The strategy process in law firms is not an easy undertaking. As with other professional services firms, the special structures influence the company right down to the core, strategic work. In this article, we discuss how a strategy is created, who should develop it in a law firm and what the role of management is.
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Anyone who thinks that strategy must be developed by the senior management of a law firm is wrong.
Nevertheless, let's assume that the leadership team of a law firm actually develops the strategy for the whole firm in isolation. In this case, the management would have to make all strategic decisions and then convince the entire team of this strategy. There are two major problems with this approach:
A good strategy answers, among other things, the question of how the law firm can offer strategic added value for the defined target groups in order to outperform the competition. Many law firms – from a medium size upwards – are organised into sub-groups (practice groups). These groups have different clients with different needs.
The "Litigation" practice group is therefore confronted with completely different requirements than the "M&A" or "Real Estate" groups. A sensible strategy for these individual areas therefore requires different strategic decisions in each case. In order to be successful, the strategy should therefore be decided at the level of the service line or practice group.
Further proof of this approach is that it is incredibly difficult for clients to distinguish between law firms as a whole. It is much easier for them to remember individual practice groups: "Law firm A is better for M&A than law firm B. But law firm B has more expertise in labour law." This differentiation is much more difficult for clients with regards to entire firms (exception: specialised boutiques).
The second problem of a top-down process lies in the partnership structure. Partners in law firms value their autonomy. They are entrepreneurs and make their own decisions. They sell themselves and can therefore only subordinate to a certain extent. If they are presented with a strategy that has been developed by a management team and does not suit their own marketing, it is not promising. Also, strategies often require changes and developments – up to and including a change in the compensation model.
Strategic processes therefore require a consultative approach. The people who plan the strategic activities (i.e. the practice groups) should also take responsibility for them. This is only successful if they feel that they have helped to develop them.
Firm strategies should be developed "bottom-up". Each practice group is challenged to show how it can contribute to the development of the firm.
HeadStarterz follows proven protocols to structure and facilitate such processes in law firms. We would be happy to advise you on a strategic evaluation or realignment: tobias@headstarterz.com
An important function of a law firm's management is to encourage and monitor the implementation of strategic decisions. It is the leadership's job to ensure that strategies do not remain paper tigers. The crucial question is: What can the firm do to support the practice groups in achieving their goals?
Management can exert a great deal of influence, especially through the introduction or revision of policies. It is also important that the leadership team keeps asking the right questions.
The way fee earners are compensated in a law firm is central in this respect. For what (non-billable) work are the lawyers effectively paid? Often, the compensation model leads to strategically important work not being done because other tasks have a much greater impact on a lawyer's salary.
For example: It is a popular strategic decision to improve marketing to existing clients – because the acquisition costs are usually much lower than for a new client. However, a law firm can only be sure that this measure will be implemented if the fee earners are also compensated for sales in this segment. Despite these strategic decisions, in practice the acquisition of new clients is often overrated and better compensated. As a result, the decided measure to better market to existing clients will come to nothing. There is simply no incentive to implement this effectively.
The example is a classic case where management demands A but compensates B.
With a proven process, we support leadership teams in initiating and managing strategy processes. We help you to ask the right questions, leave you with a framework and support you in entering a structured accelerator process as a law firm.
The Strategy Accelerator is all about action. We quickly arrive at the first strategic decisions that really move a company forward.
If you have any questions, please do not hesitate to contact us: tobias@headstarterz.com
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