(This post first appeared in SLAW)
Most firms have come to appreciate the value of practice groups in their management and marketing; but not everyone knows why they are more powerful than operating without them, which may result in their under-utilization. In this post I’ll explain the evolution of practice groups, what they look like today, and how you can use them to more effectively drive the business objectives of the firm.
The Evolution of Practice Groups
Initially, law practices were based on the personal reputation of the principal. In time, lawyers realized that if they pooled their resources, they could split costs while still maintain an independent personal practice. As firms grew, this became unwieldy so law firms attempted to increase interdependence between lawyers by brining them together in departments. These were most often delineated by business law, litigation, and perhaps included specialty hybrids such as Wills & Estates which could encompass both solicitor and litigator work. The objective was to start to manage careers and workloads, and more closely monitor revenue production by these departments.
In the late 80’s/early 90’s, individuals forming the brand-new profession of law firm marketing found that law firms were behind virtually every other business in terms of planning, structure and processes. They research other industries in an attempt to implement some of these concepts in their law firms. This included more targeted marketing and management. As law firm marketers grew in expertise and lawyers began to trust them, firms allowed those marketers to create marketing sub-sets of the firm that were not aligned with firm management practices, but were instead aligned with the marketplace. Marketers argued that clients who were after family law services wouldn’t care as much that the firm had a large business group (although those services could later be cross-sold to them). Those clients wanted to see that the firm practiced family law, and to learn more about the benefits of working with that group of lawyers rather than their competition. In other words, promoting the services that more directly met that client’s need was far more powerful in building business than promoting the firm as a whole.
Simultaneously, the internet was born (on January 1, 1983 precisely) which eventually made targeted marketing mainstream through the reality of search engine algorithms. This only intensified the need to and benefit of more targeted marketing – such as by practice area. “
This is not to suggest that institutional marketing was dead. In fact, around this time American author and information-age guru Seth Godin coined the phrase (and wrote the book) Permission Marketing” to describe how people make purchase decisions on the internet. But the basis of his concept was the natural hierarchy of decision-making which can be applied to law firms as follows: establish general name recognition within your target market as a whole; associate that name with a brand – a set of values that exist in your firm, and are important to your target market with respect to your service; drill down to their more specific need, and demonstrate your ability to provide that service; outline your differentiators in that area – why clients should come to you instead of your competitors; reel them in with free stuff (articles, checklists, videos) that increase their investment and trust in you; make it easy for them to connect with you. In each step, you are essentially asking their permission to move to the next step (actually, you’re inviting them to activate that deeper relationship with you themselves by going into the next level). And it all starts with having a well-recognized and trusted firm name that is hopefully associated with a strong brand. So institutional marketing is not dead, but it’s only the first step.
In other words, this shift to the targeted marketing of practice groups is the result of law firms paying attention to their marketplace, and reshaping their management processes around clients needs as opposed to lawyer needs. In any other industry, marketing expertise is at the right hand of the President. That’s because there’s no point in making a widget unless you have a market for them, and can figure out that best way to sell to that market. This is why large manufactures are organized by divisions: product types or by brand names the have been developed to meet specific customer needs. Practice groups are the law firm example of this market-driven delineation.
Practice groups are most powerful when they assist law firms in three critical areas: marketing, budget management, and lawyer development.
Practice Group Marketing
Years ago, I heard a radio commentary about one of those organizations that promote donations to needy communities through the “adoption” of a child in that village. It was a great program where the donor would be sent a picture of their matched child, and could exchange letters and even provide small gifts to their adoptee. But the organization couldn’t neglect the fact that they could do far more benefit to more people if they were to shift their strategy to request donations to support an entire community. This included improving drinking water, assisting with schools and hospitals, helping with sanitation or food projects, etc. Unfortunately, donations dropped off to a trickle. It turns out that donors wanted that personal connection with an individual child. The larger concept of helping a community was great, but it didn’t give them the warm and fuzzies they got from a more personally meaningful connection. So, the organization brought back the child adoption program and now, people can participate in either programs.
This illustrates what marketers have long understood: that marketing is more successful when it takes the time to define and appreciate the particular needs of a targeted market. It’s about getting the right product to the right people at the right time with the right message at the right price.
Strong practice groups comprise lawyers who practice in a similar area of law who work together to market the practice as a whole, as well as the individual lawyers. Marketing designed to appeal to family law target clients will be very different than marketing for the firm as a whole. Those differences could be in message, but also in placement. For example, family lawyers may specifically wish to market to accountants who might be the first to learn that a marriage might be going south. While the firm’s current ad campaign might be focussed on increasing name recognition for the firm in the community, the Family Law practice group campaign for accountants might be focussed on the group’s ability to work well in partnership with accountants in service of the client. That would result in significantly more referrals from accountants to the Family law practice than the firm ads would ever generate.
Practice groups may also want to determine if they should target clients by sub-areas of practice. For example, the PI could comprise motor vehicle accidents abut also occupier’s liability. Those are two different target markets that require different messages at different times to different groups of people. But the PI practice can develop a marketing strategy that delineates their target markets and then initiates different campaigns for each.
Practice groups enable similar practitioners to really analyze their target market in a meaningful way, and to create marketing that has the best chance of really touching those targets and convincing them to chose the firm for their specific legal needs.
