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Law firms doing the “same old thing” isn’t going to work anymore. Despite all the legal industry changes discussed in  Part 1  and Part 2 of this series, 66% of Managing Partners report that their law firm’s strategy has not changed.  It is imperative for today’s law firms to have a strategic plan that evolves with the firm and changes in the market; however, only 24% of law firms report having strategic plans, even though 71% of Managing Partners report that having a strategic plan improved their firm’s performance. 

What makes a strong strategic plan?

Successful strategic planning is an ongoing process; the first step is creating the plan, but just as crucial is the follow-up. Steps include:

  • Implementation
  • Making changes as needed (and things can change fast)

When drafting a strategic plan, it’s important to think about the process--and to incorporate measurable capabilities.  The tenets of good goal setting should apply--keep things simple, realistic, and achievable, looking ahead three to five years with annual goals.  As you create the plan, build it with the knowledge that it is a living document that must change, because the world is changing.  It should function as a sort of guiding principal, and it reminds your firm of your priorities when crisis situations arise.

Chart, Data

With rapidly changing technology, crises and unexpected opportunities, keeping in mind your strategic objectives is a good way to keep your firm focused on your priorities.  When surveyed, Managing Partners indicated the most important strategic objectives were Marketing and Business Development, Succession Planning, Firm Growth and improved lawyer productivity.

Where should a law firm allocate Marketing and Business Development resources?

With Marketing and Business Development as one of the most important pieces of the strategic plan; it’s important to describe what a solid strategy looks like.  For many firms, marketing and business development is not a top priority--it should be.  The research for Re-Envisioning focused questions on trends in allocating marketing resources in the following seven areas:

  • Website and Internet Marketing
  • Firm Events & Seminars
  • Organizational Involvement
  • Charitable Contributions
  • Rankings and Directories
  • Marketing Staff
  • Lawyer Sales Training

When asked about 2015 investments v. 2016 investments, it was clear that most firms are continuing to do what they have done before.  According to Re-Envisioning, “firms are doing the same old things because ‘we’ve always done it this way,’ budgets are set by equity partners unwilling to support marketing expenses, or there is a ‘let’s wait and see what the other firms are doing’ attitude.”  Investing in Marketing & Business Development can pay off in a big way, but of the firms surveyed, only 25% of them invested more than 4% of their revenue in Marketing  & Business Development.   To successfully move forward, law firms need to change their perspective and to truly innovate in terms of their Marketing and Business Development practices.

A good place to start is with the clients your firm already has--and wants to keep.  Break them into A list, B list and C list--so you can identify who may be happier working with a competitor, and who you want to make sure stays with your firm. 

What should a law firm consider when developing a business development model?

Beyond an inventory of current clients, it’s important to develop a BD model--representing how your firm views business development and how it works for your firm’s situation.  Your model should answer the following questions:

  • Why do people buy?
  • How do they buy?
  • What are prospects and clients motivations and fears?
  • What is the process for finding prospects and transitioning them into clients?
  • Where does business come from?
  • How does your business development efforts focus on building relationships?
  • How does your firm become a trusted advisor to your clients and community?
  • What differentiates your firm and your lawyers, and how do those differences align with your clients’ needs?

Asking questions like this can help your firm ensure that your marketing and business development resources are going in the right direction--and can help your firm create a deliberate way forward, with an integrated approach to ensure goals are met and resources are not squandered.  Additionally, creating a plan with measurable tenets can help your firm track return on investment so it’s clear what’s working and where additional investment might be warranted.

How does a law firm achieve buy-in for the marketing and business development plan?

Another area to consider is asking individuals in the firm--partners and associates-- to create a personal business development plan.  By asking individuals to think about marketing and business development, your firm is demonstrating its commitment to these principals.  Additionally, asking partners and associates to think about how they can best contribute to business development encourages accountability and personal reflection, so individuals can find a way to contribute that is best for them, increasing the likelihood that the commitment will be lasting.

These changes may be around the corner, many law firms are incorporating them already.  Brent Turner, Client Development--Peer Monitor & Thought Leadership at Thomson Reuters, comments, “For the first time in many years, we’re seeing healthy acceleration in the marketing and business development budgets of US Law Firms, let primarily by AMLAW 200 firms.  We’re also seeing evidence that these investments are starting to pay off in a big way.”

