How to Write and Implement a Law Firm Business Plan and Gain Partner "Buy-in"

by Joel A. Rose
 

A Buddhist maxim states: "If you want to know your past, look into your present conditions. If you want to know your future, look into your present actions."

What is a Strategic Plan?
A strategic plan is a written statement describing where a law firm wants to go and how it intends to get there. It should include the firm's guiding principles and beliefs. Typically, the preparation of a strategic plan begins with a comprehensive response to three questions:

1. Where is our firm in relation to competitors firms in our market?

2. What would the members of our firm like the firm to be over the next 3 to 5 years?

3. What additional resources are required for our firm to become what the partners would like our firm to be?

Reasons Why Firms Should Have a Strategic Plan
Every firm should have some type of a strategic plan. Managing partners and members of executive and management committees must understand that competition for the more profitable clients is but one type of competition in today's highly competitive environment. An equally compelling kind of competition is ability of a firm's to attract and retain the more profitable and productive attorneys, especially those who control a considerable amount of profitable client business or those who practice in substantive practice areas that are in high demand by profitable law firm clients. In today's practice environment the more profitable and productive attorneys have greater opportunities to move around looking for the "right" fit. Obviously, compensation is a very important component when a partner decides to remain with or to seek an opportunity with another firm, but may not necessarily be the overriding factor. Today, law firms have to be sensitive and be prepared to take constructive action if a significant number of partners believe there are areas of practice the firm ought to be in so that it may provide better service to its key clients, or there are practice areas in which the firm is so weak that it would be doing its clients a favor by eliminating it and referring them to better specialists.

Managing partners and members of executive and management committees must realize that the competition is chasing their firm, and more often than not, the other firms have a plan.

As the result of the recession, a number of law firms have diversified their practices and attracted attorneys who control books of client business as lateral hires from different law firm cultures and practice environments. Therefore, a well conceived and implemented strategic planning process will identify a sense of common direction, shared goals and will establish benchmarks to assess or measure the firm's success. Further, a firm that may be experiencing growth in size, geographic location(s) and that may be in the process of diversifying its areas of substantive expertise has a greater need for structure, guidance and direction.

Reasons Why Firms May Not Have Strategic Plans
Notwithstanding the above reasons a firm should have a strategic plan, many firms eschew the necessity of the strategic planning process. One reason is that preparing a strategic plan may be time consuming. Many lawyers, who are beholden to the billable hour, view the time devoted to drafting a strategic plan as time wasted. Also, it may be difficult for partners to reach a consensus about what should be the firm's objectives and the strategies for achieving these goals. Still, other lawyers who have little confidence that once the plan has been developed it will not be implemented and will become a "dust gathering device."

Elements of a Sound Strategic Plan

Before drafting a strategic plan for a law firm, the partners must agree about the definitions of seven crucial elements that are central to the preparation of a strategic plan. These include:

1. The firm's mission, culture and core values;

2. The firm's governance and management;

3. The firm's compensation system;

4. The firm's organizational structure for delivering legal services;

5. The firm's competitive position in its market, i.e., its strengths, weaknesses, opportunities and challenges to the firm from internal and external sources;

6. The firm's goals: financial; substantive practice areas to invest in, emphasize, maintain and de-emphasize; geographic market(s); lawyer staffing; technology; etc.;

7. The strategic plan including the role(s) of each attorney, office, practice group or industry team in developing and implementing the plan.

Many lawyers spend their careers planning for their clients: estate planning, business planning, or helping clients deal with plans which have gone awry, litigation, divorces, bankruptcy. However, most lawyers are not very good planners when it comes to planning strategically for their firm for the next several years. They are present or short-term oriented. Further, many lawyers, like other professionals, have little business education or experience. As a result, preparing and implementing a strategic plan that will be embraced by all or a significant majority of a firm's partners may be viewed as both a challenge and an opportunity.

Role of Firm Governance in Strategic Planning
The type and structure of a firm's governance, i.e., the process for determining and implementing firm policy, is a critical issue when preparing a strategic plan, attempting to gain partner buy-in to the plan and insuring its successful implementation. What makes it so important is that there is not one best way to govern any given law firm, since many of the firm's employees, the partners, collectively, own the firm.

Most closely-held businesses have a few owner-employees and most publicly-held businesses have many owners who are not employees. A law firm's future, however, is not just about people's jobs, it is also about the rights and obligations of partners as owners of the firm and their status as owners.

