Strategic Planning: Look Before You Leap

The market is asking a great deal of law firms these days. The economy is still unpredictable, clients are demanding additional value at the same costs, and client loyalty is not what it used to be. As a result, many firms are struggling with instituting internal management controls that emphasize profitability and synergy in addition to practice excellence.

Frankly, the move by law firms to become more strategically oriented is reactionary. If you ask most lawyers, they did not expect management and planning to be a part of their daily duties when they entered law school. While some have embraced their new role, very few have done it before. An even smaller fraction is formally educated in the discipline of building strong businesses.

According to a 2001 study conducted by the Legal Marketing Association, over 59% of the nation's top law firms have formal, written strategic plans. However, the same study shows that only a small minority of firms actually conduct any form of client interviews and outside market research. Therefore, many of the formal plans that are being created are what the firm wants to be in its own image. While this is not unexpected from organizations conducting their first foray into planning, it is not true strategy. For most, it is a wish list, and many other firms are wishing on the same star.

Leaders at law firms are simultaneously trying to balance the desire for autonomy and requests for resources with their constituents. A strong firm strategy must coexist with individual action plans, if they exist, as well as group and office marketing plans. In some cases, these multiple plans directly contradict each other, but they are allowed to remain in the spirit of partnership.

However, the firms that are able to make hard choices about trade-offs, pool resources, and coordinate the actions of disparate professionals will be in a better position to service their clients. Focus leads to specialization and efficiency, which allows a firm to offer the finest services and still maintain value. That is the definition of a dominant player, but over 200 years of the market capitalism model proves that not every firm is going to be one.

Status Quo

As of just a few years ago, the status quo of most law firms was characterized by a collection of highly skilled legal technicians who worked hard to cultivate personal relationships largely uncoordinated with other individuals within the firm. The recipe for long-term success was to do good work and more good work would appear. This recipe for success still applies, but the competition for a share of the most complex and profitable work has greatly increased. Firms, as collective entities, began to create enterprise level marketing strategies to generate overall exposure and enhance their market position.

Most of these plans were passive in nature and not tied to specific action plans by individuals. In addition, few firms employed any type of practice management system to coordinate and monitor the marketing efforts, and results, of tactics at the operating unit level. Accordingly, marketing and business development was a collection of random acts of lunch and golf that were semi-supported by under-funded branding and communications campaigns. The result was dissatisfaction with the effectiveness of marketing and planning. However, the problem was not the plan, but rather the execution.

Why Law Firm Strategy?

Until recently, most law firms' efforts were centered on achieving operational effectiveness (OE) instead of strategy. Harvard Business School Professor Michael Porter once described strategy as the act of making hard choices and accepting trade-offs. It is deliberately trying to be different than your competitors, as opposed to just trying to do the same activities better. Law firms typically benchmark other firms and then try to convince clients through marketing communications and personal relationships that they do it better than their competitors. Such an advantage can only be sustained for so long, and many law firms are learning this truth the hard way.

Japanese companies in the past two decades provided an example of the follies of chasing operating effectiveness rather than strategy. Like many law firms, they are traditionally governed by consensus. They also tend to mediate differences between centers of power within the organization, which leads to dilution of the firm's market position. Eventually, a market full of similar competitors exists. The inherent danger is trying to be all things to all people where clients eventually cannot distinguish one competitor from another. Japanese companies no longer hold the advantages that they once did because they have squeezed every ounce of profit and market share out of their customer base. Now they face mass consolidations and compete primarily on price, which sounds remarkably similar to what law firms are starting to see today.

Recent Trends

There are a number of recent trends in the industry that are affecting the business of law. Most of the changes are being forced by external factors that are causing more client-centric approaches to management.

First, few would deny that the competition for the best work is harder. Firms are expanding nationally ' even globally ' in response to the broadening needs of their clients. This has created a rush for growth in the number of attorneys and office locations. The quickest path to this growth is usually in mergers or acquisitions of smaller firms. Thus, firms have greatly increased in size in the past few years as well as their resources. It is becoming harder and more expensive to keep pace with the market leaders.

