Tag Archives: Strategic Growth

The Value of Client Feedback – Law Firm Strategy Topic of the Month – October 2012

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Our June 2012 strategy question of the month focused on best practices in strategic planning in law firms.  One of the principle factors that distinguished the firms reporting the most success with strategic planning from those reporting the least success was the use of client feedback in the strategic planning process.  Specifically, firms that report having “very successful” planning processes were 45% more likely to have solicited client input than were firms that reported disappointing results.  Remarkably, a similar survey conducted a month later by ALM and Lexis/Nexis largely overlooked the value of client feedback in the strategic planning process (perhaps viewing it as an element of “Client Relationship Management” and therefore skipping it as a specific focal point).

Frankly, we see broad value in gathering client feedback.  Certainly, it is incredibly valuable the the strategic planning process.   But, it can also play a valuable role in ongoing relationship management, in client service planning, in business development and marketing, in innovation, in pricing, and in quality management.

What we see here at Sterling Strategies is anecdotal.  Yes, we see and work with many law firms.  But, these monthly surveys (short and focused though they may be) give us all some real data on what is working and what is not working in the real world of law firm management.  This month, we have an opportunity to learn what approaches firms are using to gather client feedback.  And, more importantly, to learn what results firms are getting from their efforts at gathering client feedback.

The survey below should take less than five minutes to complete.  Results will be posted back on this blog at the end of the month.  Deadline for completed surveys is the end of business (PDT) on Friday, October 26, 2012.  As always, individual responses will remain entirely anonymous and confidential.  Please direct any questions you might have regarding the survey to John Sterling at jsterling@sterlingstrat.com or at (312) 543-6616.

If for any reason your web browser is not showing the survey in the box below, simply click this link and you will be redirected to the survey host.  Thank you for sharing your own experiences with client feedback with your peers.  It is valuable and widely appreciated.

 

SURVEY RESULTS – Creating the ‘Model Partner’ – July 2012 Law Firm Strategy Question

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Our July law firm strategy question of the month focused on the characteristics that comprise a “model partner.” While crafting the balance of behaviors and traits of an ideal partner is a bit more fun (and bit less strategic) than previous months’ questions, the results (and the thought process) are useful. In particular, in an era of increased partner mobility and a tighter reign on entry into partnerships, it is very important to understand what your firm expects and needs from its partners (or at least its hypothetical “model partners”).

As some were quick to note in the open-ended comments section, few partners are actually a perfect balance of the positive characteristics highlighted in the survey question. In the real world, partners’ individual strengths and limitations tend to balance each other out across the firm. Thus, some are much stronger business originators, while others are extraordinarily creative lawyers and problem solvers. Some are exceptional relationship managers and some are truly gifted in their ability to bring people together and to develop the talents of their peers and subordinates.

The “model partner” question was structured as an exercise in balance. Survey participants divided 100 points across a range of positive characteristics good partners exhibit. Thus, the overall result produces a pie chart that visually depicts the “ideal” balance of positive traits we want in our partners. Note that in the pie chart, we have grouped multiple characteristics into larger themes (for instance, training, professional development and mentoring were grouped together into people development).

The idea of balancing a range of positive characteristics is undoubtedly the most productive way to think about what constitutes a “model partner.” But, the characteristics can also be view through the prism of a simple list as well. In that context, business origination was clearly the most important characteristic (over one-third of the aggregate weighting was given to origination). Working attorney receipts and the set of qualitative factors that make-up a “good citizen” of the firm were roughly tied as the second most important factors (both slightly under 20% of the weighting). People development, outstanding legal acumen, and participation in the management of the firm each received slightly less than 10% of the weighting.

As noted above, the survey provided an open-ended question to allow for further comments and/or additions to the list. As is virtually always the case with these “question of the month” surveys, the open-ended responses were thoughtful and added important ideas to the conversation. Several characteristics not specifically noted in the “divide 100 points” options were mentioned by multiple respondents including:

  • Positive attitude, upbeat, optimism in the face of challenges;
  • An ownership mentality;
  • A team player, willingness to help others;
  • Client focused.

In addition, a number of other terms offered in the open-ended response help to define some of the more qualitative aspects of good partners including loyalty, integrity, responsiveness, self-directed, and “servant leadership” (a term coined by Robert Greenleaf in a 1970 essay).

Finally, for those who completed the full survey exercise and are interested in the detailed responses, you will find those in the chart below. Note that the weightings do not add to 100 in this chart, since they represent average weightings regardless of the number of responses given to that characteristic. In that sense, it gives added weight to the lower rated items (which were given de facto ‘zeros’ by some respondents).

As always, we welcome your comments below or off-line via email at jsterling@sterlingstrat.com. Thank you for reading and for participating in the July 2012 strategy question of the month.

 

 

Creating the Model Partner – Strategy Question of the Month – July 2012

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This month’s strategy question is designed to be a bit of fun – but, in the service of a serious strategic issue.  As  law firm leaders are well aware, lateral movement by partners has increased dramatically over the past decade-plus.  Surveys routinely find that lateral hiring is an important strategy for firm growth.

So, what do we really want in a partner?  Loyalty in this era of lateral movement is certainly welcome.  But, if we take a moment to think about the characteristics and traits that comprise the best partners – the “model partner” so to speak – what is the right mix of business generation, legal acumen, people development and other factors we really want in a partner?  If for no other reason, a firm’s leaders should be able to articulate that to up and coming associates (i.e., what do you expect associates to become?).

The survey below is designed to be quick.  Divide 100 points across the characteristics you want in a “model partner.”  We will tally and publish the results at the end of the month.  Deadline for participation is the end of business on Monday, July 30, 2012.

If for any reason the survey is not visible to you in the window below, simply click this link and you will be taken directly to the survey.  Thank you for your insights, we look forward to publishing the results soon.

 

Strategic Planning – Best Practices – June 2012 Strategy Question of the Month

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This month we are exploring the factors that make law firm strategic planning processes more or less effective.  As always, the survey is designed to be quick and easy to complete (no more than a two minute investment).   Deadline for responses is end of business Friday (PDT), June 29, 2012.

We will post the results of the survey over the weekend and look forward to learning from your collective experiences as law firm leaders.

If you do not see the survey in the window immediately below, please click here to be redirected to 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.