Tag Archives: Big Law

Intentional Management: Saying What You Mean and Doing What You Say

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Over the past year we have noticed an important word showing up more often in the strategy deliberations of our law firm clients.  That word is intentional, literally meaning “done in a way that is planned or intended; thoughtful; deliberate; goal-directed.”

Frankly, we could not be happier to see our clients embrace the term intentional to describe strategic and managerial priorities.  For far too many law firms, for far too long, many aspects of firm and practice management have been anything but intentional.  On the contrary, many firms – including many with smart, well-conceived strategic plans – accommodated highly autonomous action on the part of practices and (especially) successful partners.  Firm strategy was essentially subservient to the needs and interests of individuals and small groups within the firm.

In his landmark article “Patterns in Strategy Formation,” (pdf) Henry Mintzberg accurately characterized this as the strategy of “muddling through.”  This approach is inherently reactive and leads to continual bargaining vis-a-vis priorities and goals.  As a result, strategy is fragmented and often reflects the narrow interests of powerful individuals, rather than the proactive pursuit of best opportunities available to the organization as a whole.  Sound familiar to anyone?

What do we mean by “intentional management?”  It simply means saying what you mean (i.e., being clear about the direction the firm is heading and the priorities it will adopt in its pursuit) and doing what you say (i.e., following through on those priorities).  Now, it is easy to define intentional management, but more difficult to live it.  Living it requires linking strategy across and through the firm.

Cascading

It also requires actively managing, monitoring and measuring progress toward the firm’s primary goals.  Passively waiting for annual (or less frequent) partner compensation discussions is not sufficient.  There need to be clear commitments to action at the firm, practice, departmental, and individual level.  And, the whole endeavor benefits immensely from tracking what is working (and what is not working) via outcome measurement.

After all, we adopt strategies and implement those strategies with particular outcomes in mind (e.g., revenue growth, improved realization, stronger client relationships, a more effective work force, etc.).  If we are following through on our commitments (i.e., managing intentionally), then we can use outcome measures to identify what is working, make appropriate adjustments, and challenge the strategy when circumstances dictate.

Intentional management applies to virtually every aspect of the law firm.  For instance:

  • We need to be intentional in our approach to people management – especially in recruiting, training and professional development.
  • Client relationships benefit from intentional management.  That is particularly true for relationships threatened by clients’ demands for greater value and/or cost reduction (e.g., where project management, knowledge management, or other aspects of the ACC Value Challenge are in play).  It is also true of relationships that can benefit from greater breadth and/or depth (i.e., where others in the firm can help substantially in cementing the client relationship).
  • It is certainly a requirement for effective business development if that is going to be anything more than heroic individuals going to market on behalf of the firm.  Any meaningful targeting, leadership in industry segments, and/or team-oriented selling is a function of intentional management.
  • Pricing decisions (e.g., rate setting, creation of alternative fee arrangements) and other basic economic decisions (both revenue and cost related) benefit from intentional management.
  • Finally, the ultimate decision of who owns the law firm (and at least here in the US, that means who becomes and remains an equity partner) should be driven entirely by intentional management.

So, three cheers to the firms out there embracing an intentional approach to management.  It will serve you well as the legal marketplace becomes increasingly competitive.

Strategic Thinking for Mid-Size Law Firms

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Last month we talked about mid-size law firms:  how best to define “mid-sized;” whether aggressive growth was the most logical strategy for mid-size firms; and alternatives to adopting an aggressive growth strategy.  We got quite a bit of feedback – including some asking whether we had any alternatives to rapid, merger fueled growth.  Part of the answer to that question was addressed in the second half of that article (a section entitled “winning strategies for mid-size law firms”).  This article advances that discussion further.

Last month we identified some important commonalities among successful mid-size law firms, including the following.

  •  Successful mid-size firms tend to be general service, business law firms (though not “full service” – that is unattainable even at 2,500+ lawyers).
  • A large number (perhaps a majority) of their clients are middle market companies – and that means that legal costs are essentially paid out of the owner/CEO’s pocket.
  • Successful mid-size firms have people and/or practices that are the absolute best in the local/regional market in their areas of expertise.
  • They have at some point (perhaps frequently) been approached by another law firm (probably a larger law firm) interested in merging.

There are important strategic implications associated with each of these traits, each suggesting potential sources of competitive advantage and vulnerabilities to competitive disadvantages.  Some generic strategic thinking can be applied to these common attributes – a few examples follow.

