December 10, 2007
Law Firms With Strategic Plans More Profitable
74% of respondents to the 2007 Remsen Group Managing Partner Survey (part of the 2007 Juris Law Firm Economic Survey from LexisNexis) stated their firm did not have a strategic plan. 89% of those that did believed that a strategic plan had either some connection or a strong connection to improving profitability.
So managing partners understand that planning helps to improve profitability. Why is it that more firms don't have strategic plans?
Ed Wesemann with Kerma Partners has an answer. In an article published by The Law Marketing Portal (can also be read at the Kerma Partners website after free registration), Wesemann gives 10 "inescapable truths about law firms' approach to strategic planning that make the process harder and less rewarding than it should be":
1. Law firms often have trouble agreeing on their core business objectives.
2. Strategic planning is not a democratic process.
3.
4. Strategies and tactics are confused.
5. Planning involves precluding options.
6. Too much planning effort is spent worrying about compensation.
7. The obvious is often overlooked.
8. No one is accountable for implementing the plan.
9. Plans are too aggressive.
10. Objectives are not measurable.
1. Law firms often have trouble agreeing on their core business objectives.
The problem of agreement on core business objectives found its way into a MPIE (Managing Partner Idea Exchange) breakout session in the Midwest Managing Partner Forum held in October. A partner wanted to increase the profitability of the firm but also wanted a better work/life balance. Failure to reconcile the two left the partner indecisive on how to proceed on objectives for her firm. Wesemann simplifies the objective: "[i]n any business the primary objective is to increase shareholder value." How you define value will determine what objectives you set.
2. Strategic planning is not a democratic process.
Strategic planning is about vision. Vision requires leadership. Leadership is a function of management. In the business world, a small group of leaders gain input from others, make a decision, then ask others how they should implement the process. With law firms, it is the opposite: the leaders want to work as a democracy, all want to have a say in the decision, and afterward assign a single person to be responsible for implementing the process. Assigning accountability to one individual defeats the purpose - the entire firm must be accountable for the implementation of the plan once adopted.
3.
Wesemann argues that firms spend too many hours trying to create a concise mission statement that ends up sapping the energy of the participants and turning the process into a "meaningless exercise". Wesemann suggests picking 5 or 6 statements that represent the core values of the firm. Look here for a good article on writing a mission statement by Joel Rose.
4. Strategies and tactics are confused.
Wesemann found that attorneys want to skip discussions of strategy and go straight to tactics. Strategy dictates direction. Tactics are the types of activities needed to achieve the objectives (look here for a higher level discussion of strategy and tactics). He suggests that attorneys clarify the strategy before embarking on tact.
5. Planning involves precluding options.
Planning involves precluding options, which are counter-intuitive to how attorneys think. Attorneys are taught to maintain options and they tend to bring this mindset into strategic planning discussions. Wesemann argues that each option requires resources and the more options maintained lessens the probability of successful implementation.
6. Too much planning effort is spent worrying about compensation.
Compensation discussions end up derailing strategic plans. Wesemann's suggestion? Focus on increasing the size of the pie, not what portion a person gets. James Cotterman wrote a nice article for Altman Weil's Report to Legal Management examining compensation that can be read here.
7. The obvious is often overlooked.
Firms tend to neglect the basics while focusing on the sexier issues (read: compensation discussions). Issues such as providing good service, having good work habits, charging appropriate fees, etc., should be appraised to see where the firm's strengths and weaknesses lie.
8. No one is accountable for implementing the plan.
Law firms are the best at "voluntary requirements". Wesemann argues that the success of strategic plans rely upon accountability by everyone, which means no opting out if you disagree.
9. Plans are too aggressive.
When firms finally get around to planning, they over-reach and set overly aggressive goals inevitably leading to failure. Keep the goals in line with available resources.
10. Objectives are not measurable.
One of the constant mantras of this blog is that measurement improves performance. Law firms must define what their objectives are and measure their progress towards their goal. Make sure your accounting system has the ability to measure performance in real-time via dashboards with drill-down reporting. Creating the strategic plan is only the beginning. Success of your strategic plan requires benchmarking and continuous measurement so that if your financial objectives are not being achieved, you can adjust your tactics - and stay on track with your strategy.
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Filed under Planning by Brian J. Ritchey
Comments on Law Firms With Strategic Plans More Profitable »
John Johnson @ 1:09 pm
10 years ago I invented The 60 Minute Strategic Plan (60MSP) to answer exactly the issues Ed and Kerma focused on as problems with strategic planning. To date 10,000 entrepreneurial type leaders have been to 60MSP strategic planning workshop and rate it from 90 to 100% for 'usefullness'.
Be glad to discuss it further with you.
My best John