Strategic planning encompasses a great many inter-related procedural, substantive, financial and other subjective factors that serve as the "glue that must be present in order to hold the firm together. If partners do not perceive these factors to be fair, credible and of significant importance, the resultant strategic plan will be unrealistic in its form and unsuccessful in its implementation. In other words, execution problems usually follow from a flawed strategy.

Town meeting democracy, when all partners participate in virtually every significant and many insignificant decisions, is a better theory than reality. When each partner has equal responsibility and equal authority, no one really has either.

Representative democracy, that is, delegation of authority, a different kind of specialization than most of us think about in a law firm, is more practical. It should not be difficult, in a firm of say 10 to 50 partners, to reach a consensus about which partners should be the firm's elected representatives. However, it is curious that the important qualities of elected representatives will vary between different firms at any time and within one firm at different times. When this consensus on firm governance exists at the start of the strategic planning process, substantial partner "buy-in" will have a much better opportunity to follow.

Levels of Strategic Planning Process
It has been the author's experience that the better and more progressively managed firms of all sizes and specialties frequently have six (6) levels of strategic planning.

Level 1, the firm's Mission Statement, defines in a paragraph or so any entity's reason for existence. It embodies its philosophies, goals, ambitions and mores.

Level 2, the firm's Core Values.

Level 3, the Strategic Direction in which the partners want to take the firm, i.e., growth, revenue goals, geographic expansion, practice and/or industry area expansion.

Level 4, Management's Goals and Objectives, determined and updated annually, identify specific action items for that year, consistent with the firm's Strategic Plan, timetables for completion and individuals responsible for their implementation. The strategic Plan should focus on strategic initiatives, leaving the operational/day to day decisions to the firm's Administrator/ Office Manager and the Managing Partner or the Management Committee.

Level 5, Practice Group goals and objectives, including each Practice group's Strategic Marketing Plan, an assessment of the Practice Group's strengths and weaknesses, specific goals and time-lines in areas of significance for that group and three or four meetings each year of the head of the Practice group with the Managing Partner and Management Committee to assess the performance and recommend corrective action, as required.

Level 6, Individual partner budgets and goals and objectives, reviewed annually with the head of the partner's appropriate Practice group and/or the Managing Partner/Management Committee.

How a Strategic Plan is Developed and Implemented
Before drafting a strategic plan, the firm's lawyer management must evaluate both the internal and external issues presently confronting the firm and their anticipated future consequences. Following is a representative list of items that need to be analyzed:

Subjective Factors:

This phase involves the lawyer management to survey all or a representative number of lawyers through personal interviews, questionnaires or a combination of both to obtain their perceptions about internal and external trends that will have an effect on the firm. Examples of issues that are usually addressed during the self assessment follow:

1. The philosophy, objectives and plans currently guiding the firm;

2. The firm's culture;

3. The form and effectiveness of firm governance, organization and administration;

4. How effectively the firm's growth has been managed;

5. Partner/associate relationships, i.e., the ratio of associates to partners, classes of partners and associates, criteria for admission to partnership, communications among and between partners and associates, retirement planning, etc.;

6. Firm economics, i.e., partner satisfaction with gross revenue and net profit, individual net income, hourly and billing expectation from partners and associates, etc.;

7. Areas of practice management, i.e., how the firm is organized to deliver legal services in a quality, timely and profitable manner;

8. Firm resources and capabilities, i.e., strengths and weaknesses, as related to resources, reputation, services and legal market position;

9. Clients' perceptions of the firm and its method of delivering legal services;

10. Partners' willingness and ability to sell the firm's legal expertise to existing and potential clients, etc.;

11. An assessment of the firm's legal market, including size, synergism, trends, competition, client behavior, etc.; and

12. A forecast of the political, social and economic forces of change that will affect the firm and its clients.

Objective Factors:

This phase of the process involves analyzing the data base to highlight those key internal and external factors affecting the firm. Lawyer management should be especially interested in obtaining partners' perceptions about the following:

1. Firm Strengths

2. Firm Weaknesses

3. Competitive Advantages

4. Competitive Disadvantages

5. Number of full time lawyers - both partners and associates and their ages

6. Administrative personnel

7. Main sources of clients and income from principal clients over the past three to five years and important changes that would affect client volume favorably or unfavorably

8. Inventory of unbilled time, accounts receivable, costs advanced

9. Revenue collections and billable and non-billable hours of each attorney

10. Client origination and cross-selling results of each attorney

11. Health problems or personal idiosyncrasies of partners

12. Anticipated changes in the partner compliment, i.e., retirement, withdrawal, etc.

Many law firms have retained law office consultants to assist in the strategic planning process. Experienced law office consultants can expedite the strategic planning process. Being familiar with lawyer dynamics and the economics of law firms, law office consultants can analyze and interpret financial and management information and partners' responses. They can recommend alternative approaches for achieving firm objectives. Further, partners are usually willing to discuss their perceptions about the firm and respond to consultant's questions more readily than to similar questions asked by other partners.

