Post one in a series on strategic planning essentials
As firms dig out from a grueling year-end process, the dissection begins. This is when the firm celebrates successes, second guesses decisions, eviscerates shortfalls, and begins a cursory discussion of strategy adjustments. While it’s true that you can plan for the future by looking at the past, after the fact is not the time for strategic planning.
At its best, strategic planning should be a continuous assessment to allow for regular course corrections, not a sporadic effort. A problem for many law firms is they approach strategic planning from one of two extremes – with delusions of grandeur or fear of change. A firm may be so locked into established habits and routines, it’s impossible to overcome inertia and make positive and impactful changes. Conversely, the firm may observe the success of a competitor or be inspired by positive trends from a benchmarking study and immediately assume that they can replicate the same.
Thinking big is great, but that mindset could be a barrier to a successful planning process. No good can come from strategy sessions where ideas will be shot down because taking action is not possible or where the end goal has already been established. Firms are successful in strategic planning when preconceived notions are set aside and instead, data and intelligence inform the process – beginning with a solid internal review.
Many years ago, a well-known strategic consultant was making the rounds telling law firms, “The day of the regional law firm has passed. All firms should go big or small.” This was bad advice then and it is now. It’s a dangerous recommendation to make when hundreds of law firms should never consider a strategy that detracts from their regional expertise. Unfortunately, some firms took this advice and immediately went into merger mode or broke apart to form smaller boutiques. Ultimately, these firms no longer exist or saw a deep decline in profits. To be fair, the recession may have had an impact on this outcome, but that is when the rise of regional consolidation took place. The reason why blanket statements are so detrimental is that it excuses any review of core competencies or true strategic exercises to identify the best path forward for a firm.
What should firms do? The first part is likely the most boring part – the accumulation of data and lots of analytics and statistical testing. Firm leaders entering into a strategic planning meeting need to be armed with data. These analyses should show clear trends throughout the firm and provide answers to core business questions. A sample of these questions would be:
- What clients, practices, and books of business are the most profitable? Has that profitability been consistent over the years? How has profitability been maintained?
- Where do we see upward trends in volume? What types of clients or matter types are they? Which industries are providing the most work?
- What is the makeup of our personnel? Do we have gaps in skillsets? Has succession planning been established in core areas?
- How is our hours hygiene and inventory turnover? Are we turning work into cash in an expedited manner? Where do we see slow-downs and why?
- What practices are being cross sold? How has cross selling taken place and are there areas that are being ignored?
- Are we still generating a significant amount of new work while growing our institutional base?
- Are there practices, clients, personnel, or books of business that are not performing well? Why and what steps have been taken to change that?
Of all these questions, most of which should be discussed regularly, the most important ones before beginning the strategic planning process need to be answered by your client base:
- How do our clients perceive us?
- Are they satisfied with our relationship?
Before beginning any strategic planning, firms would be served well by asking these key questions to each material client. If not, then pump the brakes. Your firm needs to perform a relationship assessment. Strategic plans need to factor in clients’ perceptions. Sound business practices should be lockstep with talented timekeepers as the cornerstone of any firm – mixed in with insights from a vocal and informed client base.
Entering a strategic planning session without the voice of the client whispering in your ear or without performing a data-driven self-assessment leads to unfounded conclusions. Step one in any strategic planning process is to step back and be self-aware. Step two is how to decipher reality from fiction. That will be addressed in the next blog.