Terry Isner Jaffe PR Law firm business development

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19 Aug 2019

Strategic Planning for Law-Firm Success and Growth

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“Practice Management: Plan to Grow,” by Ed Finkel, was originally published in the March 2015 edition of the Illinois Bar Journal.

While nothing is guaranteed in life or law, attorneys and firm management consultants say law firm strategic planning —that is, taking a step back and looking at the big picture—is essential to know where you’ve been, where you’re going, and how you will keep growing whether you’re a solo practitioner or at a large firm. Your law firm strategic planning process is the best way to achieve success in the long run, even if it seems like you’ve been doing just fine dealing with the day-to-day.

Managing Change

“The world is complicated. It doesn’t stay the same forever,” says Craig Caldwell, department chair in marketing and management at Butler University and a speaker on law firm strategic planning at the Solo & Small Firm Institute program in Peoria. “Firms can get blindsided by getting too down into the weeds of their business. It’s necessary at times, for the livelihood and success of the firm, to pop your head up, see what’s going on in the marketplace, and see whether your firm needs to make some changes.”

Lack of strategic planning might not negatively impact a law firm as quickly as another type of business—say, a technology firm—because of the highly regulated legal environment, which provides a buffer of sorts from economic and other changes, Caldwell says. “But if there are aspirations for growth or skill sets within the law firm that simply aren’t as in demand as they used to be, you’re going to find yourself in a scenario where strategic planning is going to be critical,” he says.

One current scenario that’s affecting consumer-oriented firms, in particular, is the trend toward websites that help people handle some of their own legal matters, Caldwell says. “They have a choice to make—do we find other ways to get those dollars that we’ve lost to law.com, or do we join that site?” he says. “If we decide the Internet’s the thing, let’s chase that business.”

The most common law firm strategic planning issue facing firms in recent years has been how to respond to the economic shift in the legal market since the Great Recession, with fewer clients and a tighter bottom line, says John Olmstead, principal at St. Louis-based consultancy Olmstead & Associates.

“The process doesn’t change. The need for law firm strategic planning doesn’t change,” John says. “Sometimes what changes is the fundamentals and what’s going on, and what firms need to develop strategies to deal with. In recent years, most of the challenges firms are having are the same, everything from pressure on the economics, to resistance from clients to fee increases.”

Don’t React. Have a Plan.

It’s easy for firms to lose sight of the big picture as they’re working through day-to-day matters, says Terrence Truax, managing partner at Jenner & Block in Chicago.

“You have your nose to the stone, you’re working flat out as hard as you can, and it’s difficult to step back and ask those important questions: What is my priority? Where do I want to be in 24, 36 months?” he says.

“That doesn’t mean you don’t react to the moment,” Truax adds. “Every day is filled with new opportunities and new curveballs.”

For smaller firms and solos, there’s always a temptation to do nothing but react to the moment, says Bill Wilson, principal at The Law Offices of Wilson & Wilson and The Center for Estate Planning and Elder Law, based in west suburban LaGrange.

“But then you’re just going to work each day and letting your environment dictate to you how you’re going to manage and work your law firm,” Wilson says. A strategic plan provides “a guidebook where you’re intentionally doing things to get you to a certain point, instead of having clients or other external forces dictate to you where you’re going,” he says.

Firm Size Matters for Law Firm Strategic Planning

Olmstead figures that probably three-quarters of large firms have strategic plans, while mid-sized firms in the 50-attorney range are closer to 50-50, with the likelihood shrinking to 15 percent or less of firms with 10 attorneys and fewer. “Different approaches to strategic planning [for different-sized firms] would be appropriate,” he says. “The challenges and issues are different.”

Big Firms Hire Big Help

In larger firms, top partners typically sit down, figure out where their practice has been growing and where it’s become stagnant, and decide whether and how to recast lines of business that fall into the latter category, Caldwell says. His talks aren’t tailored to large firms because “they have a lot of their own educational systems—they hire some hotshots and bring them in and pay them a lot of money to walk them through the strategy,” he says.

