Let’s remind ourselves of the four categories of firm I rather crudely described in Part 1.
- Stars, scoring say 8 or 9 out of 10 in terms of transforming their pricing cultures and, as a direct result, their financials, often improving revenue by more than 5-15%;
- Achievers, scoring a solid 6 or 7 out of 10, these firm have done pricing well, sitting comfortably in my 5-15% range, often towards the top of that and probably know that they could do so much more ‘but, you know…’;
- B Players, scoring 4 or 5 out of 10, these have done OK with their pricing (possibly sitting towards the bottom of my 5-15% range) but haven’t fundamentally changed, with too many in the firm allowed to go back to doing things as they did before their training;
- Recidivists, scoring 2 or 3 out of 10, having failed to embed any lasting change in pricing policies and practices and financially, barely done better than recover the investment sunk into the training.
It’s important to stress that even the Recidivists see a return on their investment in training. They just don’t see anything other than transient benefits. Our B Player firms do – but the long-term benefits for them are patchy rather than firm-wide, too often dependent on the enthusiasm and skill of certain department or service line heads. So, what characterises the firms that have changed their pricing practices and achieved returns on their investment of 10-15% plus?
Stars & Achievers
It starts at the beginning. Before any training, or at any rate, after the initial training, the leaders of these firms build a coalition for the project. The Stars and Achievers will then, over time, put all their professionals through pricing training. By ‘all’ I mean 90%+ of those who will have pricing conversations with clients. And it never stops. Periodically they will invest in training a cohort of people new to the firm such that the 90%+ figure never materially drops. It’s an ongoing project.
Our Achievers commit to keeping pricing front and centre of all that they do. It becomes central to client relationships. It empowers professionals, imbuing them with confidence. Scope creep is managed better than it used it be. Pricing is valued as a skill that all the firm’s senior professionals should have. And its role in improving profitability is recognised and celebrated.
The Achievers have a critical mass of professionals trained in pricing and committed (by and large) to its deployment. Clients will get pricing options more often than not and most if not all will respond warmly to the firm’s pricing initiatives. And pricing will be an agenda item on each department’s monthly meeting.
The Stars have gone further still. The kind of things I see these firms doing really well include:
- A rolling training programme. As soon as the firm has a dozen or so professionals that haven’t had pricing training, those people get trained (‘it’s part of how we do things round here’);
- Leadership’s commitment to the pricing project is evidenced by senior people attending pricing training more than once. One Head of Department has to my knowledge attended the training four times!
- They recognise that training isn’t everything. One firm for example adds a Refresher Day onto each training program I deliver. Another books a couple of Refresher Days each year. How that day might be used of course varies. Time is allotted to teams and departments to utilise as they wish. Examples include 1-2-1s with Heads of Department to help overcome perceived obstacles, or a small group exercise on pricing a particular matter, or reminding some of pricing first principles and supplying the often forgotten ‘why?’;
- Others have ongoing external support through a Retainer, so that they can access ongoing assistance and support, often in real time, during the first year or so of the pricing project’s lifetime. This keeps the project ‘live’ for busy professionals and keeps the project management team on track;
- Successfully embedding a change in the firm’s culture, evidenced by a more commercial approach to matter take-ons (‘its ok to say no to a client, it’s even ok to lose out on a job due to price!’), a willingness to proactively manage scope and its inevitable creep, and a confident approach to conversations with clients about price – because they lead on value and benefits, not cost and a focus on profit: by department, by team, by each individual and where possible by each matter.
In short, our Stars commit to pricing, not with a view to transient gains but with a view to changing the way they manage the financial aspect of their client relationships, leading to their professionals having an enhanced sense of their own value and – this shouldn’t need saying but it does – happier clients. Why? Clients are offered the pricing solutions they want, not the Hobson’s choice so typical of unsophisticated professional service firms.
In Part 1 we looked at the failings of B Players and Recidivists to gain real and long-lasting traction from their pricing projects. In this Part we have looked at some of the characteristics of the Achievers and Stars, and what your firm could do to join them. Moving up just one category, eg from B Player to Achiever, could have a dramatic impact.
But in answer to the question posed in the heading of this piece, no, it’s not easy. If it were, everyone would be doing it, and performing as Stars. But if your firm is prepared genuinely to commit to an ongoing pricing project, the rewards could be transformational.