Monday, February 12, 2018

Organic Revenue Growth for Lawyers & Law Firms Is Not Easy©


There has never been a more competitive market for outside legal services, which has dramatically raised pressure on law firms to maintain and grow profits by increasing revenues and controlling costs.

Top-Down Strategies Prevail – The strategy of restructuring the partnership ranks, and lateral acquisitions to ensure a near-term increases in profit per equity partner has worked for many firms, but is it a sustainable strategy to continue increasing profitability? Other popular top-down growth strategies to boost profitability include rate increases, mergers,  shared-service centers, sole-sourcing, and outsourcing. These efforts are helping some firms boost their bottom-line and distributable share of the pie – but none of them produce systematic organic growth (defined as a measurable increase in new business or number of clients by type of matter and/or client share, etc.).

The most common strategies to differentiate and/or grow a firm or practice are related to either one or a combination of the following factors:
1. People (talent level, practice mix, specialization)
2. Processes and procedures (client service programs, internal training and development programs, volume pricing structures)
3. Technology (better systems, faster turnaround, etc.)
The main problem in most firms is not coming up with the strategic mix, but putting rubber to the road and actually getting them implemented over time.

Bottom-Up Support Attains Strategic Objectives – Most firms fall down in executing strategic plans and reaching objectives largely due to existing time pressures and unforeseen distractions. Without actual implementation of corresponding grass-roots, bottom-up or individual lawyer level strategies and tactics, there is a limit to how long the top-down strategies will continue to produce the desired result. Getting individual lawyers to execute is challenging for many reasons, including aggressive billable hour requirements, plus lawyers’ relatively autonomous and independent natures and/or resistance to direction, adaptation, or change. It is simply no longer enough to “keep up with the Joneses” and have a “follow the herd” mentality. If you or your firm embraces the need to continually adapt and evolve in order to survive and thrive, below are some recent trends that may be helpful to you:

1.            Define the main contribution(s) expected from the marketing, business development, and client service department(s) for YOUR firm. Firms that have had marketing departments in place for many years now are evolving and restructuring their departments and managing these processes more systematically. Many firms have noticed that with expenditures steadily increasing in this area, some investments are likely misdirected or misprioritized. In addition, the available supply of qualified and experienced staff members who will stay long term and build a solid, sustainable department is getting tighter nationwide. Firms have also realized that very few single staff members can meet all needs in all areas of marketing, business development, and client service simultaneously (i.e., it is very hard to be “all things to all people”) and that “throwing a person at the problem” does not make an effective marketing function. One firm asked: what is the greatest value or highest and best use of our firm’s marketing staff members? The firm then outsourced some important functions that the current staff did not excel in or have time for. Increasingly, firms are building more sophisticated business development and client service functions while carefully focusing their investments in marketing communications.

2.            Define LAWYERS’ highest and best marketing, business development, and client services contributions. In addition to reassessing their organized marketing communications and business development departments, firms are also focusing at the grass-roots, lawyer level. Again, the lawyers who can be all things to all people are the exception, not the rule. Firms are making efforts to guide lawyers toward their highest and best use of time and effort. Some are asking, either at the practice group or compensation committee level, such questions as: What is this lawyer’s target market? Whom do they need to know/meet/communicate with? How are they communicating? Is this most effective? What suggestions or other approaches can they consider? To accomplish this analysis, some firms require annual business plans from all partners/shareholders; others require preapproval for expenditures over a certain level. Many firms are requiring more specificity on traditional marketing efforts/investments such as attending conferences, writing, community or client donations, and speaking opportunities before funding them. Other firms have eliminated the funding of preprinted brochures, opting instead for customizable, on-demand, in-house publishing capabilities. These efforts are designed to improve the revenue resulting from these investments while ensuring cost-effectiveness.

3.            Assess the role of laterals. How much of your firm’s new business in recent years originated from lateral acquisitions and/or mergers? The answer in most Am Law 200 firms is anywhere between 20% and 70%. Some of those firms whose laterally produced percentage of growth is high are responding to this reality by recasting the focus and roles in their firm’s marketing and business development departments. For example, one firm has directed its entire marketing department to refocus its development efforts using a 70/30 ratio, with 70% of the activity being aimed at the internal client (i.e., firm partners/shareholders, especially new laterals) and 30% being aimed at the external, ultimate client. This firm is shifting time, attention and support toward new partners/shareholders who have brought a new client or clients to the firm as part of their move, with the goal of increasing client share and cross selling. The firm’s marketing and business development staff members work closely with the firm’s recruiting, professional development, and retention committees to help laterals get to know their fellow shareholders and follow up to build important internal relationships. This includes helping laterals understand more about their fellow shareholders’ practices, analyze how they can provide additional service to their clients, and create action plans implemented over time.

4.                   Find your players and give them tailored support. Lawyers vary considerably in their skill sets, capabilities, disposition, career objectives, preferences, and motivations. Not everyone can be a starting pitcher or home run hitter. Unfortunately, most training and development programs are designed to be all things to all people on a certain subject. The majority of a half-, one- or two-day session is devoted to “talking heads” conducting information/knowledge transfer. As discussed above, telling lawyers what they should know and/or do is one thing; actually getting it done is the real issue, because talk is cheap. In addition, many such training and development programs are often “required,” and as a result, attendees range from those motivated and interested to those who couldn’t care less. To improve their return on investment, astute law firm managers realize that the real payoff in training and development lies in first identifying the lawyers with motivation to adapt, grow, and participate, and then tailoring specific programs around those who will actually participate and desire the support. Providing proven, experienced sales or new business development coaches tor interested lawyers has been shown to generate more regular, routine follow-up at the individual level, and is effective at generating practice efficiencies and increased revenues.

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