Jenner has its practice broadly divided between litigation and business transactions groups, with several disciplines in each, and at the beginning of each year, each group develops its own strategic plan. Those are then “vetted and cross-examined, and people are being encouraged and challenged in a positive way,” Truax says.

“We ask all the basic questions any business enterprise would be asking. What do we look like today? What are our strengths, weaknesses, opportunities, and threats? Where do we want to be in 12 months, and in five years?”

The plans are revisited throughout the year iteratively, Truax says, which “requires focus and discipline, making sure everybody stays on message. They’re refined throughout the year; we ask people to pull together their plans and test them.”

Breaking Out of Crisis Mode at Small Firms

In smaller firms, there are fewer people involved and fewer decisions to make but also less time, Caldwell says. “People don’t engage with the same discipline because they’re doing work,” he says. “They’re fighting fires, meeting deadlines, getting things filed in court.” Plus, he adds, “They don’t have the resources to hire an expert to do it for them.”

Small firm attorneys need to pick out a time and day, on a regular interval, to pop their heads out and look around, Caldwell says. “It requires the discipline to say, Friday afternoon, from noon to 5, we’re going to sit down, and not be billable, and work through some stuff about what we’re going to be when we grow up,” he says. “Three to five years from now, what are we going to be doing?”

Wilson finds it very important to “disconnect” when he creates his strategic plans, “meaning I get off premises,” he says. “I need to do that where the phone isn’t ringing, or I’m tempted to look at my e-mails.

“I go off-site and hibernate. Then I come back and talk to the people I need to talk to, my bookkeeper, marketing person, other attorneys, to figure out how are we going to get there, and what do we need to do? I start soliciting some advice. I have my own ideas, but they’re more down in the trenches and know a lot of things I don’t know, or forgot, or need to keep in mind.”

Firms should not confuse strategic planning with crisis management, Olmstead says. The latter is more urgent. “In some of the smaller firms, especially, I’ve run across somewhere I’ve advised them, ‘You guys have so many tactical issues going on in the swamp; you’re trying to survive day to day. Until you do some things as far as operations in the short term, maybe you shouldn’t think about strategic planning,'” he says. “It’s hard to think long term when you can’t think through the current day.”

For example, Olmstead has worked with firms who have legal accounting software but need to hire a consultant to pull reports for them. “If they’re not using technology right, and they can’t even pull any basic reports to know how they’re performing financially, they can’t pull together reports as far as what they’re paying their people, if they don’t have a website or some of those basic things – and you’d be surprised how many don’t. If they’ve got 14 or 15 attorneys and don’t have an office manager in place,” they should take care of that first, he says.

The Challenge Intensifies For Solos

Sole practitioners face particular challenges, Olmstead says, because figuring out what they are trying to do and where they want to take their practice – and what steps they need to take to get there – ideally should not be a solo activity. “It’s hard to do a long-range strategic plan by yourself,” he says. “It’s not something you do in one sitting, and you need somebody looking over your shoulder, whether that somebody might be your spouse or your staff person.”

Olmstead worked with a solo practitioner in Iowa who did not realize he was only paying his associate of 10 years a $60,000 salary – or that he himself had only cleared $20,000 the previous year. “He sent me his numbers, and I’m looking at the financials, and they’re terrible,” he says. “When I say I ought to be seeing $300,000 in fee revenue per year, that’s an achievable number, and I’ve got some who are barely doing $100,000. I told one guy, ‘I hate to say this, but your effective rate is $45 per hour.’ It involves internal analysis and benchmarking.”

Implementing and Measuring Strategic Planning Results

Because attorneys tend to enjoy discussion and debate, the process of putting together a law firm strategic plan can seem natural and appealing, Olmstead says. “The bigger challenge is getting them to implement anything. [The plans] go into books, they go on shelves, and very little happens as a result,” he says.

A plan that isn’t implemented is only a list of suggestions. Here’s how to increase the odds that strategic planning will lead to real progress.

Don’t Bite Off too Much

It’s important to keep things manageable, Caldwell says. He cautions smaller firms not to take on more than one or two significant strategic initiatives at one time. “To take on more is simply not tenable because there are not enough horses,” he says.

