Category Archives: Law Firm Strategy

Survey Results – Alternative Fee Arrangements

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In the midst of the market meltdown in the fall of 2008, we were in the field doing research on behalf of DRI (Defense Research Institute) on the Future of Litigation.  Alternative Fee Arrangements (AFAs) were one element of that research.  Extensive interviews with general counsel and law firm leaders highlighted three primary motivations behind the search for AFAs:

  • Some simply needed to cut costs.  Fee arrangements trend toward discounts and blended rates in these contexts.
  • Some needed predictability, particularly if they have a block of recurring or continuing litigation.  Fee arrangements in this context trend toward fixed caps for matters – or more often for blocks of business.
  • Some were driven by risk management models or strategies.  In this context fee arrangements trend toward some form of contingency.

Now, that research focused solely on litigation.  Further, there has been considerable growth in non-hourly based fee arrangements since that time.  For instance, in early 2009 only 29% of law firm leaders believed growth in non-hourly billing was a “permanent trend.”  That has grown to 80% in spring 2012 (see Altman Weil’s Law Firms in Transition survey).

Our  law firm strategy question of the month focused on AFAs this month.  Roughly, two-thirds of respondents indicated that AFAs are growing (about a third find AFAs continue to grow at an accelerating pace).

Anecdotally, we have seen many clients ask for AFAs only to revert to a simple discount off standard rates – continuing to rely on hourly billing for a variety of reasons.  For purposes of this month’s survey, we did not include discounts as an AFA – focusing instead on non-hourly forms of fee setting.  In order of most prevalence, AFAs in use today include the following.

 

The question also allowed respondents to add other AFAs (not on the list above).  Other AFAs in use include collars/monthly retainers; deferred billing arrangements for start-ups awaiting venture funding; and highly customized approaches that provide predictability for clients.

Finally, an open-ended question at the end of the survey invited people to share “unique insights you have gained from the deployment of AFAs.”  People were very generous with their insights and the key insights are summarized in the following points.

  •  Firms have learned the value of well analyzed data – on costs and on the work being subjected to an AFA.  For instance, one firm reports very good results on contingency oriented arrangements – in cases where experience informs their understanding of the  upside for recovery.  Others noted that they have learned to improve the profitability of fixed fee arrangements – by understanding underlying costs and their approach (staffing and work process) to the work.
  • Many have found that effective communication with clients and prospective clients is a key to success.  That enables the firm to provide the predictability (or other objectives) the client is pursuing.  Further, it reinforces the strength of the relationship – clients appreciate the fact that their law firm is listening and responding.  Finally, it ensures that when risks are being shared (such as in a contingency arrangement), both the firm and the client are prepared for changing conditions.
  • Many also noted that effective AFAs are not easy to construct.  They take time to get it right – for the client and the firm.  They require attorneys to approach both the client relationship and the legal work differently.  And, they end up simply being a margin reduction if time and intellect are not invested in their creation and execution.
  • A few people noted that one key to success is doing effective post-mortem reviews of AFAs.  As one managing partner noted, “the most difficult part is circling back to see if the arrangement worked…”

Note that firms who have a higher proportion of their fees earned via AFAs were more likely to be experiencing a slow-down in the growth of alternative fee arrangements.  Certainly, the move toward non-hourly billing is not a passing phase.  Knowing your own cost structure, being able to manage the work consistent with the AFA (either via project management or via staffing models), and being able to learn from each experience are critical to success.

We thank the many law firm leaders who continue to share their insights and experiences via these questions of the month.

ALTERNATIVE FEE ARRANGEMENTS – MAY 2012 STRATEGY QUESTION OF THE MONTH

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Our March 2012 strategy question of the month focused on profit improvement strategies.  One of most important strategies for profit improvement among firms is improving realization.  In framing that question about realization, we explicitly included consideration of alternative fee arrangements – so, AFAs appear to be part of that profit improvement strategy.

Since publishing those findings, our friends at Altman Weil have published their latest findings on the annual “Law Firms in Transition” survey.  Interestingly enough, they found that law firm leaders’ expectations for increased price competition (49%), increased commoditization of legal work (58%), and increased non-hourly billing (52%) were all up dramatically.

