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On this page you will find

Three Good Reasons to Undergo a Strategic Review Process

Why you should take care to assess your Strategic Options

Is merger a Strategy?

Three good reasons to undergo a deliberate strategy formulation (or review) process.


The first reason is that firms can no longer get by simply by continuing on the strategic path which was created long ago –continuing to do what has always been done will lead to inevitable decline over time.  One simple reason for this is that client relationships do not last for ever.  Whilst it is certainly true for most law firms that the vast majority of their work comes from long established clients, nevertheless relationships and clients need renewing and replacing over time.  This can be easier said than done, as for some clients the strength of relationships often trumps other aspects of competitive positioning making it difficult to replace established clients with new clients of the same ilk.   I was talking to a partner recently whose largest client had recently been acquired by a global corporation.  Whilst that client had valued the relationship with the law firm, the global corporation had no such loyalty and – even more worryingly – most potential clients of similar size perceived the firm too small and insufficiently specialised for their needs.  Replacing this key client looks unlikely.  But it is not only client relationships which atrophy over time.  Partners do not go on for ever and succession planning needs to take place for firms to continue to develop and for client relationships to be sustained.  Another issue is the inexorable increase in the standardisation and commoditisation of legal work which has brought about a steady decline in the standing of lawyers as providers of expertise-driven solutions.  This increase in standardised solutions has enabled non-lawyers to attack the traditional markets of law firms both as a result of deregulation (impending and actual) in jurisdictions like the United Kingdom and the steady annexation of legal work everywhere by accountancy firms, surveyors, banks, consultants and other external competitors.  This means that law firms can no longer rely on the tried and tested historical working methods and solutions and need to plan to cope with the tide of commoditisation.

The second reason is that, if left to themselves, different office and practice groups – and even individual lawyers – within the same firm will make their own plans and without any overview the firm may end up with multiple and conflicting plans and goals.  Lack of joined up thinking is asking for trouble, not least because of client demands for more value, better service, consistent quality and deep expertise.  Lack of cohesion in a law firm – particularly in start-up phase – may not historically have been a strategic show-stopper, but in the face of the an increasingly hostile competitive environment, the most successful firms are those which have managed to create a sophisticated degree of overall strategic intent – that is, vision  purpose and identity –  and have developed into an united and harmonious fighting force with one overall strategic plan, and a successful harnessing of resources, assets and capabilities. In addition, lawyers do not always have the necessary skills to become business people as well as successful professionals.

The third reason is that true competitive advantage arises from the ability of law firms to mark themselves out as offering something different – maybe even unique – that clients will hopefully find meaningful.  In a benign environment where there is plenty of work around for all lawyers who have a basic level of competence, it may not matter that many law firms look the same.  However, in a harsher economic climate, conformist and copycat strategies are not likely to remain effective or sufficient.   Furthermore, in bad times, the strategic planning horizon tends to shorten – there is less scope for strategies steadily to emerge or evolve from grass roots level.  Instead, law firms need to focus hard on optimising their competitive resources and skills and developing their market positioning so as to enable them both to build market share and to develop better clients and work.

These three propositions create an imperative for deliberate and methodical strategy formulation or review.  Strategic planning – or an audit and update of existing strategy – can be time consuming, but does not need to become over-complicated.  In simple terms, the process resolves down to four distinct stages, each with a set of sub-stages, as shown in the table. Each of the four stages – establishing Strategic Intent, undertaking Strategic Analysis, assessing the firm’s realistic Strategic Options and then developing a compelling Strategic Plan – should be pursued both sequentially and iteratively; it is vital to keep circling back to completed stages to retest assumptions and intentions in the light of what has been discovered and assessed.  It is of course important to engage all the partners in the development and implementation of an effective roadmap for the firm.  A good starting point for the process is a strategy workshop or away day at which the partners’ strategic intent can be established or confirmed and at which the strategic planning and review project can be launched.

Why you should take care to assess your Strategic Options


Despite the obvious problems, there are huge opportunities for law firms and new entrants alike to take advantage of a fragmented and incoherent service sector.  It is a time when the fast will overtake the slow.  New entrants have the advantage of being able to start with a blank piece of paper to construct structure systems and brand and they come to the sector with possibly deep investment pockets to kickstart their operations.  But they have no clients, no reputation and no people.  Innovative and assertive law firms on the other hand have the huge advantage of an existing client base and established teams of people.  A good place to start is to try to gain some degree of honest self-appraisal and if any of the delusions and fallacies which I have listed affect your firm, to ensure those delusions are analysed and debunked where necessary.  Part of the strategic planning process always involves then a thorough appraisal and assessment of the strategic options and choices which the firm can make to gain a decent competitive position.  These options fall into three distinctive areas.

