tag:blogger.com,1999:blog-3248863093001003125.post2577571430428781672..comments2009-09-25T21:29:28.468-05:00Lihsahttp://www.blogger.com/profile/07377484000156287824noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3248863093001003125.post-77614546548136969652009-09-25T21:29:28.468-05:002009-09-25T21:29:28.468-05:00How wonderful to read these comments. I&#39;ve been talking to my self about this for too many years...Seriously, I teach lawyers how to &quot;do&quot; project management and budgeting. As a former practising attorney, Partner at a Big Accounting firm and practice group leader, I&#39;ve had some hands-on experience to develop the skills, syllabus and curriculum. Glad to follow up or brainstorm with anyone who might be interested. <br />Aileen Leventon<br />www.qlexconsulting.comQLex Consultinghttp://www.blogger.com/profile/15928857328029711841noreply@blogger.comtag:blogger.com,1999:blog-3248863093001003125.post-16294750479159061992009-03-26T14:21:00.000-05:002009-03-26T14:21:00.000-05:00Hi Toby,<BR/><BR/>Good post and good points. I firmly believe the answer to your question is in Project Management, a skill I am afraid most professional knowledge firms do not possess. And I'll go a step further: Excellence in project management is critical, NO MATTER HOW A FIRM PRICES (even if it uses billable hours).<BR/><BR/>My colleague Ed Kless is a Certified Project Manager, and teaches this skill. He wrote a three-part post on our blog that I think you and your readers will find very valuable:<BR/><BR/>http://www.verasage.com/index.php/<BR/>community/comments/the_triangle_of_truth/<BR/><BR/>http://www.verasage.com/index.php<BR/>/community/comments/elements_of_<BR/>a_scope_document/<BR/><BR/>http://www.verasage.com/index.php<BR/>/community/comments/elements_of_<BR/>a_change_request/<BR/><BR/>I would also like to point out that no matter how good a firm is at cost accounting and budgeting, those skills will not help it to become better at pricing. The best cost accountants in the world (CPAs) are among the worst pricers in the world.<BR/><BR/>Cost accounting is a low value activity, and any first year accounting student could do it, especially in a law firm where over 90% of your costs are fixed. This isn't rocket science.<BR/><BR/>The hard part is not figuring your costs, it's figuring out the value to the client. And this is where professional pricers spend their time. Too many firms focus way too much on how to cost, fearing they are not going to make a profit on every minute they spend. This is the wrong focus. You have to focus on value creation, which greatly exceeds your costs.<BR/><BR/>Toyota is so good at this it does not have a standard cost accounting system, a fact that should send a chill up the spine of every CPA alive. Read the book Profit Beyond Measure, by H. Thomas Johnson to learn how Toyota values, prices and costs its products.<BR/><BR/>So yes, if you are going to do Value Pricing here are the essentials:<BR/><BR/>1) Use Key Predictive Indicators to predict future client and team member behavior, since they measure success the same way the client does. No client judges the success of their law firm by how many they spend or log on a timesheet.<BR/><BR/>2) Develop your project management skills, which include allocating resources, projecting capacity forward (not looking backwards like timesheets do), and determining turn-around times (which deals with duration, not time spent doing the work).<BR/><BR/>3) Do After Actions Reviews on every major engagement to add to your firm's intellectual capital, figure out how to do it better next time, and apply lessons learned to future engagements.<BR/><BR/>4) Appoint a Chief Value Officer and a pricing cartel, a group of people dedicated to getting better at the above skills, and who are responsible for pricing across the entire firm.<BR/><BR/>This is the path the Fortune 500 companies have traversed, now that most of them have pricing departments.<BR/><BR/>It's an investment in intellectual capital that will pay substantial dividends. Once you get good at it, you'll stop sweating over how long (in 6 minutes increments) things take, since your firm will be obsessed with value. And if you achieve that, you can be a rather sloppy cost accountant. <BR/><BR/>I guarantee it, and that's from a former (recovering and repentant) cost accountant.<BR/><BR/>Regards,<BR/>Ron Baker, Founder<BR/>VeraSage Institute<BR/>www.verasage.comRon Bakerhttp://www.verasage.comnoreply@blogger.com