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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