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Setting the right course: successful strategy for law firms
Practical Law UK Articles 5-627-0696 (Approx. 3 pages)
Setting the right course: successful strategy for law firms
by Stephen Gold, founder and former senior partner of Golds
| Published on 28 Apr 2016 • United Kingdom |
Stephen Gold examines how law firms can improve their approach to strategy and entrepreneurship.
A law firm may have outstanding qualities, but these count for little if they are not allied to an effective strategy. Delivering it begins by asking two fundamental questions:
- Where do we play?
- What markets should we be in now?
- What markets should we aspire to?
- How do we win?
- How can we stand out from our competitors?
- What informs our clients’ buying decisions, for example, technical legal knowledge, service and client experience, price, our location and the quality of personal relationships we offer?
As with work produced for a client, precision and clarity are everything. It is a good rule that if a firm’s strategy cannot be set down in a few short sentences, it is probably not any good. But this rule is not always followed. Law firms often approach strategy by forming committees, taking soundings and deliberating for months, before producing a paper the weight of a small hatchback, much of which is never referred to again.
Strategy and risk
As the leading US consultant Roger L Martin has observed, strategy is a bet. Costs are a matter for law firms to deal with but revenue is up to the clients, and firms cannot control their clients’ choices. Risk-free strategy is an oxymoron. Any road chosen will have its potential ambushes. Successful business leaders acknowledge that reality and, although they will do all that they can to minimise it, ultimately they will embrace and even relish the uncertainty.
The fact that risk is ever present is a concept most lawyers find hard to live with. The typical lawyer is highly intelligent but tends to be cautious, suspicious, analytical to a fault and terrified of personal failure. These qualities make great advisers but poor entrepreneurs. They explain why so many lawyers struggle less with doing the work than with building their business.
Strategy and management are different
Strategy cannot be realised without effective management but, as Martin has also noted, it is vital to remember that strategy and management are not the same. They are often confused, with the result that discussions about strategy can descend into arguments about day-to-day issues which achieve little. Once a law firm has decided its strategy, management kicks in: setting goals and timetables; assessing the resources needed; recognising and dealing with the constraints; communicating the vision; getting buy-in; assigning responsibilities; measuring outcomes; and adapting as necessary. This may involve a mountain of detail, but all of these steps are a means of achieving strategic objectives, not the strategy itself.
Rejecting work
A central strategic question is: what does the firm not want to do? Lawyers tend to be poor at saying no. This reluctance to turn away work may be based on a desire to help, a fear of offending, a strong work ethic, a belief that any work is better than none, and anxiety about hitting fee targets.
And so lawyers try to justify taking on whatever work comes their way by arguing that it will help to cover the overheads, it is an investment to win better work in the future, or that not doing the work will result in the firm losing the client to its competitors. The possibilities for self-deception are infinite.
Look around the most successful law firms, of whatever size or sector. All of them are clear about the markets they want to be in, and aspire to deep excellence. Sometimes, this will involve taking big risks such as abandoning mainstream areas of practice or electing to practice exclusively in a specialised field (see box "Case study"). Law firms that have not thought through properly what they want to be may survive for a time, but in the long run are probably doomed. It is impossible to develop a successful strategy without the wisdom and courage to say no. If you were to wander into Pizza Express and ask for Pattaya prawns, you would be politely redirected to the Thai restaurant down the street: the chefs would not just grab a wok and start cooking. For a law firm, securing the largest slice means following their example, however difficult it seems.
Identifying the right work
In the bear pit of today’s market, every single piece of business is hard won so the temptation to take whatever comes in the door has never been stronger. But it is precisely because the pressure on profit is so intense that it has never been more important to assess every opportunity with one’s head, not one’s heart. Engineers and quality controllers use the term "go/no go" to check that a product meets the right specifications and whether it is safe to proceed with manufacture.
Go/no go should be the test that lawyers use too. Once a law firm has identified its marketplace, it needs to ask and give honest answers to questions such as:
- Do we have the skills to do this job well? The emphasis here is on "well". However juicy the fee, taking on work in which the law firm is not expert, or does not have the resources to manage well, is an express route to grief and pain.
- Do we have the data and process skills to make informed choices? The way to avoid making decisions based on fear, hope and greed is by developing good data and processes. Well-informed decisions must be made about who in the law firm will deliver the work in the best interests of the business, irrespective of personal preferences, how that person will deliver it and what resources he will need. Even if a law firm has lawyers with the right technical legal skills, it needs a sound knowledge of pricing methodology to offer attractive prices while retaining a decent margin. Large firms may appear to have the advantage here in that they are able to acquire specialists in finance, project management, tendering and pricing. But, today, the ability to develop systems and processes to guide good choices is within the reach of every firm, whether in a high tower or on the high street, often at a more modest cost than one might think.
Stephen Gold was the founder and former senior partner of Golds. He is now a consultant to national and international law firms.
Case study
Golds began as a small general practice in Glasgow, Scotland, but over time developed specialist skills in applying technology, new processes and project management to traditional legal work. In 2000, it found itself with two different businesses under one umbrella: a conventional practice acting for private individuals and SMEs and, separately, a technology and process-led practice, acting for banks, mortgage lenders, and household-name consumer businesses. It was clear that the needs of each business were separate and in conflict. It was also clear that there was an opportunity in the second business to achieve market leadership, which was not available in the first. Accordingly, the firm decided on a strategy of terminating its conventional business to focus entirely on technology and process-led work. The result was a four-fold expansion in the following seven years, resulting in a firm of 450 people, operating throughout the UK.