Last month, I was privileged to host a panel session at our PERSUIT Exchange Finserv event. Titled Mastering Pricing Strategies: Optimizing AFAs & Auctions for Better Outcomes, it was a candid conversation between clients and firms.
To say the exchange was spicy might be an understatement. And it brought back some key learnings from my time on the other side of the client/firm bargaining table.
When I was a Senior Pricing Analyst at an AmLaw 5 firm, we advised a partner facing substantial pushback from a key client over proposed rate increases.
The client's dissatisfaction was palpable.
They felt their longstanding relationship with our firm was undervalued and focused on rates.
Hesitant to engage further, the partner leading the matter felt the two sides had reached an impasse.
But instead of throwing up our hands, we reached out and embraced an open dialogue with the client.
We asked a lot of questions and did a lot of listening.
That may sound like table stakes, but when everyone is actually doing the work, talking about how the work gets done can take a backseat. It’s easy to forget the basics.
Armed with new levels of understanding — the cost pressures our client was facing internally, and the strategic outcomes they were trying to achieve — my firm (at the time) became hyper-focused on how we could re-think our approach to become true collaborators with our client.
Together, we crafted an agreement with modest rate adjustments and a commitment to alternative fee arrangements. This provided the client budget predictability and our firm with a more predictable path to profitability on the matter. More importantly, our focus on understanding and partnership actually enhanced our relationship with the client and their perception of our team as a trusted partner, rather than just another legal service provider.
But more often than not, pricing negotiations end in an impasse.
That’s because:
- Clients hesitate to provide transparent feedback, concerned about how firms might interpret it.
- Firms don't want to ask questions because they may be viewed as lacking the expertise clients sought in the first place!
Round and round it goes, neither side really getting the value they’re looking for.
How can legal teams break free from this stalemate?
In addition to skyrocketing rates, clients face internal pressures to control costs, expand the scope of their legal work and demonstrate strategic enterprise value.
And when in-house teams show up to the bargaining table with firms, they carry all of these frustrations on their backs.
Some lucky — or prescient — firms are able to read between the lines. But the reality is that the power (and responsibility) resides with the client to move beyond the impasse.
During our Exchange panel, we discussed several ways clients and firms can start to bridge their divides.
For example, when sending out RFPs, clients should provide crystal clear direction across the matter’s scope, phases and assumptions.
In doing so, firms have a better understanding of what is being requested, and can develop a fully thought out proposal that meets the client’s needs.
The broader takeaway here is clear:
- Clients must make sure they provide clear direction on matters and ensure all the relevant data is provided.
- Firms need to recognize the internal pressures in-house teams are under to defend their spend.
- Both sides should consider quarterly check-ins to talk budgets and adjust accordingly.
At the end of the day, in-house teams and outside firms want to be good partners for one another.
So how will you start that conversation?