Given those findings, we thought it would be valuable for our readers to get a sense of what their peers are doing in the realm of AFAs.  The quick, two-minute survey below takes a look at AFAs through a couple of lenses – do they continue to grow as a percentage of fees earned and what tactical approaches appear to be most prevalent?

Deadline for completing the survey is midnight, Tuesday, May 29, 2012 (the day after Memorial Day).  As always, individual responses will remain confidential and anonymous.   Thank you!

If your browser does not support the embedded survey (i.e., you do not see the survey in the box below), click this link to jump to a hosted version of the survey.

Practice Group Portfolio Management

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One of the key findings of our April 2012 “strategy question of the month” involved the strategic importance practice groups (and filling out the practice group portfolio) have in determining law firms’ merger and acquisition strategies.  In the write-up of those survey findings, we promised to pull out and abridge a section of John Sterling’s book Strategic Planning for Law Firms: A Practical Roadmap.  The book includes a lengthy chapter explaining the background and the application of several proven strategic management tools and models – including applying portfolio management tools to practice groups.  What follows is an excerpt from the book addressing the portfolio management concept.

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Portfolio analysis (and portfolio management) traces its origins to the leading management consulting firms of the 1960’s and early 70’s. There were several variations on the same underlying idea. Namely, that the key to effectively managing a business with multiple product lines and/or multiple divisions was to understand the role each should play in the company’s overall strategy.

Further, each approach to portfolio analysis examined products or business units from two fundamental perspectives. First, they looked at the relative competitive position of the business or product line. Second, they assessed the market in which that business unit or product competed.

Law Firm Application

The application to law firms – particularly general practice business law firms – should be quite apparent. As law firms have grown, developed multiple practice and industry specialties, and become more managerially complex, the need to apply some order to that increased complexity has grown. Portfolio analysis and portfolio management provide a set of tools well designed for precisely this type of organizational complexity.

Essentially, practice groups (generally including industry groups) are in most respects like a strategic business unit in a diversified corporation. They offer distinct services, have unique underlying “production” or operational capabilities, face identifiable competitors, and compete in markets that differ (sometimes dramatically, sometimes subtly) from the markets of other practices. Further, it is entirely possible (in fact advisable) to measure the financial performance of a practice group – if not on a fully loaded profit and loss basis, then certainly on the basis of contribution to firm profits (e.g., revenues net of direct expenses before the allocation of firm overhead).

Further, given the inherent limitations on resources, it is not feasible to treat every practice the same. Nor is it sensible to expect the same results and contributions from every practice. Some practices are well suited to attract new clients to the law firm. Some are well positioned to drive profitable revenues. Some are integral to maintaining a deep and lasting relationship with clients. Ideally, a firm should be able to define its expectations of each practice based on a portfolio analysis – and the practices should be able to pursue a valuable role within the firm in response to those expectations.

Using and Applying the Tool in a Law Firm Setting

Portfolio management is a straightforward process in which management (or a strategic planning committee) ranks practice along two critical dimensions. The attractiveness of the market in which the practice group competes; and the relative market position/strength of the practice group. Each of these dimensions is discussed in more detail below.

Market Attractiveness

The attractiveness of any given market is a function of a variety of factors – some purely objective, others more subjective. The key to using the portfolio analysis tool is to agree on a consistent set of “attractiveness factors” and each factor’s relative importance.

Some examples of market attractiveness factors follow.

  • Competitive intensity influences the attractiveness of a market. Highly competitive markets may not be as attractive as those with less competition. Note that a separate tool designed for assessing competitive intensity is discussed in some depth in a subsequent chapter.
  • Rate sensitivity is an issue in many legal market segments. Markets or specialties that do or can bear premium billing are clearly more attractive than those with a high degree of rate sensitivity.
  • Market growth is another obvious factor in rating the attractiveness of markets. Patent litigation was attractive throughout the 1990’s and 2000’s in large part because of the consistent growth in that market.
  • Market size must also be considered. A large market is generally more attractive than a small one. A large, growing market is even better.
  • The needs and demands of the firm’s existing client base is usually a factor. For instance, if virtually all of the firm’s corporate clients need and use the firm’s tax services, the tax market would be rated favorably on this particular factor.