That goes for the law firm strategic planning document, too, Olmstead adds. “Most of the [plans] I’ve done for 15 and 25 attorney firms and under, particularly even smaller ones, will typically be 10 pages or less,” he says. “To me, if you can keep them briefer and to the point, as opposed to carrying on and making these things too elaborate, they’ve got a much better chance of implementation.”

Define Goals Clearly

“If you’re going to get into family law going forward, you have to have some ideas about what success is going to look like before you launch it,” Caldwell says. “If you’re wanting to grow your corporate law practice, maybe it’s the snagging of three to five major accounts, something that will let you know you’re getting a little bit closer to what the plan had set out for you.”

Make Results Accountable

Be sure to assign responsibility for specific planks of the law firm strategic plan , Caldwell says. “To the extent you can reduce implementation down to metrics that let you know how much progress you’re making, that’s critical,” he says. “And then also, it’s important to get back to people in the organization with feedback about how things are going.”

Olmstead agrees. “I want to know: When are we going to do it, and whose name am I putting in the box, and when is this task going to start,” he says. “It needs to get down to the nitty-gritty, hold people accountable for some of the action items you’re going to get done. Otherwise, it’s just one of those non-billable activities.”

Move Quickly

While a larger firm might take six months from the kickoff meeting to the presentation at the end, smaller businesses can get the law firm strategic plan finished in a month—and that’s probably wise given that they don’t have the professional administrators and other support staff in place to help out, Olmstead says.

“They may only have one shot at doing it,” he says. “They’re not going to have the patience for a time commitment over a period of months. It might have to happen in a retreat setting. You do the pre-work, financial review and analysis, beforehand. And then we lock ourselves up for a day or two in a retreat-type setting and basically work through the whole process.”

Measure Results

To measure law firm strategic planning success financially and otherwise, Jenner uses a range of metrics and compares performance throughout the year against the strategic plan, monthly, biannually, and annually, Truax says. “That will guide us as to whether we’re moving forward with respect to that strategic objective,” he says. “There may be all kinds of reasons why your performance deviates from the plan, but we measure that on an ongoing basis.”

What sort of metrics? Wilson’s strategic plans go out five years and attempt to project for each year the gross revenue, net income before taxes, the number of people he will employ, and numbers of matters he expects to handle. He measures his marketing success in terms of numbers of articles published, newsletters contributed to, seminars delivered, and new contacts and referral sources. “From that, we would also try to back in the number of new clients we would get each year,” he says. “These obviously are all projected goals.”

Wilson considers his plans living documents that he revisits continuously to see how well the law firm’s strategic planning efforts are matching the vision laid out. “If my plan is to increase estate administration and asset planning, and I see we’re putting too much time into real estate, I’m not adhering to my plan,” he says. “The reason it’s important is that it’s a guide for a firm to keep on topic and on goals, so we can always look back and bring it up at a monthly meeting.”

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law firm strategic plan

law firm strategic plan

Steering Law Firm Strategy

Strategy in the law.

Strategy can seem like an amorphous concept. Goals are often easy enough to identify—maybe you want to maximize your firm’s revenue or be in as many cities as possible or attract the top talent—but the strategy (or strateg ies ) needed to get there is the million-dollar question. There are countless ways to understand law firm strategy. The lead article in this issue of The Practice offers one approach by segmenting Am Law 100 law firms based on revenue per lawyer and lawyer head count. But, as the article “ What Else Should We Do? ” explored, there are other ways to define strategy within the legal services market. In this article, however, we look less at the substance—or even the merits—of any particular strategy and instead examine the history of how strategy as a concept developed within law firms and therein the major players driving its development and implementation.

Strategy evolves

Strategy as an explicit concept and worthwhile consideration is rather new to law firms. “For a long time, law firms didn’t need to have a strategy. Or to be very fair, the implicit strategy was: do excellent work,” says David B. Wilkins, a professor of law at Harvard Law School and the faculty director of the school’s Center on the Legal Profession. He continues, “The thinking was that if you do excellent work for your existing clients, not only will those clients continue to come to you, but you’ll get new clients, and if you have enough clients, good lawyers will want to come and join you.” This implicit strategy of doing good work was considered more or less enough to ensure overall firm health, prestige, and profitability. By implication, things such as marketing, business development, communications, professional development, and other operational departments now common at most modern law firms either were not relevant or, in many cases, didn’t exist.

