Quality or quantity: the levers for firms to boost growth.

Both qualitative and quantitative strategies can be very profitable. The important thing is that each firm has a strategy: qualitative growth, growth in turnover or a combination of both.

February 23, 2024 |

3 min lectura

I have always maintained that strategy is not relevant to professional services firms (…), I think we just need to hire the smartest people, enable them to do the best possible job for clients, and everything will work out.” Strangely enough, with these words, the president of one of the top international global executive search firms was clearly defining his company’s strategy while denying its relevance. Defining and executing a strategy is necessary to compete in an increasingly mature and sophisticated market such as the legal market. The strategy allows for a clear positioning in the market and for the firm’s practices to have their own identity.

Of the business levers that law firms have, rate or average billable hour value is the most closely related to strategy-although the most closely related to profit may be operating leverage.

This average value of the billable hour is easy to calculate. It is the result of dividing the firm’s net turnover by the – real – hours spent to obtain that turnover. Its relationship with strategy is very clear: a high value indicates a qualitative strategy, a lower value indicates a quantitative strategy. Do not be misled by the apparent exclusive correlation between higher value and higher profitability. Both qualitative and quantitative strategies can be very profitable, if they are well configured with the rest of the utility factors or levers.

One of the first factors to be studied in qualitative and quantitative strategies is the size of each market. Such a reflection, among others, led Mark Harris and Alec Guettel to found Axiom Law more than 25 years ago, when they believed that the market for services that can be provided through process efficiency would grow more than that for highly sophisticated services.

The positive side of being in this more qualified segment is that there are fewer competitors. The complexity of the services, the high number of hours needed to acquire this knowledge and the way in which they must be provided (large teams with coordination and efficiency capacity) leave this positioning within the reach of fewer firms.

Another of the complexities that firms that opt for this type of strategy must deal with is the attraction and loyalty of talent. The professional who provides services in this segment is scarcer and more expensive (the average billing per lawyer justifies it). Firms know that the turnover of professionals of this profile is not desirable, and loyalty strategies are essential. This is something I have already mentioned on other occasions.

As can be deduced from everything described so far, the important thing is that each firm has a strategy: qualitative growth strategy, growth in turnover or, why not, a combination of both if it believes it can grow in both indicators -several firms have achieved this. In other words, more turnover, more professionals and at the same time more turnover per professional. This strategy, qualitative or quantitative, is related to the positioning of the firm: a strategy that is clearly designed and perceived by the market (and executed correctly) leads to a clear positioning of the firm.

In short, we can see how value or volume strategies, at their extremes, have inverted business levers: (i) in qualitative strategies, margins and average hourly value are (or should be) higher. (ii) in quantitative strategies, utilization and leverage are higher. In qualitative strategies, they are lower.

All these factors shape the strategy of each firm. Knowing how to read the evolution of the market, how to best respond to the needs of clients and the type of service that different sectors and industries will need are the key to designing a successful strategy to compete in the market. The maturity of the Spanish legal market makes it increasingly necessary for firms to have a clear strategy in the market in which they want to compete, segmenting the information well to make the right decisions and achieving a positioning that differentiates them from the competition.

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