Second, some firms are beginning to employ practice management models that treat practice groups as operational units comprised of attorneys with similar client bases and areas of functional expertise. Measurement of financial success and deploying of resources are increasingly being evaluated at the unit level.

Third, clients are demanding multi-faceted business solutions, instead of just legal solutions, to their problems. In response, practices centered on industries and key clients have emerged to address client need across a wide range of functional areas of legal expertise. For example, a manufacturer wants their law firm to help improve their profitability by using their corporate, employment and real estate attorneys to help them expand. Clients who want to spend more time worrying about their core business rather than managing a network of disjointed legal service providers welcome this cross-disciplinary approach.

Building a Coordinated Business and Marketing Strategy

The answer for law firms is to build from the top and the bottom, and then meet in the middle. A firm must be willing to create a unique strategy that defines the parameters of what they are trying to achieve. Resources, both time and money, must be focused on a few key areas. Strategy is about choosing what not to do as much as it is choosing what to do. This requires strong leadership and a clear view of market need from the client perspective, as opposed to simply maintaining the status quo. The leadership must ask, not guess, what clients want and build a corresponding plan that cannot be easily duplicated by competitors. This is the essence of a strong strategic plan.

However, strategy is not a living, breathing thing. It is the specific, daily actions of attorneys that will execute the firm's strategy. It is not realistic to create a firm-wide plan and wait for it to become reality. Individual action plans that fall within the parameters of the firm's strategy must identify what activities they will undertake. Client and prospect contact, association involvement, speaking and publishing goals are all components of a comprehensive action plan. It is also not enough to have “get more work from public companies” as a goal. Individuals must add names, places and dates to have a workable individual plan.

The culmination of individual action plans, that all fall under the firm's overall strategy, make up practice level and group marketing plans. It should be the responsibility of practice leaders to coordinate group activities and identify outliers. It is at the group level where individual action plans be monitored and managed using financial data and non-billable time reports. This allows the firm's leadership to manage their operating units instead of each individual, which is unrealistic for firms with hundreds of attorneys scattered throughout the world.

Roadblocks and Obstacles

Going from a collection of uncoordinated efforts to managing individual efforts by operating units, such as practice groups, is not an easy task. Firms must be able to manage the desire for autonomy and still address the need for long-term profitability.

There are those who will oppose such structures because they may not believe in the strategy or not like their place in it. The leadership must insulate themselves with data that shows that their decisions are based on market and client need and not motivated by ulterior motives that solely benefit the architects of the plan.

Others may oppose the structure because they are desperately trying to preserve the status quo or are looking back to the “good old days” when the firm did more of the type of work that they like to do. Financial data profiling the top clients and the work your firm has performed for them over the past 3-5 years helps to counteract this position. A firm should not let an identity crisis sabotage the planning process.

Some may look to outliers as a reason not to make trade-offs and hard choices. That one matter that was done last year may have been very profitable, but it cannot be reasonably replicated. Marketing and business plans should define the work the firm is trying to capture, but not be confused with what work can be done. The presence of work that falls outside of a group plan should not be a legitimate argument against having a plan at all. Having a plan and doing unplanned work are not mutually exclusive concepts.

The End Result: Increased Profitability

How firm and practice group marketing strategies impact individual marketing efforts is a challenging problem, especially at firms that have seen continued annual growth. No one will argue with the fact that a firm can see short-term success by chasing operational effectiveness rather than employing strategy. In the long term, operational effectiveness manages revenue, but strategy drives profitability.

Firms with formal strategic and marketing plans are in control of their own destiny. It requires hard choices from the leadership, actions with accountability from individuals, and managed efforts by practice/industry groups. This discipline is effective for the market leaders in almost every industry. As law firms are starting to realize, the key is for them to emulate the best practices of their clients rather than argue why they are different from them.

