you for listening. See you next time.