Other factors might also be included in this analysis such as historical or future profitability; regulatory and other external influences on the market; and the technology required (now and in the future) to compete effectively in the market.

Relative Market Position/Strength

The other dimension to consider in a portfolio analysis is the relative market position of each practice group. The key word is relative – to key competitors and to the needs and expectations of the market.
Again, a variety of factors determine the relative market position of a practice. Some examples follow.

  •  The relative quality of lawyers and/or work produced is a key factor, but is often difficult to rate objectively. Third party ratings can serve as a proxy here (e.g., number of attorneys listed in Leading Lawyers or tier ranking in Chambers).
  • Practice profitability (measured by contribution, realization, revenue per lawyer, net income per partner, or other means) can be an indication of relative market strength. As noted above, profit potential can also serve well as a factor in determining market attractiveness.
  • Market reputation/perception can be a strong indication of a practice’s relative strength. Is the practice considered the leader, among the leaders, at parity with most firms, lagging other firms, et cetera?
  • Market share – locally, regionally, or nationally – is another key measure of relative market strength. Unfortunately, law firms generally have to rely on the number of lawyers they have in a given area as a surrogate for market share. Nevertheless, share and share growth are good measures of relative market position.

Plotting the Portfolio

Assessments of each practice group’s relative market position and the attractiveness of the practices’ respective markets can be viewed graphically by juxtaposing the two dimensions (market position and attractiveness) on a matrix. At a basic level, market attractiveness and relative market position ratings can be broken down to three “generic grades” – high, medium, and low.

The result is a three by three matrix like the one pictured below.

The matrix suggests relatively generic strategies.  Naturally, the specific strategies a firm should pursue depend on many factors, some of which reach well beyond the scope of this analysis.  Nevertheless, portfolio management is an extremely valuable tool in making resource allocation decisions among practices.

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There is considerably more discussion of both the generic strategies and a “how to” on applying the portfolio management tool in a real world setting in the book.  And, we are happy to discuss the tool with you directly over the phone (312) 543-6616 or in the comments section below.

Survey Results – Strategic Growth – April 2012 Strategy Question of the Month

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Our April 2012 strategy question of the month focuses on strategic growth. The latest Am Law 100 found that headcount growth has resumed across the largest firms in the U.S. Further, those tracking law firm mergers found that activity in 2011 (i.e., competed mergers) had returned to pre-recessionary levels.

We wanted to get a sense for how integral mergers and acquisitions are to law firms’ growth strategies. So, we asked a very direct question, “Does your firm plan (hope) to complete at least one merger and/or acquisition by the close of 2013 that would grow headcount more than five percent from a single combination?” Those answering ‘yes’ were asked to rate the relative importance of a range of factors they consider when evaluating potential merger candidates. Those answering ‘no’ were asked to share the considerations that led their firm to opt out of merger and acquisition activities.

MERGERS AND ACQUISITIONS AS A GROWTH STRATEGY

The survey split almost 50/50 relative to whether firms plan (hope) to complete a combination that will add more than five percent to their headcount. Slightly less than 50% said that strategic combinations (of at least the scale noted here) are definitely part of their strategy. Meanwhile, just over half the respondents noted that they do not expect to complete a combination of reasonable scale over the next 18 months.

FACTORS DRIVING THE EVALUATION OF STRATEGIC COMBINATIONS

Factors driving the evaluation of prospective merger and acquisition candidates break-down into a few categories. First, there are a couple of factors that appear to be foundation – that is, factors that are not so much a driver for seeking merger partners, but that a lack thereof will squelch discussions with prospective merger candidates. Second, are factors that are clearly strategic to an overwhelming majority of the firms actively evaluating merger candidates. Third, are factors that are strategic for many, but not for a significant minority of firms seeking a strategic combination.

Foundational Factors
Cultural fit appears to be an unquestioned foundational factor – over 96% considering it to be an important or critically important factor (and over 60% rating it critically important). Similarly, the ability of a combination to deliver long term financial improvement appears to be a foundational factor – again, over 96% consider long term financial contributions to be important on some level (though only 46% rate it critically important).

