October 25, 2007
The Strategy Problem in Law Firms
Why is there such a void in strategic planning and execution in midrange law firms? Consultants often point the finger at the lack of full time management. In my mind, the root cause is more systemic. It is a lack of investor value.
The core mission of strategic planning is survivability. When you get right down to it, why should law firm partners be more interested in survivability than in what the partners can draw out of the firm during their tenure? Owners in commercial businesses benefit from the increasing value of their enterprise. Exiting law firm partners take nothing with them. Until US law firms address this issue of investor value, it is unlikely that we will see a general improvement in strategy planning and implementation.
Law firm partners do have an interest in improving partner income. Surveys indicate that law firm leaders know what they need to improve. The issue is “how” to make those improvements. Someone once said that the definition of a crazy person is someone who keeps doing the same thing and expects the result to be different. David Maister notes that “It is remarkably common to hear clients ask, ‘We don’t want to change how we do things–that’s our culture, but tell us how we can get more of what we want!” Frustrated with the unwillingness of law firm leaders to plan and implement sound strategy, David Maister has written a new book Strategy and The Fat Smoker, with the down-to-earth message, “If you don’t want to get on the diet, you can’t achieve your goal”.
Let’s discard the notion that a strategic plan is the end goal. The end goal is strategic thinking. A formal or structured planning process is nothing more than a vehicle developing the strategic thinking skills among the leaders of a business. If you want to get a feel for the dynamics that are reshaping the business world and testing survivability of law firms, tap into the visionary concepts behind the Blue Ocean and the Long Tail.
The struggle to get law firms thinking strategically has even caused one leading consultant, Rob Millard of The Adventure of Strategy, to go back to school for his Ph.D., with a personal mission of reinventing strategic planning, or I should say strategic thinking?
In the end, it will take a systemic change in the business of the law firm. Law firms will have to separate compensation for work performed from investment earnings. They will have to find a way for owners to extract the increased value of the law firm upon withdrawing as investors. When that change takes place, the other attributes discouraging strategic thinking and execution will begin to fall. We will begin to see the addition of full time management, the movement away from cash accounting and the adoption of a corporate structure, versus the fraternal partnership model.
Will this ever happen? It is happening on the other side of the ocean as we speak.
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