Two years ago, I wrote an article for Managing for Success offering my 12 top tips for financial recovery, and designed to help firms to retrieve their strength and achieve stability in an uncertain world (‘In the nick of time’, May 2013, ). The market and the economy have since moved on, and now, as a counterpoint to that article, I now offer 12 longer term strategies to help firms realise their potential in a more positive economic environment.
The strategic projects outlined here are built around modifications of the balanced scorecard and the intellectual capital frameworks, about which I have written extensively in the past (see, for example, Robert Kaplan and David Norton’s The Balanced Scorecard (1996), Strategy Maps (2004), and The Execution Premium (2008), all published by Harvard Business Press). This framework is broken down into four key sections: developing people and skills; building the firm’s unique assets; developing business; and finally, achieving optimal performance. I am convinced that there is a causal link between these four. Firms that develop their people and skills find it helps them to build a better firm, with a more positive working environment, better systems and processes, and a more commercial approach. This, in turn, enables an increase in business and market share, through better and more satisfied clients, an improved reputation and brand, and the ability to exploit networks that might not previously have been available to the firm. The causal chain then makes it entirely natural for the firm to approach its work with discipline and rigour, and thereby build revenues and profitability.
1. Enhance capabilities
Every firm relies heavily on the skills, experience and competencies of its lawyers to help win clients and differentiate the firm from rivals. No firm should settle for plain ‘vanilla’, but instead seek some meaningful specialist or sector-based skills that give a competitive edge.
There are three practical tips here. First, every professional should be encouraged (through appraisals or a staff development plan) to seek their own niche – in sectors, client types or specialist services. Second, all senior lawyers should be encouraged to self-help by reading industry journals, spending time with clients and learning from each other, as well as being required to mentor juniors. This is the baseline level of training / professional development, but it may also be helpful to invest in a formal training programme. Third, you may consider seconding younger lawyers to clients, and even to other firms in the city or overseas to gain extra experience.
In short, the firm’s leaders should try to foster a learning culture. This may not bring about short-term gains – and indeed may, in some cases, affect chargeable hours targets – but there is little worse than a firm where lawyers remain stuck at existing skills levels and where the same work experiences are endlessly repeated.
2. Get the staff mix well aligned
We are all aware staff costs have risen steadily over the last two decades as a percentage of income, and as a consequence, innovative firms have been discovering new ways of reducing overheads that go beyond just the reduction of support staff ratios. The growth in paralegals, contract staff and outsourcing are all examples. However, efforts here seem to have been rather haphazard in many cases. The right starting point is to analyse work types and profiles (accompanied, perhaps, by process mapping) to work out what work is best done at what level. The objective should be to get partners to do only partner-level work, and delegate the rest. This alignment can take several years, not least because partners want to keep themselves busy and are reluctant to over-delegate or take on extra staff at a lower level. But the world is not sitting still, and ‘NewLaw’ firms are able to get their staff mix right from the start, so established firms cannot afford to stand still.
3. Recruit and retain effectively
Many firms have instituted projects aimed at winning a place on the various ‘best places to work’ lists, and have found retention benefits from their endeavours. Several of the 12 suggested projects should have the effect of making the firm a better place to work. The competition for talent is eerily similar to the competition to win clients. The difficult question to answer is why staff should choose to join your firm or to stay with it. A recruitment and retention plan is partly process-driven and partly cultural. Smaller firms will find it difficult to justify hiring an HR professional, in which case, somebody else in the firm needs to make it their business to spend significant time on setting up optimal recruitment and interviewing processes, and regularly scanning the market for likely candidates. The mantra ‘if at first you don’t succeed, try, try again’ should replace the complaint ‘we have tried to recruit a new fee-earner, but can’t find one’; many firms have found that persistence has its reward.
Build the firm’s unique assets
4. Work on positioning and pricing
The firm’s position in its chosen marketplace depends entirely on its ability fully to meet the specific business and individual needs of its existing and hoped-for clients. Hence, the firm’s successes in winning work against rivals will reflect its achievements in the first project (enhance capabilities).
Pricing, however, is a major positioning factor that follows from and reflects the firm’s status. If the firm constantly has to adjust its prices to reflect the volume market, then it is likely to be just another ordinary firm, with little differentiation. At the other extreme, highly specialised firms can often charge premium rates. The aim here is to punch above your weight by attracting clients and work normally done by firms that are, on the face of it, in a superior position. This is one project where some carefully targeted promotional expenditure might help to build profile. Careful submissions to directories and awards can also help.
5. Work on the firm’s methodologies
Systems, processes, workflows and knowledge management are all areas which can bring about almost immediate efficiency gains, as well as emphasising the firm’s distinctive ways of doing things. Case management and legal process improvement projects also link with the second project (get the staff mix well aligned). It is not efficient to be a ‘motel for lawyers’, in which all partners behave like sole practitioners, with their own precedents and working methods. Work on this project can therefore help to build a one-firm mentality. Beware, here, the new competition: Radiant Law (by no means a large firm), for example, is believed to boast four in-house developers, building significant in-house applications, while other new mid-sized firms have invested significantly in knowledge management.
6. Encourage a positive firm ecology
I use the word ecology to describe the working atmosphere within the firm. Ecology includes the firm’s culture, its values and its norms of behaviour, as well as observable features like office layout and the office manual. The leadership team can influence this area by the way they communicate, their approach to business planning, and their discipline and ability to keep promises. Above all, a project in this area should be directed to help the firm be flexible and responsive to change, as well as emphasising teamwork and collegiality. One way of focusing on this area is to list the negative aspects and obstacles within the firm, and then to work out how to deal with them
7. Agree a structure of progressive management and governance
Many firms are impeded by their inability to make commercial decisions quickly. The need to gain everybody’s approval not only takes up valuable time, but also often requires the expenditure of valuable energy in fighting political battles. The constitutions of firms are often outdated, and a project to overhaul the firm’s governance and decision-making processes almost always brings speedy benefits. It is important to achieve the right balance here between consensus and consultation, as well as between heavily controlled management and lightness of touch.