Practice Portfolio Considerations – Most Strategically Important Factor
Over 90% of the firms actively seeking strategic combinations are looking (at least in part) for a merger partner that can close gaps in their own firm’s practice portfolio or capabilities (i.e., rate it important or critically important). In fact, as an evaluation factor for prospective merger partners, it rates nearly as highly as the foundational factors. We have written extensively on strategies related to managing practice portfolios – most recently in our book for the Managing Partner magazine bookstore. We will likely provide an abridged discussion here on the blog in early May 2012.

Geographic Considerations – a Mixed Bag
Adding size and scale to existing offices is an important strategic consideration – a geographic factor that figures into the strategy of roughly three-quarters of responding law firms. By contrast, adding a presence in a new city is important to many firms seeking a strategic combination, but not on the level of ensuring “critical mass” in existing offices.

Client Considerations – Clearly Important, But Not Universal
A very strong majority (over three-quarters) of firms do expect a strategic combination to add important client relationships that their firm currently lacks. Likewise, a large majority of firms noted that their evaluation of prospective merger candidates in part “responds directly to the stated needs of existing clients.” Stated client needs are not as universal a driver as closing portfolio gaps – or even as adding important new relationships – yet, it is clearly an important consideration.

High Profile People – Important, But Not Critical
Firms clearly want a strategic combination to add high profile people to their firm. However, it is not a critically important factor (only eight percent of firms consider the addition of high profile people to be “critically important”).

Growing Maturity
Finally, we were pleased to see an indication of growing maturity among those looking for strategic combinations. Specifically, a large majority of firms are not looking for a near term positive financial impact from mergers and acquisitions – over two-thirds of respondents consider near term finances to be either not a factor or only a minor factor. Had that question been asked 10 years ago, the responses may have been quite different.

OPTING OUT OF STRATEGIC COMBINATIONS

Most of those responding that they were not planning (or hoping) to make a substantial strategic combination of the next 18 months were kind enough to share their reasoning and rationale for opting out of merger activity. We have grouped those open-ended responses into the following points.

  • Nearly half of those not actively seeking a strategic combination noted that they are actively growing via smaller scale initiatives such as lateral hiring, smaller acquisitions (that would not meet the “five percent headcount growth” cut-off in the initial question), or via “strategic organic growth.”
  • Many noted – often in thoughtful and thought-provoking terms – that growth via mergers and acquisitions runs counter to their well-considered strategies (e.g., commitment to a “boutique” strategy, a “focused model,” or a solid existing market position).
  • Several respondents (roughly a quarter of those not actively pursuing a strategic combination) said that they remain open to discussing combinations when approached, but are not actively seeking a merger partner.
  • A couple of respondents recently completed major mergers and do not anticipate doing another significant combination over the next 18 months.
  • A couple of respondents noted that they are currently reevaluating their overall strategy and have not determined yet if they are in the hunt for a combination.
  • Finally, one respondent noted that they have looked in the past and do not believe there is an appropriate merger partner for their firm.

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As always, we thank the many firms that responded to this month’s strategy question. The response rates continue to grow, the insights are very helpful to us as strategy consultants, and we hope they are useful to you as leaders of your respective organizations.

The comments section is open and we welcome dialog – online here or off-line via phone and email.

 

Strategic Growth – Strategy Question of the Month – April 2012

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When the National Law Journal published the new NLJ250 (now expanded to the NLJ 350) in late March 2012, the headline was “For Large Firms, Time to Grow Again.”  We certainly see an uptick in merger and acquisition activity among our clients, but that is not representative of the industry as a whole.  Both the Hildebrandt Institute and Alman Weil actively track merger activity – and their reports on mergers in 2011 suggests that law firm combinations have indeed returned (and even surpassed) pre-recession levels (see the links to their respective blogs).

This month we want to get a broader sense for what law firms’ future plans are regarding mergers and acquisitions.  In that context, we want to examine the factors strongly influencing the search for (and evaluation of) merger and acquisition candidates.  And, for those firms that are not pursing strategic combinations, to get a sense for the strategic considerations that went into the decision to forego mergers for the time being.

The survey embedded below (click here if you do not see the survey in the box) is entirely confidential and should take no more than two minutes to complete.  Deadline to respond is midnight, Saturday, April 28, 2012.  Thank you for your continuing help with these monthly strategy surveys.

