DEVELOPING AND IMPLEMENTING STRATEGIC PLANS THAT WILL DIFFERENTIATE YOUR FIRM FROM THE COMPETITION DURING 2015by Joel A. Rose
What is Strategic Planning?
A strategic plan is a clear statement of guiding principles, beliefs and overriding values that will direct the firm in the future. It is a clear delineation of who the partners of a law firm want to be, and the process to be followed to achieve these objectives.
The plan should include a clear resolution of important contradictions among and between partners, and address such items as:
-Will the firm be a "unified" law firm or a collection of solo practitioners?
Properly conceived and implemented, the strategic planning process, and its results will foster communication, provide partner input, and create a sense of ownership and common direction that will bind the firm, and help it withstand adversity, and to achieve longevity, and success. It builds "emotional and financial equity" among partners, as opposed to only financial equity.
Strategic planning allows firms to re-focus on team work and investment in the long-run, even though this investment can reduce short-run profit. The glue that holds the law firm together, never has been and never will be partner income. Instead, it is composed of the values and beliefs about client service held and followed by everyone in the firm, a clear and concise mission and direction, and goals that partners and employees understand and to which each partner is committed.
Lawyer managers in the better managed and more financially and professionally successful law firms recognize that their firms cannot build a long-term continuous stream of business in one year. No organization is static. Both internal and external forces change law firms. The following examples illustrate this point: Internal: The successful and profitable firm that fails to plan for the replacement of business generated by retiring rainmakers; External: The current recession, especially in transactional work, i.e., Mergers and Acquisitions, etc.
Law firms must grow (however defined) to improve position and retain viability: An important goal of long-range planning is to assure, as much as possible, that partner income will continue to rise at a pace equal to or better than the rate of inflation. But, growth must be managed so that success does not crush the organization. Strategic planning does not necessarily mean - how do we grow bigger? That may not be what is right for the firm, i.e., Brobeck, Phlager, since continuous issues affecting a law firm may change with growth.
Participation and Roles for Strategic Planning
Law firm managers must be committed to planning and execution. Without that commitment, no strategic plan will be successful. One of the crucial decisions that must be made in the planning process is whether to take a top-down approach or give more authority to various practice area and have them develop their strategic plans with the firms plan being the cumulative input from all of the various departments and offices.
The Managing Partner and Executive or Management Committee must set the tone and methodology of communication, inclusion, efficacy and input by all partners. They must review lessons of the past, lest mistakes of the past be repeated and decide on the result of the Strategic Planning Process, even if the goal is as simple as getting all partners together for a weekend Retreat for fun and interaction that reminds them why they are practicing law together.
The Department Heads and Practice Group Leaders provide the ultimate "sanity check" for the Managing Partner and Management Committee, i.e., are their broad goals and desired results realistic and achievable given the expertise, personnel, personalities and level of business in the firm? Further, they should offer more precise goal definition given their front line responsibility for, and knowledge of, the firm's practice and practicing lawyers.
All Partners will be responsible for contributing to the development and implementation of components of the implementation process.
How to Ensure Participation
Before the Retreat or Strategic Planning meetings, interview or survey all partners on the critical issues defined by the Executive Committee and Department Heads. Interviews or Surveys are best conducted by an independent, experienced law firm management consultant. Partners are more likely to "open up" to outside consultants during confidential interviews. Such interviews can advise the creation of an appropriate survey to propel the planning process into the directions that the partners of the firm consider advisable.
In larger and mid-sized law firms, interviews should be followed up with a survey to confirm the definition of critical issues and establish reportable and understandable data that will move the Retreat or Strategic Planning meeting into the desired direction in advance of those meetings. Moreover, interviews and surveys will eliminate or minimize wasteful pontificating at the Retreat or Strategic Planning meeting, and will focus the firm on the key issues for discussion and action.
Critical Elements to a Sound Strategic Plan
Partners must reach a consensus about the firm's (1) Culture; (2) Governance and Management for policy determination and implementation; (3) Compensation System; (4) Competitive Position; and (5) Plan of Attack, and each group's and each individual's role in the implementation effort.
1. Culture: Partners must define what is the firm now and what they want the firm to be within the next three to five years. They must assess those broad wealth, life, liberty and the pursuit of happiness issues.
2. Governance and Management: Partners must define how their firm is managed and how it should be managed. To achieve this consensus partners must determine what form of management best fits its culture, and will best achieve the partners' goals as in and through the strategic planning process. Also, they must agree upon their expectations of the various roles that law firm leaders will play and how their contributions will be measured.
3. Compensation: Partners must define the current compensation system and reach a consensus about whether it (a) reflects the defined culture and goals of the firm, (b) motivates and incentivizes partners to buy-in and to play their roles after the planning sessions, (c) will achieve group and personal reinforcement of expected behaviors, (d) will reward successful participation in implementing the firm's strategic plan and (e) will achieve results.
