In any informal conversation with law firm partners, their firms’ plans for the future come up. They always express an ambition for improvement and positioning in the coming years, but few are clear on how to achieve it. For this improvement to materialize, the role of strategy is very important, which has great particularities in the legal industry and whose result should be a strategic plan that allows the partners to immediately answer the question “what is the plan?
Strategy is the set of decisions that a firm adopts to achieve its objectives, and law firms, as professional services companies, must take into account that they are very different from other companies in this matter, as they are human capital intensive companies, not financial capital intensive, and this difference will mark the whole process of defining the strategy.
One of the most delicate parts is the definition of corporate strategy. It is common to see that firms, in their ambition for growth, incorporate practices that may later hinder the strategy. Defining very precisely what areas a firm is going to offer and what the synergy between the areas is is a much more critical decision than it may seem. Any lateral integration or appointment of new partners should have as its main question what synergies does this new appointment generate for the firm?
Once this part is defined, the firm must develop each of the practice areas’ strategies in order to outperform its competitors.
Firms that seek accelerated growth have a completely different strategy from those that seek to maintain a position in the market and those that have decided to protect the position they have already built. A firm that focuses only on efficiency is, at best, maintaining a past strategy that has worked well for it, but cannot expect to position itself differently from what it has already achieved.
The challenge is to make the execution of the strategy coexist with the improvement of operational efficiency (achieve more with the same resources, or achieve the same with fewer resources) and, consequently, be more competitive in the profitability of partners and associates’ salaries.
Once the firm has clearly defined its strategy for the coming years, it must put all the concepts on the ground and face reality. In other words, if its projected strategy is viable, the questions that the firm must clearly answer are the following:
a. Do I have the right team of partners and associates? It is impossible to develop a strategy if we do not have the right professionals. Otherwise, it would be as simple as locating the most profitable firm in a jurisdiction and copying its portfolio of services. But we know this won’t work. That, without the right professionals, in terms of knowledge, experience and reputation, it is impossible to develop a strategy. The pattern of decisions in this matter is also very important: If I want to incorporate these professionals, what strategy should I follow? Develop the competencies of the professionals I have in the firm? Lateral incorporations of partners with their team? Integration of entire firms?
b. Where in the spectrum of services do I want to place my offer? The firm must be very clear about where in the spectrum of professional services it places its offering. An excessively diversified offering (from the least to the most complex) will require different capabilities from the firm and professionals that will sometimes be impossible to manage. Hence the team splits that occur in firms.
c. What services does the market demand? It is time to connect with reality and study the economic flows of the jurisdiction where we operate. What markets are growing? What is the volume of business in each industry or sector? Are our services decisive for the development of that sector?
d. To which clients will I provide these services? Finally, the partners’ ultimate competence for a successful strategy: their relational capacity. Do I have access to the market? How is my network of contacts in those sectors?
These are just some of the questions that arise when defining a firm’s strategy. They should also include others, such as operational strategies, business development, reputation management, information systems and communications. But the foundations of a good strategy are built on the knowledge that the secret of success is adaptability to the changing environment and the management of uncertainty, assuming that the plan will not be written in marble.
Antonio Gómez Montoya.