 

PROFIT IMPROVEMENT STRATEGIES

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OVERALL FINDINGS

This month we looked at law firms’ plans relative to profit improvement. Specifically, we asked law firm leaders which profit drivers they planned to use to improve profitability at their own firms over the next few years. We also asked each to share his/her expectations regarding profit growth in the next three years.

Starting with expectations, we were pleased to see a measured optimism coming from the overwhelming majority of law firms. Only about 11% of firms expect their annual profits to be flat or declining over the next three years. Conversely, roughly 60% expect profits to rise modestly (i.e., less than five percent) annually each of the next three years. None, however, expect robust profit growth of greater than 10% annually.

EXPECTATIONS FOR PROFIT GROWTH


What strategies do firms expect to drive that measured profit growth? Two profit drivers were stood out as preferred strategies for the coming years – increased production (i.e., billable time) and improved realization. Meanwhile, increased leverage was far and away the least preferred profit improvement strategy – in fact a quarter of respondents consider increased leverage to be “not a viable driver for profit growth at our firm.”

PREFERRED PROFIT IMPROVEMENT STRATEGIES

These findings represent a marked departure from profit growth strategies of the past two decades.

  • In the 1990’s (and the late 80’s as well), leverage was considered something of a “holy grail” for driving profits – it is now the least preferred approach to growing profits.
  • In the pre-recession years of the 2000’s, rate increases drove profit improvement. Rate increases are now a somewhat distant third – and are even less important among firms expecting the most robust (5-10%) profit growth.
  • Tighter standards for equity partnership – including de-equitizations and wide-spread adoption of two tier partnership structures – were an important driver of PPEP across both decades. That strategy appears to have waned as well. As a profit improvement strategy, it rates nearly as low as leverage – and, over 20% of firms do not consider it to be a viable profit driver for their firm.

THE MOST OPTIMISTIC FIRMS HAVE A DIFFERENT STRATEGY

Looking at the most optimistic firms responding to the survey (i.e., those expecting profits to grow five to ten percent annually) – and comparing them to everyone else – reveals that those firms are pursuing a somewhat different strategy. Namely, the most optimistic firms plan to put a much greater emphasis on improving realization (they rate realization as a strategy more than 20% higher than their peers in other firms).

Since the questions made clear that alternative fee arrangements were one means for improving realization, AFAs could be an important part of the most optimistic firms’ strategy. More simply, the more optimistic firms may simply plan to discount less and/or write-off less time. The most optimistic firms were slightly less bullish on raising rates (compared to others), so those firms very well could be focused on charging (and collecting) standard rates.

Given these findings, however, we plan to take a closer look at AFAs in an upcoming “strategy question of the month.” Thanks for participating and for commenting below.

SURVEY NOTES

The average ratings regarding profit improvement strategies were based on a four point scale in which:

1 = Not a viable driver for profit growth at our firm
2 = A minor driver of profit growth for our firm
3 = An important driver of profit growth for our firm
4 = A primary driver of profit growth at our Firm

Our response rates continue to grow month to month (thanks again for that). We hope that continues to grow and we encourage you to share your experiences with your peers.

Practice Group Management Effectiveness – Follow-up to the February Survey Results

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The results of our February 2012 strategy question of the month generated a number of follow-up discussions, as well as some very intelligent and insightful correspondence with readers. We thought it warranted a bit of follow-up here on the blog.

Our primary conclusion from the survey can be summarized simply – focus practice group management on activities that really make a difference in the performance of the group. The most effective groups are driving additional, valuable services to their clients. AND, they are improving financial performance at the same time (perhaps as a result of that). The least effective groups are expending valuable time, energy and resources on activities that do not matter on balance.

The subsequent discussion underscored some of our own experiences working with practice groups and practice group leaders. In particular, that discussion was a reminder of the substantial and important advantages larger firms have vis-à-vis practice group management.  Those advantages include having the scale to provide valuable support services to their practice groups.

