August 30, 2005
Law Firm Challenge Number 1: Get a Plan!
The 2005 Survey of Law Firm Managing Partners conducted by Juris, Inc. and the Managing Partner Forum identified three key challenges that firms face to achieve their growth objectives. The first of those challenges involved planning.
- 84% of surveyed firms do not have a written strategic plan
- 13% of managing partners focused on long-term strategic objectives
- 46% of managing partners focus on initiating change or day-to-day administrative matters as their #1 priority
- 64% of firms have a very or somewhat democratic governance structure
- 67% of firms indicated that they have a formal budget
It is clear from the survey that most mid-sized firms don’t have a strategic plan. We would not be surprised to find that of the 16% with written strategic plans, they have plans that are inadequate for practical application. From our follow-up conversations with managing partners, we ascertained that in many cases “we plan to grow” and an elegant mission statement is what passes as strategic planning in many mid-sized firms. We do know that larger firms invest in strategic planning. Virtually all Am Law 200 law firms have a strategic plan, and surveys conducted by the Managing Partner Forum found that larger law firms (i.e., greater than 100 attorneys) are much more likely to have strategic plans with about 50% of respondents indicating that they did have a written strategic plan. It is somewhat interesting to note that 2/3 of surveyed firms said they have a formal budget. Yet, without a strategic plan, it’s most likely that these budgets are simply last year’s results plus a growth factor and are not an effective tool for managing of the firm.
Whether firms have a strategic plan or not, not many managing partners are focusing on long-term strategic objectives as their number one priority. The survey indicates that managing partners do spend significant time on managing change or day-to-day administrative matters, but these results hint at a reactive disposition in the absence of a strategic plan or focus on long-term objectives. Instead of managing change as the firm would like to see the world unfold, managing partners are instead being buffeted by external pressures for change and they are merely endeavoring to do damage control and adapt as best they can. This is not a recipe for long term success.
Like Drucker, we believe that the principle responsibility of the CEO or managing partner should be strategic in nature. Without a strategic plan it is certainly difficult…nigh impossible….to focus on executing the firm’s strategy. We think a clue as to why such a large percentage of firms do not have strategic plans or a leader focusing on strategy is a direct result of the democratic governance model prevalent in law firms. It may be simply that as the number of partners grows it becomes harder and harder to find a consensus as to what the firm's strategy should be. Instead of building a consensus and moving forward, the discussion simply ends to avoid conflict. Compensation plans in this environment are more likely to focus on short-term measures of performance like fees received, billable hours and origination. Not that these measures are irrelevant or unimportant. The point is that investment of partners’ time and resources in activities to achieve long-term growth and success are not being rewarded and are unlikely to be a priority for the firm’s leaders. Interestingly enough, The Brand Research Company found in their report of “Why Law Firms Fail” that there is a high correlation between failure and “eat what you kill” compensation structures. More successful firms rewarded partners and associates for long-term practice building activities and for team results in addition to traditional individual performance.
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Filed under Management, Planning by Tom Collins