Lately, I have started to see more focus on strategic planning and tools like the Balanced Scorecard when we talk about Law Firms. We started focusing on strategic plans about ten years ago when we started working with our first law firm. We have not found a lot of law firms that have a strategic plan they are following. The idea of a balanced scorecard frequently goes hand and hand with strategic planning, and it is still difficult to find that idea implemented. If these two ideas have become almost universally accepted why is it so difficult for a law firm to implement? Or, perhaps the real question is, do these ideas apply to a law firm?
Based on the law firms that we have worked with and the success we have seen, these two ideas apply. So, it is not that these concepts are difficult to implement or don’t apply that they are not being used. I believe the problem is that most law firm owners do not understand the value of the concepts. But even that is a bit of a stretch. When I look a little deeper, I find several reasons.
- By far the first reason on my list is that law firm owners have trouble defining their business objectives. It sounds crazy when you hear this, but I have found that most law firm owners cannot tell me what their vision is. In fact, even crazier, they cannot tell me why they are in business. OK, they can say “I want to make money” but why baffles them. The whole idea of having a well-defined vision for the business is the foundation of strategic planning.
- Strategic planning is all about defining the vision and then creating a roadmap to realize that vision. This is a top-down process. Since the “leader” generally does not know what the vision is, this is turned into a group effort. The resulting statement was sufficiently vague and so fragmented that it was doomed from the start.
- When the group finally starts writing the plan, there is a tendency to move or skip right to execution. Immediately jumping to an action plan without going through the process of clarifying the strategy sometimes has you going down the wrong path.
- I find that nobody is identified as the owner of the plan or the person accountable for the implementation. Everyone wants to contribute their ideas, but they are not the owner of the plan. In fact, it should be the law firm owner that is accountable for the plan. This is a new concept for a lawyer/owner because they see themselves as a professional whose only responsibility is to their clients. They frequently separate themselves from the business.
These concepts have been around for many years in Corporate America but only for a few with law firms, so there is not a long history of success to point to as evidence of value. Where we have implemented these concepts, we see success. Often it has been between one and two years before we see measured success in the law firms we have worked with. The first year is all about planning and the second is gathering data from the balanced scorecard.
When the strategic plan is used to develop action plans, and the balanced scorecard is used to measure the results that can be used to improve the plan, we typically see a clear picture of the law firm. The four areas that are measured in our balanced score card are;
- Finances – those measures that measure financial success. This is everyone’s favorite because it is what they are used to. How much money did I make? How big is my bonus this year? This is real to everyone.
- Client Service – those measures that capture how well the firm served their clients. Law firms frequently focus on client service but never measure it. So, this is something all law firms want. The problem is leadership has trouble relating this measure to success or failure. If I improve client service by 10% what happens?
- Growth – those measures that capture how well the firm is doing to improve. This is the measure that will tell you if you will still be in business in a few years as the market changes. It is a measure of how effective the firm uses the human resources (staff). One of the problems here is that frequently staff is viewed as only a resource instead of being a key element of the business process. How do you relate training your paralegal to an improvement in the bottom line?
- Internal Processes – those measures that capture how efficient and effective the business process is. How are the tools, like the case management system, used? Do you have the right mix of skills, tools, workspace, and supplies? Frequently many steps in the process are skipped or ignored, so it is not easy to show how a quality review of a few process steps is beneficial. Most of the law firms I have worked with view their business as being skill based and not process based when, in fact, a high percentage of the business is process based.
Before we get to the execution phase, we need to have a good understanding of what we want to build and how we are going to measure success. Without this, we will be fighting fires every day and depending on brute force to make it through the day. Very little business improvements or refinements are going on. Is the law firm a business with business processes that react to the best business practices of the day? In the competitive environment we are in today, those law firms that are viewed as a business have a better chance of being here tomorrow.
One of my favorite stories I remember from our years working with law firms was a firm that was celebrating a million-dollar settlement. I, being the ole auditor that I used to be, started asking questions, like what was your return on investment. I got a lot of blank stares. With a little research, I could see that the “business” lost money. That peaked my interest, so the next question was, what was the vision of the “business?” I wanted to find out if they expected to make money. Well, more blank stares. We could dig deeper into this hole all day. Dare I ask to see the strategic plan for the business? Maybe tomorrow, I am getting some cake and coffee.