The market is asking a great deal of law firms these days. The economy is still unpredictable, clients are demanding additional value at the same costs, and client loyalty is not what it used to be. As a result, many firms are struggling with instituting internal management controls that emphasize profitability and synergy in addition to practice excellence.

Frankly, the move by law firms to become more strategically oriented is reactionary. If you ask most lawyers, they did not expect management and planning to be a part of their daily duties when they entered law school. While some have embraced their new role, very few have done it before. An even smaller fraction is formally educated in the discipline of building strong businesses.

According to a 2001 study conducted by the Legal Marketing Association, over 59% of the nation's top law firms have formal, written strategic plans. However, the same study shows that only a small minority of firms actually conduct any form of client interviews and outside market research. Therefore, many of the formal plans that are being created are what the firm wants to be in its own image. While this is not unexpected from organizations conducting their first foray into planning, it is not true strategy. For most, it is a wish list, and many other firms are wishing on the same star.

Leaders at law firms are simultaneously trying to balance the desire for autonomy and requests for resources with their constituents. A strong firm strategy must coexist with individual action plans, if they exist, as well as group and office marketing plans. In some cases, these multiple plans directly contradict each other, but they are allowed to remain in the spirit of partnership.

However, the firms that are able to make hard choices about trade-offs, pool resources, and coordinate the actions of disparate professionals will be in a better position to service their clients. Focus leads to specialization and efficiency, which allows a firm to offer the finest services and still maintain value. That is the definition of a dominant player, but over 200 years of the market capitalism model proves that not every firm is going to be one.

Status Quo

As of just a few years ago, the status quo of most law firms was characterized by a collection of highly skilled legal technicians who worked hard to cultivate personal relationships largely uncoordinated with other individuals within the firm. The recipe for long-term success was to do good work and more good work would appear. This recipe for success still applies, but the competition for a share of the most complex and profitable work has greatly increased. Firms, as collective entities, began to create enterprise level marketing strategies to generate overall exposure and enhance their market position.

Most of these plans were passive in nature and not tied to specific action plans by individuals. In addition, few firms employed any type of practice management system to coordinate and monitor the marketing efforts, and results, of tactics at the operating unit level. Accordingly, marketing and business development was a collection of random acts of lunch and golf that were semi-supported by under-funded branding and communications campaigns. The result was dissatisfaction with the effectiveness of marketing and planning. However, the problem was not the plan, but rather the execution.

Why Law Firm Strategy?

Until recently, most law firms' efforts were centered on achieving operational effectiveness (OE) instead of strategy. Harvard Business School Professor Michael Porter once described strategy as the act of making hard choices and accepting trade-offs. It is deliberately trying to be different than your competitors, as opposed to just trying to do the same activities better. Law firms typically benchmark other firms and then try to convince clients through marketing communications and personal relationships that they do it better than their competitors. Such an advantage can only be sustained for so long, and many law firms are learning this truth the hard way.

Japanese companies in the past two decades provided an example of the follies of chasing operating effectiveness rather than strategy. Like many law firms, they are traditionally governed by consensus. They also tend to mediate differences between centers of power within the organization, which leads to dilution of the firm's market position. Eventually, a market full of similar competitors exists. The inherent danger is trying to be all things to all people where clients eventually cannot distinguish one competitor from another. Japanese companies no longer hold the advantages that they once did because they have squeezed every ounce of profit and market share out of their customer base. Now they face mass consolidations and compete primarily on price, which sounds remarkably similar to what law firms are starting to see today.

Recent Trends

There are a number of recent trends in the industry that are affecting the business of law. Most of the changes are being forced by external factors that are causing more client-centric approaches to management.

First, few would deny that the competition for the best work is harder. Firms are expanding nationally ' even globally ' in response to the broadening needs of their clients. This has created a rush for growth in the number of attorneys and office locations. The quickest path to this growth is usually in mergers or acquisitions of smaller firms. Thus, firms have greatly increased in size in the past few years as well as their resources. It is becoming harder and more expensive to keep pace with the market leaders.

