Monthly Archives: December 2012

SURVEY RESULTS – Goals, Measures and Balanced Scorecards – December 2012 Strategy Topic of the Month

Posted on by

Our final strategy topic  for 2012 focuses on what law firm management is doing relative to setting objective measures for their strategic plans. More specifically, what do law firms measure and are those measures in any meaningful way connected to their own strategies?

What we learned – in short – is that law firms measure financial results with real consistency.  Beyond financial results, measurement is relatively limited and is often unconnected to firms’ strategies.  That puts law firm management roughly 15 years behind corporate management – where balanced scorecards enable companies to translate strategies into measures in four primary categories:

Balanced Scorecard Graphic

The balanced scorecard idea was novel when Robert Kaplan and David Norton introduced it in the mid-1990’s.  Essentially, they recognized the peril in having a company focus only on financial performance – without consideration to its performance vis-a-vis customers, employees and underlying business processes.  Since then, research has demonstrated the positive impact of adopting measures in key areas beyond financials.  For instance, a 2008 study published in Advances in Accounting found that “firms that adopt the balanced scorecard significantly outperform firms that do not (including financial returns).”

No one responding to this month’s survey has formally adopted a full scale balanced scorecard approach.  However, roughly 40% of the firms responding to the mini-survey have either adopted portions of the balanced scorecard (25%) or are working with an informal version of the balanced scorecard (15%).  This is consistent with what we found in early 2009, when we were putting together case studies for Balanced Scorecards for Law Firms – namely, very few firms have formally embraced a balanced scorecard approach to strategy implementation and/or performance measurement.

Unsurprisingly, 100% of law firms report having and using financial measures.  In fact, the overwhelming majority of them consider their financial metrics to be either “solid and reliable” (24%) or “excellent and highly informative” (72%).  To the extent firms have measures linked directly to their strategic plans, those measures are predominantly financial.  Asked specifically if they have measures linked to their strategy, only about half of responding firms reported make any effort to link measures (financial or otherwise) to their strategic plans.

A summary of how prevalent measures in each of the four balanced scorecard categories are within law firms underscores the overwhelming reliance on financial results as a proxy for everything else.

Survey Table

The most striking thing here is that although over 95% of all firms have solid or excellent financial measures, 80% of firms have limited (or no) measures of client satisfaction.  This is consistent with our October 2012 strategy topic of the month.  In that study we found that relatively few firms have structured client feedback programs focused on their top clients.  Frankly, this is both a huge missed opportunity and a potentially critical mistake.  Even if you never seriously evaluate or adopt a balanced scorecard – at the very least augment your financial metrics with systematic feedback from clients.

*********************************************************************************************************************

As always, we thank you for your input and willingness to share your insights via these brief monthly surveys.  We will return next week with a recap of the top ten insights gained from the 2012 strategy question of the month surveys.

Best wishes for a healthy and prosperous 2013.

 

Goals, Measures and Balanced Scorecards – December 2012 Strategy Topic of the Month

Posted on by

Our final strategy topic of the month for 2012 focuses on what law firm management is doing relative to setting objective measures for their strategic plans. Peter Drucker famously said, “you can only manage what you can measure.”  The question is, do law firms measure progress against the key elements of their own strategies (i.e., are they measuring what they are managing)?

Kaplan and Norton put systematic rigor behind measuring key elements of strategy with the Balanced Scorecard. The essence of the balanced scorecard involves adopting a set of measures that allow management to track whether strategies (and strategy implementation) is working.  We take a particularly keen interest in the topic, having written a book for Ark Publishing/Managing Partner on applying balanced scorecard principles in law firms.  A generic balanced scorecard adopts measures in four broad categories.

 Balanced Scorecard Graphic

This month we explore the extent to which firms are using measures in these categories and the extent to which they are linking those measures to strategic goals.

As always, the survey is very brief (should take less than two minutes to complete) and all responses will remain confidential.  If for some reason you do not see the survey in the window immediately below, click this link to be taken directly to the survey.  Deadline for responses is end of business PST on December 21, 2012.  Questions can be directed to info@sterlingstrat.com.  Thank you for your insights and candor.

Partner Development Strategy – November 2012 Strategy Question of the Month – Survey Results

Posted on by
Our strategy topic for the November 2012 focused on where the future leaders of law firms will be coming from.   There is a simple industry wide issue relative to generational demographics.  A very large cohort of baby boomer partners will be retiring over the next 20 years.  In fact, by 2020 (eight years from now) half of the boomer cohort will be 65 or older.  If you look at the broader demographics, the generational cohorts create something akin to a roller coaster.
 
 
  • Baby Boomers are a large cohort of over 80 million people
  • Generation Xers  are a smaller cohort of roughly 60 million people
  • Millennials are a large cohort of over 80 million (similar in size to the boomer generation – with many still in high school)
So, how do you overcome the overall industry (and societal) demographics to ensure you have strong people across all generational cohorts?  Our findings point emphatically to the value of hiring and developing ‘lifers’ (i.e., people who stay with the firm they join at the entry level).  In other words, the best path to ensuring you have great people across the generations is to hire and develop your own!  To quote a  couple of respondents:
 

  • “We are blessed with strength throughout the demographic ranks, as well as a culture that is attracting like minded star/potential star laterals. We highly value having high quality lawyers at all levels (including entry level), training and mentoring, and making it such that all who work here can, if they do their parts, make a career at our firm.”
  • “(Our future leaders are) most likely from “lifers”.  We have a good group of them.”
Firms who reported that 50% of more of their current attorneys are ‘lifers’ (let’s call those firms ‘high lifers’) are dramatically more confident in the future prospects of their young people.  Asked the importance of various generational cohorts in future succession (i.e., who are most likely to produce business developers and leaders over the next 10 years):
.
  • ‘High lifers’ are three times as likely to consider their current associates to be a very or critically important source of future leaders (compared to ‘fewer lifer’ firms).
  • Similarly, ‘high lifers’ are 3.5 times as likely to have confidence in associates that they ‘plan to hire and train in the next ten years.’
  • ‘Fewer lifers’ on the other hand only truly have confidence in their mid-career (over 45) and younger equity partners.
 
More broadly, no one expresses much confidence in the ability of future lateral hires to be key players in 10 years.   However, there were firms anecdotally expressing great confidence in their laterals.
.
  • “We have grown over the last 10 years 200%, mainly from lateral hires. It is from this group that we see our future leaders.”
  • “(Our future leaders will be) highly successful laterals that subscribe to our business philosophies and firm culture.”
In addition, there is not much confidence in the future prospects of younger (under 45) non-equity partners.  While not entirely surprising, the lack of confidence in non-equity partners raises enough questions about their long term role(s) to fill its own blog post.

.
Hiring at the entry level has been consistently lower across the industry – as compared to pre-recession levels.  The following pie chart explains why that condition persists quite clearly.
 
Finally, a couple of respondents looked into the proverbial crystal ball and offered predictions about where the future generation of law firm leaders will emerge.
.
  • “They will come from the middle tier of law schools, they will have worked their way thru college and law school, they will have started working early in their teens and understand how to make a dollar.  They will display a high level of emotional intelligence and a majority will be women.”
  • “From those who have a business/entrepreneurial bent as opposed to simply applying a legal analysis to a set of facts.”
As always we thank those who took the time to share their insights with peers and colleagues.  Comments are open and we welcome your emails and phone calls as well.
…