  • Marketing Support – Larger firms have deep enough pockets (and deep enough marketing departments) to line-up resources to directly support their practice and industry groups’ broad marketing efforts. That helps free-up partners to focus on business development and cross-marketing.
  • Financial and Operational Support – Larger firms also have administrative personnel and information systems that help practice leaders drive profitability. Our March 2012 strategy question of the month deals directly with profit management – we encourage you to take two minutes to participate in this month’s survey.
  • Technology and Vendor Support – Practice group leaders in larger firms do not have to worry about managing technology and third party vendors – they have support staff available to take care of that. Again, they are free to focus on things that really matter.

For readers in mid-size and smaller firms, the question becomes, “What can we do to overcome the scale advantages the bigger firms have in this area?” Our short answer is to keep the practice group leaders’ responsibilities as streamlined and simple as possible.

Knowing they only have limited hours in any day/week/month to devote to practice group leadership, ensure that time is focused on just a few things: 1) cross-marketing into and out of the group; 2) the single most important profit driver for that practice (whatever that might be); and 3) putting their people in position to be successful. Everything else is secondary in a smaller firm setting.

For those interested in additional reading on the subject, we would suggest a couple of articles (note, both are pdf).

PLEASE TAKE TWO MINUTES TO COMPLETE THE MARCH 2012 STRATEGY QUESTION OF THE MONTH
PROFIT DRIVERS FOR 2012 AND BEYOND

Strategy Question of the Month – Profit Drivers

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Most law firm managers are familiar with the primary drivers of profitability – rates (i.e., the standard price per hour for professionals’ time); productivity (i.e., hours worked and recorded); realization (i.e., ability to collect on production at standard rates); leverage (i.e., the ratio of equity partners to other time keepers); and costs (i.e., salaries, benefits, overhead).

In the 1980’s and 90’s, profit growth at many firms was driven by increasing leverage – coupled with modest rate increases and improved financial management.  In the pre-recession years of the aughts, profit growth was driven largely by rate increases.  The “great recession” led many firms to turn to cost reduction – and many found that there was ample fat to be cut from the cost side of the business.

In addition, the high visibility of the American Lawyer’s AmLaw 200 rankings and their ubiquitous measure of profitability on a per equity partner basis (Profits Per Equity Partner or PPEP) has added a dimension to how many firms manage profitability.  Thus, many firms now also actively manage the denominator of PPEP as part of their respective approaches to profit management.

This month we are examining what firms’ priorities are going forward vis-a-vis profit management. Essentially, we are interested in identifying what profit drivers firm leaders believe offer the best prospects for growing profits over the next few years.  Further, we will look at how those profit drivers correlate to expectations vis-a-vis profit growth over the next few years.

Please take two minutes to complete the survey below.  If for some reason your web browser does not support the embedded survey (i.e., you don’t see it in the window below), click this link and you will be taken directly to the survey in a new tab.  Deadline for responses is midnight on March 24th – results will be published the following week.  Thank you for your help with this month’s survey!

 

PRACTICE GROUP MANAGEMENT EFFECTIVENESS

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PRACTICE GROUP MANAGEMENT EFFECTIVENESS

FEBRUARY 2012 STRATEGY QUESTION OF THE MONTH

This month’s strategy question of the month focused on practice group management.  Specifically, we looked at the question of whether there is a link between what we ask practice groups (and their leaders) to do and perceptions of how effective those groups are.

The key take-away lessons from the survey:

  • The effectiveness of practice group management remains mediocre overall with an average rating of 5.86 (on a 1-10 scale);
  • The most effective groups focus considerably more on cross-marketing efforts and financial performance than the least effective groups;
  • The least effective groups are more likely to be working on knowledge management and practice support vendor integration than the most effective groups.

The survey asked two questions.  First, law firm leaders were asked to identify what responsibilities practice group leaders were given in their respective firms (from a list formatted as a “check all that apply” question).  Second, law firm leaders were asked to rate the overall effectiveness of practice group leadership at their firm (where 1= not effective, 5 = moderately effective, and 10 = extremely effective).

OVERALL EFFECTIVENESS

As noted above, ratings of overall effectiveness remain mediocre on balance.  Roughly, one quarter of managing partner and/or COOs consider practice group management at their firms to be highly effective.  Well over half consider practice group management to be only moderately effective.  The remaining respondents consider practice group management at their firms to be largely ineffective.