4. Competitive Position: Since a firm's competitive position represents its core strengths and competencies, and even, to some extent, its weaknesses. It answers the following questions: (a) Who are we? (b) What are we? (c)What makes us successful? (d) What inhibits further success? and (e)What should we do, and in what directions should we go?
Strategic planning requires assessment of core strengths and of weaknesses. The strategic plan must leverage strengths to exploit and profit from prior investment and established good will. At the same time, the strategic plan must identify those weaknesses in which the firm will invest, and those weaknesses which the firm will shed, in order to become more focused on its market position.
The plan must stress the importance of identifying core competencies in strategic planning. The more financially and professionally successful law firms have benefitted from the thoughtful and careful positioning of their firms in their marketplace. While firm's success may resulted initially from the energy, skill and reputations of the partners, at some point the firm should establish an identity which transcends the partners and attracts clients because of the firms special capabilities.
Quantitative and Qualitative Analysis
An examination of a firm's competitive position requires firms to conduct both quantitative and qualitative analysis. The quantitative analysis involves an examination of revenue at the firm level. Fees for the past several years should be collected, and arranged in the following ways:
Clients should be listed in descending order by order by fees collected.
Group engagements should be examined. For example, in an insurance defense firm, one grouping might consist of the dollars generated by coverage opinions.
Grouping clients by industry.
Grouping clients by geography.
Ranking clients by the size of entity.
Examining engagement by size (in fee dollars collected).
Ranking clients by billing rate.
Ranking clients by realization rate.
The foregoing are primarily financial questions, and define the firm's financial situation. The following quantitative issues are positioning questions:
Is the firm's client base diversified or dependent on a few clients?
Is the firm concentrated in one or a few particular industries or is it diversified? What are the future prospects for each industry?
Is the firm concentrated in one geographical area or dispersed?
Is the firm concentrated in one size client (or business vs individual)?
Is the firm performing a small volume of large-fee matters, or a large volume of small-fee matters?
Is the firm offering a full bundle of services to its clients, or just particular services?
What are the firm's trends in regards to profitability? Billing rates? Realization rates?
Are the firm clients sophisticated regarding the delivery of legal services?
What has the client turnover been in the last three years? Why have clients left? How does the firm obtain new work? Are those methods likely to be successful in the future?
What are the firm's service levels?
How does the firm's breadth and depth of expertise compare to its perceived competitors?
By assessing these attributes, the firm can determine its competitive position and determine where it has a competitive advantage, in which industries that it is most likely to obtain business, and in which geographic areas and what services the firm must offer. Most important, the firm will learn whether it is capable of offering the bundle of services needed to address its target market.
Plan of Attack: Positioning and Business Development Through Implementation of the Strategic Plan
Consistent with the definitions of culture, compensation and governance, and with established goals, the plan must:
Define expectations for group and individual behaviors.
Establish implementation systems that give constant feedback, that reward contribution, efforts, and results, and reinforce these expected behaviors and results.
Establish objective and measurable standards against which the firm can measure its progress and in interim and "final" basis.
Establish a culture of accountability achieved through the governance, management and compensation structures of the firm.
Identify strengths - core business issues.
Identify targets consistent with the trends. Set goals.
What strategies and tactics will lead to achievement of goals?
The below strategies illustrate representative strategic planning action plans:
Example: Environmental Practice Group
Example: Capitalize on client-service strengths and eliminate client-service weaknesses.
GOAL : Create an environment which stresses commitment to client service. Continually seek to improve the quality of client service.
A. Objective: Seek to capitalize on client-service strengths and eliminate client-service weaknesses.
Strategic Plan Implementation
Accountability is an essential part of the strategic planning and implementation process. If the investment of time and effort needed to develop a plan strategic planning process is worth engaging in, then it is worth supervising and insuring successful achievement of goals. Therefore, the firm must assign someone with responsibility and authority to implement the strategic plan.
The strategic planning process requires the full and complete support of lawyer management at the highest levels. Below the firm level, firms increasingly are using plans at the practice group, departmental, and individual levels. It is clear that overall direction must come from the top - this is the long-term strategic plan. The implementation of plans, at the department, practice group, and individual levels, drive toward short and long-range goals that lead to achievement of the long range strategic plan targets.
Increasingly, firms are gauging in new business development practices through practice groups, which are now key to many firms' marketing strategies. If practice groups are not used, marketing is conducted by specific legal discipline.
A critical role in the implementation process calls for firm management to define, for each partner and group (a) Their role in the large firm picture, (b) What each partner promises to do, and (c)(And later) An assessment what each partner and practice group has done to implement the strategic plan. As an integral part of the implementation process, the author recommends that the firm's lawyer management conduct a quarterly review of the plan's implementation and that ultimate accountability be enacted through the compensation system.
Implementation of the strategic plan requires the same priority as client work, continuing reminders of the firm's culture and expectation, follow-up, reinforcement, publicity - internal and external - for efforts and especially results, measurement of results and an assessment of goal achievement at various stages, i.e., are we getting it done? If not, mid-course corrections. Finally, the system must offer appropriate rewards to those who successfully comply with the strategic planning process.
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