Instead of business as usual this year, I invite you to consider managing your firm like it’s a business instead of a law firm: through business goals and plans.
Most law firms only have a general sense of what they want to accomplish this year as a business. Earn more revenues. Grow our client base. Hold onto our associates. Survive.
These types of business goals won’t cut it anymore. This is a competitive environment with a trifecta of issues: shrinking revenues, more demanding clients, and a less stable workforce. Firms that want to survive – and better yet thrive – need to toughen up on business processes, like goal setting and planning.
What’s so tough about today?
Let’s examine the trifecta…
1. Shrinking revenues. These are resulting from two key realities:
– Greater competition: We are facing tough competition, both from within the legal profession and outside of it. From within, law firms aren’t staying within their traditional boundaries. Here in BC, we’ve been infiltrated by Ontario firms wishing to appear to have BC satellite offices. Firms from the Kootenays and Vancouver Island are starting to set up shop in Vancouver (and vice-versa). Firms that rely heavily on interactive software and Skype technology don’t have geographical boundaries. They are perfectly happy to come into your region and eat your lunch. Meanwhile, more corporations are realizing the value of bringing full or part time lawyers in-house to see to their legal needs.
– Smaller legal budgets and low-risk mentality: Businesses simply don’t have the financial appetite to fight legal battles. They are far more likely to settle than go to court. They are far more likely to offer an employee a package than to run the risk of legal action from firing them for cause. Boards and shareholders are more likely to see a legal budget as an expense rather than an investment, and like any expense, it will then get carved during budget time.
2. Demanding clients. In the glory days, before internet, clients didn’t understand their legal needs the way they do today. The simply put an issue before a lawyer and paid the sizable bill afterwards. Not now. Clients research an issue. They know what’s involved, they have a sense of how they want it handled, and they know how much they are willing to pay for the service. The can compare practitioners through the internet, often making up their mind before they pick up a phone or speak with a single lawyer. Corporations tell their law firms what they will be charged for legal services, what they will pay for and what they expect to get free of charge.
3. Unstable workforce. There are three workforce pressures in law firms:
– Senior Partners need to figure out how to retire, but that’s difficult to do without an extended succession strategy in place. A major producer can’t just walk away from the office and expect the firm to produce regular revenues plus enough money to buy out the Partner. The firm needs a ramp-up plan to ensure new producers are being developed and that work is being appropriately transferred over time from the soon to depart Partner.
– Lawyers are an unstable investment by most firms. Used to be a lawyer would stay with a firm for 20 or 30 years or more. Today, that’s rare. It’s likely that your firm may experience a 10% churn of lawyers in any given year (depending on the size of firm). This makes it even more difficult to plan for Senior Partner retirements!
– Staff seem to be moving from firm to firm like their career is a speed-dating event. This is exacerbated by the fact that firms are getting better at pushing the work down – making legal assistants and paralegals even more important and necessary. Yet here in Vancouver, it’s almost impossible to find a good Legal Assistant or Paralegal and when you do, you’ll have to pay them at least 20% more than they’re worth. Indeed, many have figured out that the best way to get a raise is to quit and move.
In this type of environment, firms can’t expect to operate the way they always have and to remain profitable, or even viable.
What’s Are the Steps?
First, set your business goals. Make them specific. Analyse your business over the past three to five years and determine where your strengths and weaknesses are. Seek to maximize your strengths, and mitigate or otherwise address your weaknesses. Want to improve revenues? By how much, and in which practice areas? Be specific. Anyone retiring in the next five years? Include succession on your list. You’ll probably need goals around staffing, and technology, and marketing. To stem the flow of associates you’ll want some goals around associate retention (including training and mentoring). Think of all of the areas of your firm where you should be proactively working on improvements, and turn those into specific business goals.
Next, create a list of action items under each goal to identify how you intend to accomplish those goals. A single action item seldom does the trick. You’ll need a list.
Now place a due date and a responsible party beside each action item.
And finally, develop and accountability strategy to ensure that appropriate members of the firm will meet regularly on the plan to ensure it is being accomplished.
This is more detailed and process-driven than most firms like to operate. But if you want different results, you need to take different actions. It might help to realize that virtually every other business in the world (except law firms) follow this process. Now that law firms are no longer immune to marketplace conditions, it’s probably a good idea to get on the band wagon and doe this the way they teach it at Harvard (or Sauder or Wharton or Dartmouth…)
Heather Gray-Grant is a business strategist, marketing expert and executive coach for law firms and lawyers. She can be reached at heather@heathergraygrant.com