Welcome to Leganomics: Applying the insights of economic theory for efficient and profitable client-lawyer relationships

 

Programme

 

9.00 Registration

9.15 Welcome

Module I: STRATEGY

9.30 Strategies for managing suppliers of professional services

"Companies that spent up to $500,000 at a particular firm paid an average of $255/hour. But those that spent $5-10 million and had leverage and bargaining power…paid almost twice as much - $477/hour" Sept 2010 (The American Lawyer reporting on the Real Rate Report by the Corporate Executive Board and CT TyMetrix)

In the beginning of the 90s the University of Chicago's Booth School of Business supported the research of two professors which resulted in the innovative paper "Strategies for Managing Suppliers of Professional Services." Twenty years after corporate counsel are sophisticated buyers of legal services. This session will examine "supply chain management" and decision-making techniques relied on by corporate counsel in the US and the UK. We will examine how a risk/value approach to hiring law firms has shaped the legal market in the UK and consider whether it has created any market "bottlenecks" which allow rates to stabilize at higher levels.

10.40 Is the UK legal market an oligopoly?

To what extent do the economic forces of supply and demand determine a top law firm's pricing? Are law firms charging as much as they can get away with? The effect on clients, prices and profits and how the market behaves from the point of view of the principles of economics.

Corporate counsel frequently voice concerns over the fee levels of their law firms. In the Strategic Legal Advisor general counsel survey (Feb 2009) businesses reported that nearly half of their routine legal advice was costing them more than £350 an hour. What about the strong forces of competition that keep law firms on their toes?

This session will examine whether the UK legal market has features of an oligopoly and the impact on prices and client satisfaction. We will use economics, including game theory, to model how law firms compete. We will analyze the available options to buyers and sellers in an oligopoly market. The session will help you gain tactical advantage and evaluate current practice.

11.30 Coffee break

Module II POSITIONING AND PRICING

11.50 Economics of information production

This session will focus on an economic analysis of the market for information goods and services and whether law firms, as a market sub-set, can learn from the positioning and pricing strategies of other information suppliers. We will evaluate whether the oft repeated observation "there may be too many (similar) law firms especially in the middle tier" has a foundation in the tendency by some information market segments to overproduce at close to oligopoly prices.

In this cross-disciplinary study we examine the market for information goods and apply for the first time its insights to the market for legal services. We focus on versioning and unbundling techniques which afford in-house counsel an increased flexibility to purchase exactly what they need at the right time. We examine the impact of this novel application of versioning and unbundling on client satisfaction, repeat purchases, cost efficiency, and high profitability at law firms. Is there a truly alternative model for providing legal services?

13.00 Lunch

Module III MARKETING & DECISION MAKING

14.15 Modelling complex buying decisions: Can economics explain why incumbent legal providers, favourites from yester year, keep winning the panel competition? How does a firm position optimally its offering before and during panel selection?

Part I "I wish law firms had systematic knowledge of who, when and how corporates hire outside legal counsel."

We will focus on the "frictions in markets" theory which won the Nobel Prize in Economics in October 2010. The "frictions in markets" theory can be applied to the market for legal services and shows that in certain circumstances supply and demand for legal services can be matched inefficiently. This may result in higher than optimal pricing at City law firms, mismatches between law firms' skills and the "jobs" on offer, and even contribute to the difficulties in growing certain practice areas at law firms.

15.25 Coffee break

15.45 Part II Forget the "premium work for premium clients" talk. Is it good to be a compromise solution?

Cross-disciplinary research has demonstrated that a host of well-documented effects predictably and systematically affect choices and decision-making. We will use principles of economics to define and explain them in the context of legal panel selection. Through practical examples, we will discuss what makes a law firm's candidacy the winning solution.

We will examine the effect of satisficing (a combination of satisfy and suffice coined by the Nobel laureate Herbert Simon), a decision-making practice that attempts to satisfy criteria for adequacy but may sacrifice an optimal solution. We will also discuss the compromise effect which exerts a powerful force on choice because it provides a compelling justification for the purchase of one option over another.

The compromise effect is an economic and behavioural phenomenon that results in a favourable bias to pick the option which is positioned or exhibits the features of a compromise solution. This favourable bias is not an unconscious process, quite the contrary, it is a rational undertaking inherent in any decision making. It is this feature of rationality that allows a clever service provider to predict how likely it is that a particular offering will be successful, and thus structure its offering optimally. Corporate counsel will learn to recognize the main drivers that push decision makers to the compromise solution.

16.45 Five-minute BlackBerry break

Module IV LEADERSHIP

16.50 Bankers' corner: When and on what conditions will investment professionals, bankers and those in private equity, share their lucrative fees with the lawyers on the same transaction?

This interactive session will examine a novel way of possible compensation for solicitors. Can we move away from the billable hour, fixed fees, and the usual discounts associated with alternative billing and try to "follow the cash"? Is this a better measure of the value outside counsel bring? But what will the impact be on corporate counsel?

17.40 Closing

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