 

HIGHLY EFFECTIVE GROUPS

The key question then becomes, what distinguishes the most successful groups from the least successful groups.  Note that both highly effective and ineffective groups have some common responsibilities: marketing and new business development (coordination and planning); people management (work flow management, professional development oversight, and planning for entry level hiring); and team building (encouraging teamwork and morale and coordinating group level planning).

Highly effective groups did differ in important ways.

  • First, and most dramatically, highly effective groups were almost three times more likely to be expected to plan for and coordinate cross-marketing activities – both inbound (i.e., seeking work from clients of other groups) and outbound (i.e., encouraging cross-marketing the groups’ clients to others in the firm).
  • Second, highly effective groups were more likely to be asked to focus on the financial performance of their groups – both profit planning and day-to-day administration and hygiene.  In fact, the highly effective groups were almost twice as likely to be involved in financial planning and profit management as the least effective groups.
  • Although less common overall (see overall expectations below), leaders of the more effective groups were considerably more likely to be involved in firm level strategic planning than leaders of less effective groups.

Leaders of the most effective groups were also moderately more likely to be involved in lateral hiring (planning for and executing that hiring), in setting partner compensation, and in acting as a channel for inter-practice and firm level communication.

INEFFECTIVE GROUPS

The less effective groups were considerably more likely to be given responsibility for activities that were – on balance – not priorities across the larger survey sample.  The less effective groups were considerably more likely to be involved in activities that rated at the bottom of the longer list of responsibilities of practice leaders (see the section below on practice group responsibilities).

When compared to the most effective groups, the less effective groups are more likely to be working on two things in particular.

  • First, the less effective groups are nearly twice as likely to be working on knowledge management activities (e.g., form files, brief banks, etc.) than are the most effective practice groups.
  • Second, the less effective groups are much more likely to be working on the development or integration of new practice support vendors (e.g., LPO vendors) into the practice than are their counterparts in other firms.

The less effective groups also appear to be somewhat more directly involved in the entry level recruiting process than their counterparts in more effective practice groups.

To some extent, the differences the most and least effective practices may reflect the size of the responding firms and/or the availability of non-lawyer support.  However, differences regarding the heightened focus on cross-marketing and profit management cannot solely be dismissed as being a function of firm size or the availability of support resources.

GENERAL EXPECTATIONS OF PRACTICE GROUP LEADERS

The survey provided a useful snapshot regarding what responsibilities are most (and least) common for practice group leaders.

The most common responsibilities:

And the least common responsibilities:

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We will return next week with some follow-up discussion of both this month’s findings – as well as last month’s findings regarding partner compensation systems.  Until then, we welcome your comments below and/or via email to jsterling@sterlingstrat.com.

 

Practice Group Management Responsibilities – Question of the Month

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Our strategy question of the month for February focuses on practice group management.  Specifically, we are asking law firm leaders to share their own experiences relative to what practice group leaders are expected to do at their respective firms.  The list of potential responsibilities is long, but many firms focus on a narrower set of responsibilities.

We are interested in learning what practice group leaders are expected to do.  In addition, we hope to link those findings to perceptions of the overall effectiveness of practice management.  So, you will find two questions below.  The first is a “check all that apply” question listing many responsibilities practice group leaders could be expected to take on.  The second is a simple rating scale – how effective overall is practice management at your firm?

We recognize that firms have different terminology for their practice groups (e.g., sections, service teams, practice groups, etc.).  Further, we realize that in many firms practice management occurs at two levels – one focusing on larger, all encompassing groups (e.g., the transactional lawyers, the litigation and dispute resolution lawyers); and the other focusing on more discrete groups (e.g., structured finance, public finance, class action litigation, toxic torts, etc.).  For purposes of this survey, we are looking at the smaller, more discrete groups – so, focus your answers on that level of practice management.

Results will be published here on our blog after the President’s Day holiday.  Deadline for responding to the survey is midnight, February 18th.  All individual responses will remain confidential and anonymous.  Feel free to contact John Sterling with any questions that might arise (312) 543-6616 or jsterling@sterlingstrat.com.

If for some reason you do not see the survey in the window below, click the link here and you can complete the survey at a secure secondary site.