A SWOT analysis (the critical assessment of the firm's strengths, weaknesses, opportunities and threats), can be helpful in the realistic evaluation of the firm. With appropriate input from other partners, lawyer management must create a vision of how the firm will effectively address these issues.

Implementation and Obtaining Partner Buy-in:

The firm's collective vision must be agreed upon by the partners. It must be realistic and attainable. The strategies for achieving each component of the vision must be specific, realistic and attainable. Further, they need to identify "what the firm (or its components) is going to do with it," "the roles of different people to implement the strategy" and the "details about how the strategy will be implemented."

The pay-off for the strategic planning process is the plan's implementation. This is frequently the most difficult part of the strategic planning process.

It is recommended that the plan be implemented through the firm's existing organizational structure, i.e., the Managing Partner, the Executive Committee (in larger firms through the Strategic Planning Committee, Heads of Substantive Practice Areas and Branch Offices, as required).

Obtaining partner "buy-in" is central to implementing the strategic plan. Unless partners are committed to "buying-into" the objectives and action plans to be undertaken, they will be implemented with limited success.

Partner buy-in is usually obtained through the clear and frequent communications and assiduous diplomacy by lawyer management. Some partners will be skeptics about the strategic planning - "not that stuff again, what a waste of time;" and others probably will be neither enthusiastic nor openly negative about the process.

Obtaining partner buy-in calls for involving partners throughout the strategic planning process and reinforcing the need for their opinions and ideas.

Lawyer management needs to identify and discuss with those partners who are perceived to be "key informants" what those partners think will be an effective strategic planning process and outcome. Participants then feel they have a voice in the process and can influence outcome of the plan.

Individual partners should be assigned responsibility and held accountable for the satisfactory implementation of each phase of the plan in accordance with an agreed upon timetable. Partners responsible for the implementation phase should report to the Managing Partner, Executive Committee, Strategic Planning Committee or other group designated to oversee the planning process. Problems and/or progress should be reviewed and assessments made to determine the most appropriate strategies to be followed. Status reports should be provided to the other partners on progress and/or problems in each phase of the plan in order to keep them apprised about the planning activities.

The implementation process must be monitored to assess how effectively the plan is being implemented and corrective action must be taken, as required.

Throughout the strategic planning process the Managing Partner's job is to sell the strategic plan, create buy-in by explaining the benefits to be derived as the result of implementing the strategic plan, and using his or her role as a "bully pulpit." It is imperative for the Managing Partner to keep the momentum for the plan and the planning process at a high level and to measure/evaluate the performance of each component of the strategic planning process in order to keep the process moving forward. Also, lawyer management should call upon other members of the firm, and the firm's administrative managers, accountable for implementation of the plan. Typically, Managing Partners use the firm's cultural influences and compensation incentives to facilitate the expeditious implementation of the strategic plan.

Conclusion

Strategic planning is a dynamic process. The strategic plans need to be revisited on a frequent basis and updated to meet changes constantly occurring in the firm's environment. The strategic planning process is a fluid and dynamic process. It is not a stone carving or a Stalin-era five-year plan (in the former Soviet Union), done once, completely rigid and only occasionally related to reality. Lawyer management must be prepared to be flexible and revise or modify the strategic plan, as appropriate. Further, the leaders must continually review and revise the plan after it has been completed based on the expected occurrence of unexpected occurrences.

The strategic plan must be seen by the partners to be realistic. Utopian plans will flounder on partner skepticism and consequent unwillingness to participate actively in the plan implementation. The plan must be diligently and consistently implemented. In fact, a group of leaders need to be engaged in evaluating the progress of plan's implementation and responsible for mid-course revision of the plan, as required.

Properly conceived and implemented, the strategic planning process will be especially helpful to a firm by providing the necessary information for determining immediate and long-term goals and objectives and for identifying opportunities and recommending strategies for their implementation that may be considered by the partners.

©1999-2017 Joel A. Rose & Associates