Step One – The Foundations for Competitive Strategy  

First the firm should consider exactly what it is that makes or is likely to make the firm competitive.  The questions here include “which of our services help us to compete, what specialist focus can we have which will win us work, and what is our pricing model that helps define us?”.  Where the building and maintenance of strong relationships with clients and referrers is seen as a vital part of the firm’s recipe for success, those relationships must be nurtured and renewed, not just by being nice to clients but by providing them with services that they will continue to fins valuable.  The basis for a firm’s competitive strategy is largely client oriented and externally focused.   If the clients can see no added benefit or advantage from the firm, then the firm is not likely to develop a winning competitive edge.   What is clear is that the firm must decide how it wants to be seen in its marketplace, what position in this market it wishes to occupy and what type of client will provide its core as it goes forward.

Step Two – Strategic Direction

The second area which a firm needs to consider is the overall strategic direction the firm needs to take in order to build the competitive position which it has established it needs at step one.  The firm needs to consider, for instance, the extent to which it needs to grow (if at all) in order to have the depth of specialism that it needs to provide a compelling client proposition.   It needs to consider the development of its resources and capabilities in order to service the clients for whom it aspires to act, and the required depth in each practice area.   It needs to decide if the firm needs to expand into other towns or regions or whether it still has ample opportunities to build market share in existing areas.  Furthermore, the firm needs to consider if it needs to diversify into other logical service offerings or even via Alternative Business Structures. The new regime heralded by the LSA will of course give both existing law firms and new entrants to the market the opportunity to pursue a strategy of unrelated or partially related diversification into the legal services market.  The questions here include “what if any are the synergies with what we do?  What are the entry barriers?  What is the likely cost of the investment and what is the likely return?  How difficult will it be to acquire the people and build the systems, processes and infrastructure?  How easy will it be to build the brand and successfully to take our offerings to the market?”

Step Three – Methods of Pursuing Strategy

Once a firm has established its basis for competitive differentiation and has decided its overall strategic directions, it can then turn to the final of the three areas, namely the methods by which it can best pursue the firm’s strategy.  This part of the strategic thinking will need a thorough appraisal of the firm’s existing resources and momentum in order to decide whether a combination of organic growth and operational improvements will suffice to carry the firm forward.  In some cases, heavy investment capability will be needed to enable the firm to hire people expansively, to acquire teams or to build the firm’s brand.  In many areas of private client and consumer law, for instance, firms are seeing the benefits of persistent and well thought out advertising campaigns, but the heavy cost of a long term marketing budget needs both resolve and access to funds.

Is merger a strategy?

It has frequently been observed that merger is not a strategy in itself but needs to be considered as a tool to implement or assist strategy.  Growth for growth’s sake is not a strategy. There are however, some compelling reasons for attaining fast growth in size and substance though mergers and acquisitions. Every firm needs to consider the minimum amount of growth necessary for the firm both to retain its existing market position and to maintain its strength and ability to perform or survive.  Clearly, all firms need to have a viable market standing.  In a consolidating market, most firms therefore need a high minimum growth rate in order merely to stand still, or maintain existing competitive advantage and levels of profitability.   Certainly most firms who are seeking to compete in commercial areas of work need a minimum size in each of the main heavy lifting departments in order just to maintain it competitive edge, let alone improve it.  The issues of scale, shape and growth are therefore increasingly affecting the potential of all law firms to compete.  Mergers and acquisitions need therefore to be considered against the background of the optimal size and shape of any law firm to maintain and improve its ability to compete.

There are seven essential ingredients for both the reduction of risk and a successful merger.  These focus on a long term vision, profitability growth and value enhancement for the firm’s stakeholders.  The seven reasons for merger are set out in The Merging Risk Article. Mergers are however notoriously difficult to negotiate in law firms. It helps to understand that there are basically four types of merges – Absorption, Alliance, Alchemy, Asset-Stripping. These four types of mergers and ways of dealing with objections are set out in United We Stand article


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