Stress Testing Strategic Plans – the Seven Essential Elements in Strategic Planning
In my view, there are at least seven elements which must be covered in any planning exercise. These elements can be used as a checklist for stress-testing an existing strategic plan or to inform a strategic planning review.
First the strategy must be futuristic – it should look at the future and consider trends and developments which may affect the Firm for better or worse. To be able to compete in the future, someone somewhere in every law firm (hopefully more than one) is going to have to form a view of the opportunities and threats out there. This analysis ought to be radical and forward thinking, but is more than just a brain storming item at a partners retreat – there needs to be careful and painstaking research and information gathering. It ought to be a mixture of blue sky thinking and visioning – daring to dream, if you like – and painstaking research into markets and trends.
And you need to look at what others are doing both in our profession and outside it, in this country and further afield. I would go so far as to say that more than 50% of what law firms are going to have to learn in order to face the future will have to come from outside our own profession – other service industries, High Tec, Manufacturing and so on.
Finally, so many strategies talk about moving from where we currently are to a place where we might be in the future – ‘from here to there’ philosophy. I believe this to be the wrong way round. We should try to stand at some point in the future and work backwards from there. If, for instance we had known in, say 1999, what we now know about the market place and working practices, how would we have changed our attitudes, actions and the way we practice? The sort of questions to be asked will include ‘do we have to practice in that way?’ ‘Is there a different way of doing things?’ and ‘what demands can we contemplate from our clients –present and future – arising out changes in the way they will be doing business?’
Second, to be any good, your strategy must address what your firm is currently doing to be successful, and the areas in which it is likely to be successful going forward. When a client is choosing a single law firm, there are no prizes for coming second. A good starting point is to think about the things you are good at – a reality check if you like. This should also focus on the areas where you need to improve in order to win, as well as the areas where you have a chance of adding value to clients.
The triangle or pyramid shows three dimensions, at the top the internal ‘ecology’ of the firm, then what the clients, your referrers and the market think of you and finally – left hand bottom – what the reality of your situation is.
1. The reality check should be internal and external. The internal examination may entail a certain amount of navel gazing but it is important to keep this within limits. What sort of Firm are we? What is our culture? How do we do things? What structures and systems do we have and what are our skills? How do we behave to each other? How are we financed? The answers to these questions will help identify how (internally) you are different from the other firms round about you.
2. Next, how does the market see us? What is our reputation? Are we trusted? Do we have credibility? Are we seen as cheap or expensive? Do we have a strong brand? What do our clients say about us? Who would the market say are our competitors and our natural boundaries?
3. Finally, what is the reality? What is our list of core clients? In what practice areas can we really claim to be strong and where are we weak? Whom do we regard as our competitors? How do we deliver our services – in person, on the telephone, electronically and so on? And where do we deliver our services – what is our geographical reach? Do we rely extensively on our Partners to do the work or do we have an engine room of other fee-earners with case management systems which do most of the work?
The point about the pyramid or triangle is to assess whether or not all three areas are balanced or aligned. If, for instance the perception of the firm in the market place is better than the reality of your clients and service quality, then the firm can be said to be ‘punching above its weight’. So often it is the other way round and then you know that some of you objectives and goals need to be centred upon the improvement of your market perception.
Finally, this examination should enable you to define your core focus – those things which make or will make you famous, and the areas where you have strength in depth
The third essential element to a successful strategy is that it must include a set of goals and objectives. Unless your strategy is firmly rooted in action, it will be ineffective. And the objectives must be action-based too. Consider for example an objective such as ‘we must win better clients’ or ‘we aim to continuously improve profitability’ – unless it can be refined down into a task or series of tasks, these are meaningless aspirations.
The fourth essential element is the area of sharing and ownership. The plan delivered from on high just does not work. To stand any chance of success, the strategy must be contributed to and owned by all the partners. Much of the work will of course be done at a high level, and leadership, inspiration and vision needs to be evident from the firm’s leader or leadership group. But if the strategy of the firm is seen as an iterative, ongoing process, it may not matter exactly how long it all takes as long as the rubber has already hit the road as the process is gone through.
If involvement and engagement has been achieved throughout the firm, then the task of implementation and follow through becomes easier.
The fifth essential element is that the Law Firm must figure out how it is going to stand out from the crowd – the issues of differentiation. The whole area of market positioning and differentiation is dealt with in an article of mine which was published in Law Business Review in 2009, and which, for ease, I am reposting here.
The sixth essential element in any Law Firm Strategy is that it must focus on profitable growth, rather than growth for growth’s sake. To gain growth in profit, four key levers have to be methodically applied – margins, leverage, utilisation and realisation – and technological solutions are key to all these, if integrated with the overall strategy for the business. The majority of law firms still have a lot to do to clean up their financial disciplines. There are very few firms who can claim to be working with maximum efficiency and full productivity. Chargeable Time is still lack-lustre. Write-offs and leakage occur all too frequently. Billing disciplines almost everywhere can be improved. Lock-up in debtors and Work in Progress are still too high in most firms. Overheads and budgetary controls are often not rigorously in place. What is more, issues of underperformance, both at Partner level and below that, are tolerated and not confronted.
Strategies for law firms should, therefore, include some measures for better financial disciplines, firmer accountability and stronger management of the Key Performance Indicators.
A greater focus on Leverage, also, is essential. Leverage can be defined as ‘any measure which gets things done at lower aggregate cost’ – through technology, ‘packaging’, or people, with less partner time on matters and more time at a non-partner level.
Finally, the Business Development Strategy should be focused on gaining higher rate, more profitable, work, whilst the less profitable work is dumped.
The seventh and perhaps the most important element is that the strategy should add value to clients, is aimed firmly at the fulfilment of their latent and blatant needs, and provides the necessary resources and capabilities to enable the firm to obtain the most lucrative work possible during the lifetime of the plan.