General Service, Business Firm

As a diversified law firm, a “general business firm” has an opportunity to build deep, multi-practice, multi-partner client relationships.

Potential Advantage – Partners at mid-size firms have a strong personal familiarity with (most of) their partners.  That should provide an advantage relative to introducing one another to clients as new needs arise (assuming partners have confidence in one another).

Potential Disadvantage – Every firm has practice capability gaps and those gaps can be pretty large at mid-sized firms (even in the strongest).  When competing against biglaw, mid-size firms need to avoid competing on the basis of scale or breadth.

Middle Market Clientele

Serving middle market companies has preconditioned many partners at mid-size firms to be value conscious.  The legal market has been moving decisively toward reduced costs and value, particularly since the great recession.  Many mid-size firms have been benefiting from that trend.

Potential Advantage – Generally speaking rates are lower in mid-size firms.  In addition, many mid-size firms are predisposed (temperamentally and practically) to staff matters with lean teams.

Potential Disadvantage – Biglaw firms are making substantial investments in knowledge management, project management, and financial management and that has the potential to close rate and efficiency advantages currently enjoyed by mid-size firms.  In addition, as Bruce MacEwen has noted here, some large firms are engaged in “suicide pricing” – it isn’t sustainable for a biglaw firm, but it is a real threat to competing mid-size firms.

Market Leadership

Strong mid-sized firms are often the best choice in their local or regional market for a number of legal issues.  Yet, they are rarely the largest or most visible firm in their own market.

Potential Advantage – Marketing and business development that supports market leading practices generally has the best return on investment.  That includes both investments intended to attract new clients and those intended to expand existing relationships across practice areas.  The key is being willing to make those investments.

Potential Disadvantage – Essentially, two can play that game (i.e., biglaw competitors will be pushing their own strengths forward in the marketplace) – and larger law firms have larger marketing and business development budgets.  In addition, that biglaw competitor may have a great option for the client sitting in an office 2,000 miles away (geography often isn’t a barrier for  work these days).

Merger Inquiries

Critically, you need to know what your firm’s general disposition is vis-à-vis merger.  Even if it is quickly dismissed by the partners, it is important to have that conversation from time to time at the Executive Committee or Board levels, as well as with the broader partnership.

Beyond that, as a general rule of thumb, mid-size firm managing partners should accept invitations to lunch from an out-of-town (merger seeking) peer.  At worst, you will learn a bit about a firm that is obviously interested in competing for clients and people in your market.  And, you will gain insights into what other people value in your market and in your firm.

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As always, we welcome your comments and insights below, via email at info@sterlingstrat.com, and via phone at (312) 543-6616.

 

 

What Are the Prospects for Mid-Size Firms – and What Does Mid-Size Mean Anyway?

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The Executive Committee of an AmLaw 200 firm (aspiring to become an AmLaw 100 firm) raised the following question.  “(We’re at) an awkward size (roughly 500+ lawyers)…what should a mid-size firm like ours do (strategically)?”  Given their aspirations, the answer was to keep growing and become a ‘big’ law firm.  They certainly would not be the first to follow that road and some have realized their aspirations.  For instance:

  •  At the time of their merger in 1999, Piper Marbury was a 400 lawyer “Baltimore law firm” with most of its lawyers located outside money centers and Rudnick & Wolfe was a 350 lawyer “Chicago real estate powerhouse” with no New York presence at all.  According to the American Lawyer DLA Piper is now the world’s largest law firm, with over 4,200 lawyers in 30 cities worldwide.
  • Similarly, at the time Elliot Portnoy became chairman of the Firm in 2007, Sonnenschein, Nath & Rosenthal was a 600 lawyer “Chicago-based law firm,” with less than 20% of its people in New York.  Since declaring its intention to become leading global law firm, Sonnenschein scooped up over 100 lawyers from the disintegrating Thatcher Proffitt & Wood in New York, merged with UK law firm Denton Wilde Sapte, and simultaneously merged in international firm Salans and Canadian firm Fraiser Milner Casgrain.  Dentons now has over 2,600 lawyers in 80 offices across 50 countries.

“Moving up market” (as some like to term the strategy) is certainly not impossible.  But, the conversation with that aspiring AmLaw 200 firm raises a couple of pointed questions.  Is a 500-600 lawyer firm actually “mid-sized?”  And, is growth the only winning strategy for mid-size firms that intend to survive and prosper into future generations?

What is a Mid-Sized Firm Anyway?