One last comment: many lawyers feel that targeted marketing lowers the chances that clients will consider the firm. “If the firm has a strong name recognition campaign out there, then clients of all legal needs will surely find the firm, right? If we focus on a campaign for a specific area, we won’t get the same bang for our buck”. As noted above, firm name recognition/branding campaigns are necessary and a great start. But the decision funnel is so much deeper than simply recognizing a firm name. The client must realize you practice in the area of law they require, that you are good at it, that you provide value in that practice that your competitors do not, and that you are approachable. These are infinitely easier to achieve with a more target campaign to the specific clients of that practice.
Practice Group Budget Tracking
By now, most firms should be creating and tracking against detailed budgets that span revenue and expenses. Some firms track these in two general columns. Others break them down by individual lawyer, increasing revenue targets across the board in year by a standard percentage point and hoping that individuals take those targets seriously. These same firms address expenses in much the same manner: looking at what was spent previously and either trying to stay the course or providing a percentage increase across the board (to represent the rising cost of living, one presumes). I find these projection styles unrealistic, demotivating and inaccurate. And such generalized budget determination suggests that the firm hasn’t really explore the benefits and values of operating like an actual firm.
Some law firms have progressed to tracking revenue and expenses by department (usually litigators vs. solicitors) or by office if there is more than one. Again, I see little benefit to this level of analysis other than potentially building animosity between the groups.
Practice groups, on the other hand, are more manageable and meaningful business units. Practice groups can set more realistic and assertive revenue targets by asking each practitioner in the group to identify and be responsible for achieving a personal growth target for that area of law, then combining those to create a realistic practice group revenue budget. The practice group expense budget should be built from scratch every year as a result of business planning: setting business goals, developing a plan to achieve those goals; and identifying the budget necessary to do so. This means that a practice group budget might look very different each year, and may even dip from the previous year’s spend at times.
By establishing and tracking revenue and expense budgets by practice group, the firm is able to create a more accurate projection of anticipated earnings and expenses, and can better address variations to those budgets by comparing the plan to the actions and results – usually on a monthly basis. This allows business units within the firm to adjust if a strategy is not working, or if marketplace or case law changes require a different approach.
This is far preferable to what many firms do: wait until the year-end numbers show up and then ask for explanations for the shortfall in revenue and/or over-spend in expenses. By then it’s too late to do anything about it, and this seldom results in key learnings that can better guide projections and actions in the following year.
Firms that approach expenses from a practice group basis sometimes find that they are initially requested to put more money into the expense budget – at least temporarily until groups understand what they need to spend in order to produce greater profits. However, over time this will settle down and be better able to keep within the firm’s overall marketing commitment of 3.5% of the previous year’s gross revenues. And on the flip side, if practice groups are managed well, firms will find that they will be far more successful in growing happy, competent lawyers and building more profitable practices. And for a slight percentage increase in spending in the first year or two, most firms find that they actually experience a significant increase in revenue.
Lawyer Development
Around this same time that targeted marketing and the internet were born, the concept of mentoring was formalized (although it had always existed in the professions and trades). Today, many firms either assign or allow for organic mentorship teams to develop so that Associates get the training, oversight and encouragement they need to build a strong practice. But what happens when both the Associate and Partner are in various practice groups that might not perfectly align? How can that mentor provide training and support for the Associate in all of their areas of law?
The way to resolve this is to ensure that there is a more fulsome support structure in place for the Associate that involves mentorship from a number of sources as follows:
- Legal knowledge and skills: These are best shared by more senior lawyers who actually practice in those area of law. For this reason, legal training and skills oversight are best done within the practice groups.
- Business and political skills and savvy: This includes advice on how to run a practice (time keeping, delegation, file management, client management); marketing, and any politics within the firm such as the real power structure, how to approach different Partners, how to resolve personality conflicts, etc. This mentor needn’t be in any of the practice groups of the Associate. I find these relationships are best brokered by the Associate themselves, but I have also seen successful mentorship programs when training for the mentor has been provided by the firm.
- Overall budget oversight: the firm will still need an individual charged with ensuring Associates are meeting their billable targets and maintaining discipline with respect to timely and accurate billing, collections, etc. A compensation committee can fulfill that role, as can a Partner responsible for Associates. Certainly, each practice leader is responsible for individual and collective billings within their practice area and should be meeting with their Associates regularly to review production within that practice area, but that’s only part of the picture.
Associate hiring, training and ongoing development is one of the most expensive elements in a law firm. It is said to cost from $300k – $500k per Associate until they start to make money for the firm, in the fifth or sixth year. But this investment time can be truncated by ensuring the Associate has and follows an annual personal development and marketing plan, is provided strong legal mentorship and is provided business and political mentorship.
Successful law firms are generally so because they’ve thought through two aspects of the business: it’s structural management (and budgeting), and its legal expertise. In my experience, practice groups support both functions powerfully and efficiently. This takes more time than not doing these things, but the results are well-worth the investment in people, time, effort and money.
Heather Gray-Grant is a business strategist, marketing expert and executive coach for law firms, lawyers and administrators. She can be reached at heather@heathergraygrant.com