Second, some firms are beginning to employ practice management models that treat practice groups as operational units comprised of attorneys with similar client bases and areas of functional expertise. Measurement of financial success and deploying of resources are increasingly being evaluated at the unit level.

Third, clients are demanding multi-faceted business solutions, instead of just legal solutions, to their problems. In response, practices centered on industries and key clients have emerged to address client need across a wide range of functional areas of legal expertise. For example, a manufacturer wants their law firm to help improve their profitability by using their corporate, employment and real estate attorneys to help them expand. Clients who want to spend more time worrying about their core business rather than managing a network of disjointed legal service providers welcome this cross-disciplinary approach.

Building a Coordinated Business and Marketing Strategy

The answer for law firms is to build from the top and the bottom, and then meet in the middle. A firm must be willing to create a unique strategy that defines the parameters of what they are trying to achieve. Resources, both time and money, must be focused on a few key areas. Strategy is about choosing what not to do as much as it is choosing what to do. This requires strong leadership and a clear view of market need from the client perspective, as opposed to simply maintaining the status quo. The leadership must ask, not guess, what clients want and build a corresponding plan that cannot be easily duplicated by competitors. This is the essence of a strong strategic plan.

However, strategy is not a living, breathing thing. It is the specific, daily actions of attorneys that will execute the firm's strategy. It is not realistic to create a firm-wide plan and wait for it to become reality. Individual action plans that fall within the parameters of the firm's strategy must identify what activities they will undertake. Client and prospect contact, association involvement, speaking and publishing goals are all components of a comprehensive action plan. It is also not enough to have “get more work from public companies” as a goal. Individuals must add names, places and dates to have a workable individual plan.

The culmination of individual action plans, that all fall under the firm's overall strategy, make up practice level and group marketing plans. It should be the responsibility of practice leaders to coordinate group activities and identify outliers. It is at the group level where individual action plans be monitored and managed using financial data and non-billable time reports. This allows the firm's leadership to manage their operating units instead of each individual, which is unrealistic for firms with hundreds of attorneys scattered throughout the world.

Roadblocks and Obstacles

Going from a collection of uncoordinated efforts to managing individual efforts by operating units, such as practice groups, is not an easy task. Firms must be able to manage the desire for autonomy and still address the need for long-term profitability.

There are those who will oppose such structures because they may not believe in the strategy or not like their place in it. The leadership must insulate themselves with data that shows that their decisions are based on market and client need and not motivated by ulterior motives that solely benefit the architects of the plan.

Others may oppose the structure because they are desperately trying to preserve the status quo or are looking back to the “good old days” when the firm did more of the type of work that they like to do. Financial data profiling the top clients and the work your firm has performed for them over the past 3-5 years helps to counteract this position. A firm should not let an identity crisis sabotage the planning process.

Some may look to outliers as a reason not to make trade-offs and hard choices. That one matter that was done last year may have been very profitable, but it cannot be reasonably replicated. Marketing and business plans should define the work the firm is trying to capture, but not be confused with what work can be done. The presence of work that falls outside of a group plan should not be a legitimate argument against having a plan at all. Having a plan and doing unplanned work are not mutually exclusive concepts.

The End Result: Increased Profitability

How firm and practice group marketing strategies impact individual marketing efforts is a challenging problem, especially at firms that have seen continued annual growth. No one will argue with the fact that a firm can see short-term success by chasing operational effectiveness rather than employing strategy. In the long term, operational effectiveness manages revenue, but strategy drives profitability.

Firms with formal strategic and marketing plans are in control of their own destiny. It requires hard choices from the leadership, actions with accountability from individuals, and managed efforts by practice/industry groups. This discipline is effective for the market leaders in almost every industry. As law firms are starting to realize, the key is for them to emulate the best practices of their clients rather than argue why they are different from them.