Wilkins notes that this notion—that the only “strategy” a law firm needed was doing good work—persisted well into the 1980s and even the early 1990s. However, as the legal market grew more competitive, things began to change. In this more competitive legal landscape, defining the firm’s goals and establishing a plan to achieve them became increasingly important. At the same time, however, those devising and implementing these strategic processes remained highly circumspect. Moreover, it was largely informal, lacking the sophistication more common in companies and large industries. Wilkins notes, “Initially it was just lawyers working on strategy, but not all the firm’s lawyers. Early law-firm-strategy formation was typically just a small group of partners—the managing partner, maybe some members of the executive committee. It was a relatively informal process, and even then it was often reactive to the competition.”

However, as competition increased, so did the need for explicit and well-crafted strategies. For instance, as in-house counsel became more powerful and began demanding more from their external service providers, it created more competition among law firms and therein the need for differentiation—and this, of course, required strategy. Perhaps the clearest example of an external factor magnifying the need for law firm strategy was the global financial crisis (GFC). “In the years prior to the recession,” notes Laura Empson, professor in the management of professional service firms at Cass Business School, London, and director of its Centre for Professional Service Firms, “there was a massive expansion in a lot of leading law firms at a rate perhaps faster than their ability to properly manage themselves.” This was not so much of a problem when these firms were performing well. As Empson says, “People were not forced to ask the difficult questions around strategy so long as the money was rolling in. Choosing what you don’t do is a key component of strategy.”

Early strategy formation was typically just a small group of partners. It was a relatively informal process, and even then it was often reactive to the competition. David B. Wilkins, faculty director, HLS Center on the Legal Profession

This changed with the GFC. “The recession hit, and suddenly tough decisions had to be made,” says Empson. “These kinds of decisions—being firmwide and time-sensitive—required collective action, which meant power moved away from the relatively autonomous individual partners and coalesced around the people who were ultimately responsible for leading the firm—in theory, the managing and senior partners.” This, Empson explains, led many firms to adopt more-systematic processes for partner performance management, which in turn led to changes in compensation systems and significant partner departures. “The GFC raised big questions around strategy, because if you can no longer make money by doing everything, you have to start making decisions about what to stop doing.” Empson, who is also a senior fellow at the Harvard Law School Center on the Legal Profession, continues:

If you were a senior or managing partner at a firm before the recession, you might have been thinking for years, “I really don’t understand why we’re doing any private client work at all. We’re a corporate law firm—why have we got this private client practice?” And perhaps at the time you thought, “Well, the private client people are actually quite profitable, and everyone likes them, so why not?” But when suddenly that particular practice is no longer looking as profitable, you now have the mandate to make the choices you’ve wanted to make for years. With the GFC, suddenly you are able to do that because, if you close down the private client business, the rest of the partners won’t be banging on your door saying, “Why is so-and-so gone?” They’re going to be sitting in their offices thinking, “I’m so glad it’s not me.”

In the immediate aftermath of the recession, law firms began to grapple with these tough decisions—they were forced to think long and hard about which areas were priorities and which areas were not worth the time and energy of their lawyers. In short, the need for strategy ran amok. In such a hypercompetitive climate, having a small group of senior lawyers pledging to do excellent work was no longer a viable strategy. Wilkins notes, “After the GFC and the failure of many prominent law firms, people got very scared. They saw that if you didn’t have a strategy—or worse yet, if you had a bad strategy of simply growing by leaps and bounds, extensively hiring laterals without any idea of how to integrate them, or trying to be in all markets at all times—then it could really be a disaster.”

Who’s in the room—and what’s their influence?

While the importance of strategy has been amplified over time, this does not answer the question of who is steering strategy—and how. Of course, managing partners and executive committees remain at the center, but the iceberg goes much deeper. Below we review some of the key influencers of law firm strategy formation and implementation—both the major players and their impact.

