Strategic Planning for Law Firms – Key Steps in the Process

So what’s all the mystery about strategic planning for law firms?  Why do so many firms fail to do strategic planning, and if they do try it, why do they fail to implement?

First I’ll address the mystery part.  Most law firms are run as democracies, which allow partners to do what they want with no real accountability.  Strategic planning assumes that you are thinking about your future as a firm, not as a group of solo practitioners.  This is the key to making a strategic plan work.

Here’s some key questions to address in getting the planning process going.

Where Are We Going?

Ideally, you should follow a standard strategic planning process, which involves creating a mission statement and long-term vision for the firm.  The strategic planning process will address the next 3 to 5 years, and should be revisited every 3 to 5 years as the environment changes.

Who Are We?

A core values statement is also essential, to guide all partners and staff on the firm’s expectations of its people.  This will decide who’s in the boat, and who isn’t.  The core values statement is normally created separately from the mission statement, but must support it.

What’s Stopping Us From Achieving Our Vision?

First you need to identify the key issues facing your firm at the moment.  This gives you a place to start turning issues into goals and strategies.  Every issue is a potential hurdle which is preventing you from achieving your firm’s goals.  The firm’s  key issues should be summarized and prioritized.  The top 5 issues should be discussed and ideas exchanged on how the issues are stopping the firm from achieving its mission statement and vision.

What Are The Steps Along the Way To Achieving Our Vision?

Once the mission statement and vision are determined, usually during a strategic planning session with all partners, then you can start eliciting goals from the mission statement. The firm’s goals are normally contained within the mission statement.  Focus on the top 5 goals.

Quantify Objectives

With the top 5 firm goals decided on, you can then quantify objectives which must be met in order to achieve the goals.

How Do We Get There?

Conduct a brainstorming process to consider various strategies to help achieve the goals.  Prioritize the strategies needed to achieve the goals.

Who Will Do What And By When?

This is the action planning stage.  Here we identify who will carry out the strategies and assign deadlines to complete the action plans.  This provides accountability and helps with follow-through.

How Do We Ensure It All Gets Done?

This is where most firms fall down and don’t implement their plans.  You need a management structure with accountability to make it happen.  The Managing Partner will be in charge of executing the firm plan and will ensure every partner does their part in implementing the plan.  The Managing Partner must also be able to impact partner compensation to make partners accountable for their role in the process.

The Top 5 Things Law Firms Need To Do Now To Increase Profitability

Here’s some issues that are common amongst small and midsized law firms that should be addressed now to increase profitability.

1. Management

Too many firms try to run as democracies where partners have full say on which clients they work for and the type of work they do.  They’re not accountable for their actions and effectively act as solo practitioners.  This is a sure recipe for mediocrity and substandard profitability. You need to centralize management with a Managing Partner assigned the authority to screen all significant new clients for potential profitability, say no to high credit risks, and impact partner compensation to ensure all partners are accountable for their actions and performance.  The Managing Partner will also direct strategic planning and execute the Firm Plan.

2. People

You need the right people. Many firms have ill-defined partnership entry criteria and even less understanding of what it takes to remain a partner.  As a result, you end up with mediocre people and risk losing your best people to your competitors.  You need to have high-performing people to move the firm forward and achieve your firm goals and profitability targets.  Ensure your top performers are paid what they’re worth. Define partnership entry and retention criteria and enforce these criteria regularly.

3. Clients

You need to be constantly pruning your client base and upgrading your clients.  Studies show that  80% of your profits come from 20% of your clients.  You need to figure out who these high profit clients are and how to get more work from these clients. At the same time, you need to review and replace low profit clients with better opportunities.  Get a list of your top 50 clients and start reviewing them for profitability and ask them if they’re satisfied.  Do some client satisfaction interviews and you’ll generate more work from your most profitable clients simply by going through the interview process.

4. Vision

You need the “right” vision and a process for initiating strategic planning on an ongoing basis.  Start with a strategic planning process involving all partners and facilitate the creation of a new Vision and Firm Plan.  This will help direct your efforts in the most effective way and will help  increase profitability dramatically if you get all  partners to “buy in” to the new Vision.

5. Systems

You need to reward partners for cash in, not billings.  Many firms focus on volume without looking at the quality of the work being brought in and worked on.  You need to examine realization and profitability of all your clients.  To do that, you need a system to quickly determine profitability of clients and practice areas and services provided.  You also need to determine your cost per billable hour and create strategies to reduce costs and increase your profit margins.