8. Develop the client base
On the whole, lawyers make reluctant business developers, so the bar is at a comfortable height for firms to increase their market shares through a variety of face-to-face sales activities. The market for legal services – both tapped and untapped – is huge, so business development initiatives can provide easy gains. Clearly, efforts should be made to exploit hot areas; currently, one example is the growing property market. Some of the effort, however, should be directed to the gaining of better business, not just more business. At the heart of a ‘better business’ initiative is the ability for the firm to be able to spot and exploit previously unexploited opportunities, particularly in emerging and growing areas
9. Improve brand and reputation
All of the 12 projects will help to build the firm’s brand and its reputation. As my partner Gerry Riskin suggests: “Invest a small percentage of your business development budget on the stage upon which you perform (name recognition… nature of offerings etc) then spend the majority on training your people to satisfy and attract clients. It’s not the brand – it’s what’s behind the brand.” (‘The Black Hole of Branding’, ). Branding therefore entails having values and enforcing them, communicating consistently with a common image, and providing clients with great value. The logo, website and promotional literature can obviously also help to support the firm’s efforts and to show consistency.
10. Exploit networks
I have often found a mismatch between the work ethic of entrepreneurs and that of law firm partners. Owners of businesses – particularly start-ups – tend to work long hours, not just on their business, but also on exploiting whatever networks they can find. I know some hard-working law firms that expect partners to work an average of 10 hours per day, plus attend networking events at least twice a week – but they are, in my experience, exceptions. Firms should concentrate on at least seven types of networks: client and industry sector networks; local and social networks; referrer networks; networks of regional / national / international firms; networks for recruitment; networks that provide clout or cutting edge knowledge; and informal networks of clients, friends and acquaintances. Try listing, prioritising and allocating these among partners, and holding them accountable for their networking contribution
Achieve optimal performance
11. Manage growth and the firm’s finances
Beyond the obvious financial management measures, there are three key areas the firm should be managing carefully as it grows or as the market eases.
First, the firm should carefully monitor its pricing decisions, particularly its fixed fee engagements. Information in this area can help the firm to improve both its pricing decisions next time round, and the efficiency with which similar projects are pursued. Second, if the firm is growing, great care has to be taken in marshalling its working capital – firms have been known to overheat if they take on too much overhead too quickly, or if longer or contingency engagements are won where interim invoices are impossible. Third, the firm should, in better times, be looking at ways in which the balance sheet can be strengthened, and the long term capital base of the firm protected and improved. For many firms, this should be a period where bank loans and indebtedness can be reduced, at the same time as building up investment funds. In my experience, firms have generally found this task easier to achieve with a corporate structure, as opposed to a general or limited liability partnership.
12. Manage and drive performance
Very few firms achieve success just by allowing partners and staff to get on with their work without intervention. Whether in sport or in business, the best teams are disciplined, coached, and pushed beyond their comfort zones. This means that every player needs to know his or her position and how this fits in with everyone else. Performance standards help to improve results. Consider a project to set quality and performance standards, fix achievable but stretching targets, and monitor how individuals and teams perform. A performance management process can be relatively succinct and informal, and certainly does not need to be long-winded or bureaucratic. It should certainly do more than monitor instances of underperformance.
How to prioritise the projects
This list of projects may seem overwhelming, and could easily provide a full-term manifesto for a new managing partner or board. In an ideal world, firms would work on all 12 areas at once, but in reality, efforts must be prioritised to projects where bigger and easier gains can be achieved. In prioritising projects, I would suggest proceeding in numerical order in this list, because of the causal links between the four main sections. In other words, the projects in sections two, three and four will not work well unless section one is worked on.
Priority decisions need to be made as objectively and clinically as possible. I suggest that the prospective projects should be tested against three important criteria:
1) Strategic benefit and outcomes: what are the expected outcomes and results?
2) Resources: what are the resources needed to bring the project to success, what are the costs and funding implications, and what are the time requirements?
3) Capabilities: how confident are we in our ability to deliver this project, what degree of change is necessary, and what is the risk if things go wrong?
It is then vital to kick-start action on the priority projects is by constituting a project team – not necessarily just partners – led by an enthusiastic project leader.
A project team needs members who know about and understand the problem being tackled, and who both care enough and will make sufficient time to do something about it. It also needs to include partners with a high degree of power and authority to achieve results.
The project must be clearly scoped and have a timetable and a budget. There must be a clear, step-by-step plan, with milestones and regular reporting.
Project leaders need to know that they have teeth: in other words, the power to enforce. They must be well respected in the firm, and have demonstrable leadership skills. They must have the clear support of the leadership group, and the authority to obtain necessary resources. They must have the capacity to devote the necessary time to the project; it is quite surprising how many internal projects in professional firms run out of steam because the project leader keeps getting sucked into unavoidable client work. Finally, it is vital that project leaders have good organisational capabilities (or, at the least, the active support of a capable administrator), together with sufficient operational experience to know how to get things done. The true test of a project leader is the extent to which he or she is easily able to manage and organise an internal project, and to sell the results internally.
This article first appeared in Managing for Success in May 2015 and is reproduced with their permission