The partnership.   The general partnership of any law firm is central to law firm strategy. While the old days of strategy—one of merely doing excellent work as outlined by Wilkins above—may be long gone, lawyers, and more specifically partners, and the work they do undeniably remain at the heart of any firm’s wealth and well-being. But a firm’s partners are not just individual lawyers producing work and revenue. They are each part owners, and collectively they are the owner. Motivations, whether for profit, prestige, or some other strategic aim, are important to the firm only insofar as they are important to the partners. As such, a strategy has little hope of taking effect without the support of the general partnership, rendering the partnership’s buy-in critical for any plan’s success. “This means that a law firm’s strategy needs to be responsive not only to clients and competitors but to the demands and actions of internal stakeholders as well,” says Empson. “Law firms have to simultaneously attract and retain clients and attract and retain professional staff—otherwise they have no product or no service to deliver to the client.”

But the story is not that simple, as there is an additional nuance to the relationship between the partnership and firm strategy. Unlike in a traditional public company, in a law firm, in addition to the overall firm strategy, individual partners are forming strategies of their own—for instance, about their clients and their practices. In the best-case scenario, a partner’s strategy is in harmony with the overall firm’s strategy. However, as this is not always the case, there is a potential for conflict between firms and their partners. This complication is amplified by the fact that clients are often tied to their lawyers and not their lawyers’ firms. As discussed in the previous issue of The Practice in “ Why Law Firms Collapse ,” the old mantra of “We hire lawyers, not firms” largely still holds true. Add to this a robust lateral market, and it is clear that the strategies of individual lawyers matter when it comes to the strategy of the firm as a whole.

Empson describes the tension between law firms and their partners as being between individualism and collectivism. On the one hand, there is the entrepreneurial drive of lawyers and the autonomous individual partners who form the partnership, and on the other hand, there are the liabilities and relationships that bind the partners together as well as the leaders chosen by the partners to manage their collective interests. The leaders require buy-in from the individual partners just as the individual partners require a steady ship steered by the leaders.

What does this have to do with law firm strategy? As Empson explains in the book she edited, Managing the Modern Law Firm: New Challenges, New Perspectives , law firms operate differently depending on where this balance is struck. In a firm weighted toward individualism, its lawyers are able to pursue their own strategies with minimal oversight, so a significant part of the law firm’s strategy is formed on a lawyer-by-lawyer basis. It is important to note that this may not represent a lack of a larger strategy but instead could reflect a strategy of allowing partners to operate with minimal constraints. On the other end of that scale, in a firm pulling closer to collectivism, we would see the managing partner and other firm leaders setting more defined strategy by which individual partners must align their efforts. Such a firm’s leadership would have a mandate to enforce its decisions and this would be reinforced by partner consensus.

The complex dynamic between partners and the collective means that enough of the general partnership needs to be onboard with any strategy for it to have any effect. This is not to say that law firm leaders are powerless to drive the agenda, but rather that the general partnership is a key—and complicated—piece of law firm strategy.

The leadership.   The other main character in this story is the law firm’s leadership. Perhaps the easiest answer to who runs strategy at a law firm—that is, strategy for the firm as a whole—is to point to the top of the pyramid: the managing and/or senior partner, the executive committee, and the board (here, the exact titles may differ, but the relevant organizational positioning remains largely the same). But how does the top develop strategy on behalf of the collective interests of the partnership?

The leaders require buy-in from the individual partners just as the individual partners require a steady ship steered by the leaders.

To begin, a law firm’s leadership is rarely defined by just one individual. While there are instances in which a firm’s strategic decision making is reduced to a single person commanding an exceptional level of influence—say, a charismatic founding partner—for most law firms, leadership is best described as what Empson calls a “leadership constellation,” and this constellation ultimately drives law firm strategy. Empson argues that most law firms are not just led by a central leader or leaders; several “orbiting” actors also influence that center. As with the center, the profiles of these circling outside influencers may look different from one firm to the next, but the group most likely includes some combination of practice heads, regional office leaders, non-fee-earning “management professionals” (more on this below), and other key influencers who may not serve a formal management function but whose support is nevertheless exceedingly valuable (e.g., rainmakers). These actors will orbit around the leadership center at various distances, influencing all manner of strategy.