Let’s deal with that first question – is a 500+ attorney firm mid-size?  Sure, if your frame of reference is the AmLaw 50 or 100, then an AmLaw 200 firm is mid-size.  That is especially true if your firm aspires to being part of ‘BigLaw.’  To generalize the point, defining what mid-size is depends largely on what you are comparing it to (e.g., an elephant is mid-size next to a brontosaurus).

That said, for many, many firms ‘mid-size’ is better defined in the context of nearby (i.e., local and regional competitors).  In other words, mid-size is a function of your size relative to other firms/offices in your primary (or only) city.  Firms that are mid-sized by that definition tend to share some common traits.

  • They tend to be general service firms (since “full service” is unattainable at any size) focused mainly on the legal needs of business clients and their owners.
  • They have a number (perhaps a majority) of clients who are classic middle market companies – and that means that legal costs are paid out of the owner/CEO’s pocket (if it isn’t insured risk).
  • They have people and/or practices that are the absolute best in the local/regional market in their areas of expertise.
  • They have at some point (perhaps frequently) been approached by another law firm (probably a larger law firm) interested in merging.

Is the only (or even the most logical) strategy to say ‘yes’ to merger overtures and/or launch a search for suitable merger partners with whom to grow aggressively?

Winning Strategies for Mid-Size Law Firms

So, is aggressive, merger fueled growth the best/most logical/only strategy for mid-size firms?  After all the demise of the mid-size firm has been predicted for at least 25 years.  Our answer:  it is certainly not the only strategy, but it really depends on what your firm aspires to become.  We addressed that broader question in a recent article regarding strategic direction.

Mid-size firms can adopt a compelling strategic direction that does not include substantial growth.  Assuming there is widespread agreement among the partners regarding that direction (whatever it might be), there are a few things that you can (in fact should) do to turn that into a winning strategy.

Focus on a Few Things that Can Create a Competitive Advantage

Focusing a a few things that create competitive advantages requires a firm to do at least two things.  First, honestly assess what the firm is (or can become) truly great at doing – strengths that can become the epicenter of genuine excellence that cuts across the firm.  Second, get external validation that being great at those things is meaningful in the marketplace.  Focus on a handful of things you are great at (or can become great at) that also have meaning in the market.

A basic SWOT assessment (strengths, weaknesses, opportunities and threats) can highlight your areas of strength (actual and latent).  If you are not good at looking objectively at yourself, a good consultant can help.

External validation can and should come from your clients.  Your best clients want you to succeed into the future – they almost certainly consider your partners to be among their most trusted advisers.  So, ask your clients what you are good at and what you can do better.  It will inform your strategy and improve your relationships to boot.  It is amazing how few firms do this in any systematic way.

Think Strategically

What does that mean, to think strategically?  Well at a minimum, think about competitive advantage (those areas you might focus your energies on) through three lenses.

    • Consider whether you enjoy size or scale advantages over competitors – or more likely face larger competitors who have size advantages with which you must cope.  Large firms do have deeper pockets (or at least more equity partner pockets) over which to spread marketing, technology and other shared costs.
    • Identify factors that may help you to defend your firm’s market position against competitors (even much larger, better financed competitors).  It may be your knowledge of the local courts and judges, your reputation and brand may have deep roots in the community, you may have very deep and broad relationships with clients.  Consider how you can capitalize on and solidify those defensive advantages.
    • Finally and most importantly, take an indirect approach – occupy the unoccupied market positions and be willing to do things differently from competitors.  Precedent is a horrible source of strategy – don’t do what others are doing, do things no one else is doing.

Implement – Do What You Say You Are Going to Do

We have written extensively on implementation – through the balanced scorecard and through other means as well.  Successful implementation involves:

    • Cascading strategy implementation throughout the organization – from firm level initiatives to practice and departmental level activities to a vital and meaningful roles in implementation for all of the firm’s people (partners, associates and staff);
    • Measuring and monitoring implementation and the results it is producing – reinvesting in and celebrating the things that are working;
    • Adjusting as implementation unfolds – abandoning or recalibrating initiatives that are clearly not producing expected results and responding to new market challenges and opportunities as they arise.

In sum, if you think you are mid-size, you probably are – it is entirely a function of your perspective on the competitive marketplace.  Being mid-size is not equivalent to being diagnosed with a fatal disease.  You are free to reject the label and seek to grow – others have done so with remarkable success.  But, you can also adopt other winning strategies by focusing on few sources of competitive advantage, thinking strategically, and implementing with discipline.

As always, we welcome your comments and insights below, via email at info@sterlingstrat.com, and via phone at (312) 543-6616.