And often, there is not just one person at the very center but two—what Empson calls a “senior leadership dyad.” The degree to which the two roles are distinct or overlapping—and the degree to which the two individuals work well together—will vary from one firm to the next, and there are different ways the dynamic can play out between them, both positive and negative. This could have numerous implications for strategy, whether the two tackle the same issues more or less together or split their focus—a common example would be one concentrating on the day-to-day with the other thinking about the bigger picture. Whichever way the center is structured, it is in many ways the epicenter of strategy, as its support is the sine qua non for any plan to have a chance of success. However, depending on where the balance is struck on the individualism-collectivism spectrum at any given law firm, the power available to the center to implement strategy is constantly in flux.

This alone does not provide a complete answer to who manages law firm strategy, but it offers a perspective on how influence over strategy can shift within a firm. Any number of factors can affect how that influence slides, some of which are internal to the firm—its culture, number of lawyers, number of offices, the spread of those offices around the globe—while others are entirely out of its control—opportunities and setbacks that arise from market forces. These factors will determine not only who is in the room to set strategy but also the ability of the people in that room to implement the strategy it produces.

The management professionals.  Lawyers are no longer the only ones driving law firm strategy. One trend worth watching is the increased voice given to executives and professionals coming from outside the legal profession. Nowhere is this more apparent than with the introduction of C-suite executives with expertise outside of the law. Trained and experienced in fields such as accounting/finance, technology, and management consulting (Figure 1), these executives were often specifically brought in to shore up law firms’ strategic processes. Indeed, prominent players such as Baker McKenzie, Ropes & Gray, and Paul Weiss have all hired a chief strategy officer (CSO). CSO positions are relatively new (Paul Weiss created the position less than two years ago) and are typically tasked with overseeing business development functions and the firm’s positioning in the marketplace. Meanwhile, positions such as chief operating officer (COO), chief financial officer (CFO), and chief marketing officer (CMO), which have been around longer, are increasingly playing roles in firm strategy, having dramatically evolved from outsiders with purely operational focuses to valued members of the firm’s inner circle. “Another recent addition to the law firm strategy team is the chief talent officer (CTO), a position that has become increasingly important since the GFC,” says Bruce Boulware, managing director at Boulware Partners. “People strategy is just as important as practice and client strategy.”

Coming from a 25-year career as a law firm executive director and COO, Boulware has seen the evolution of these professional positions up close. “When I first started in the 1980s, the focus was heavily operational,” he says. “Few firms, if any, in those days were approaching strategy the way we are now. Looking purely at the executive director or COO role, it used to be that most people had predominantly financial backgrounds, but now you have MBAs and people looking at broader areas other than strictly finance who are able to influence both the development and execution of strategy.”

The GFC was a wake-up call for many firms that had not previously put a lot of thought and resources into these positions. After that, Boulware continues, “firms did not necessarily replace this older, more operations-focused position, but if that particular role didn’t expand, they might have added new talent around them instead. And so now some firms have five or six C-levels reporting to a managing partner or chair. It’s evolving, but it’s certainly not one-size-fits-all.” Boulware notes that the most important function of these roles may be in facilitating strategy implementation. “I think this is where the COO or CSO, or whoever it might be, has to play the role in leadership that not just develops the process but also manages it,” Boulware says. “It’s about execution, and that breaks down three ways: sustaining or growing the business strategically, connecting the people to the strategy effectively, and managing the profitability. That’s where these business leaders add real value—by influencing all the moving pieces.”

A chart that indicates the "previous work experience of C. Suite professionals," with 88 percent having not practiced law. These previous jobs have been accounting, finance, health care, technology, advertising, consulting, and manufacturing.

When it comes to influence within the firm, these executives are competing against a long-standing law firm culture in which nonpracticing colleagues are often viewed as “less than,” regardless of how well they perform their duties. For her forthcoming book, Leading Professionals: Power, Politics, and Prima Donnas , Empson interviewed a range of law firm leaders about their thoughts on those lacking legal training—whom she refers to as “management professionals”—about this issue. One partner she spoke with gave voice to this sentiment:

The last time I went to a Management Committee meeting I thought there were too many non-lawyers on it… This is a law firm. Everybody has a part to play but the most important people, unashamedly so, are the lawyers… The major challenges for us are our clients, and the people who know the clients best are the lawyers. Fees? The people who know best are, guess what, the lawyers. Recruitment; why are we losing our lawyers? Well, the people who should know are the lawyers. So, for every essential business decision, the people I believe who know best, or have the most information in this area, are the lawyers.

While this belief in lawyer exceptionalism clearly persists—according to a 2016 ALM survey, only 13 percent of law firm C-suite respondents are voting members of their executive committees—there are signs that that is changing, which gives those law firm strategy experts lacking a J.D. more latitude to do their jobs. In that same ALM survey, 89 percent of respondents agreed with the statement, “The partnership’s respect for my position is high.” Likewise, 86 percent agreed that lawyers treat senior administrative staff with respect. Perhaps most telling, when asked to rate their working relationship with partners on a scale of one to five (with one being “poor” and five being “excellent”), respondents gave an average rating well over four (Figure 2). In other words, the perception among managing professionals seems to be that they are able to do their jobs with the support of their partnerships.

law firm strategic plan

Recent improvements aside, there remain obstacles to management professionals enacting change and influencing strategy. “I think there are two keys to overcoming those obstacles,” says Boulware, who, apart from being a former COO for a number of prominent law firms, currently advises on firm strategy and facilitates discussion groups among legal professionals. “The first key is you have to have a managing partner or a chair who is committed to making strategy work from beginning to end. The second key is developing relationships with the practice leaders and thought leaders who may not be in those practice leadership roles but can influence those folks and others to get onboard and provide leadership.”

Empson echoes these points in her book, outlining a process whereby management professionals transition from outsider to insider at law firms. That process hinges on the management professional’s relationship with the managing partner. Namely, in order to establish themselves within law firms, management professionals must first establish a solid relationship with the managing partner—strong enough to the point where it can withstand the management professional challenging the managing partner when necessary. Once the managing partner’s support has been thus proven, the management professional can leverage that relationship to effect change and, equally as important, expand their network within the firm.

This may well change in time, but for now it clarifies the management professional’s role in strategy: implementer rather than developer, perhaps not the brains that determine strategy so much as the muscle used to get things done according to the strategy already set. However, the progress here should not be overlooked. The growing presence of these management professionals demonstrates that law firms are getting serious—and staying serious—about strategy.

Read the Research

law firm strategic plan

Professional organizations—such as accounting and consulting firms, law firms, and investment banks—are fundamental to the functioning of the global economy. Yet many of the most powerful are notoriously private. This book uncovers the complex, messy, and surprisingly emotional challenges of leading professional organizations—revealing the realities that lies beneath the ‘professional’ surface which these organizations present to the outside world.

Individual professionals—highly educated, highly intelligent, and highly opinionated—are generally reluctant to see themselves as followers and may be equally reluctant to put themselves forward as leaders. They value their autonomy and confer authority on their leaders on a highly contingent basis. How does a professional come to be seen as a leader within a professional organization? How do leaders maintain their position once they have reached the top of their organization? How do they navigate the complex power relationships among their professional colleagues and actually get things done?

Leading Professionals: Power, Politics, and Prima Donnas analyses the complex power dynamics and interpersonal politics that lie at the heart of leadership in professional organizations. It is based on Laura Empson’s scholarly research into the world’s leading professional organizations across a range of sectors, including interviews with over 500 senior professionals in 16 countries. It draws on the latest organizational and leadership theory to analyse in detail exactly how professionals come together to create ‘leadership’. It identifies how change happens within professional organizations and explains why their leaders so often fail.

Published by Oxford University Press, September 2017

The consultants.  In addition to management professionals, law firms are increasingly turning to outside consultants—both individuals with specific industry or subject-area expertise as well as more established full-service firms—to help define their overall strategy. “Consultants help firms get focused when it comes to strategy,” says Boulware. “Do they have a strategy? What is it? And is it right given the people and practices they have? If a firm doesn’t already have its strategy in place, there’s a whole lot of analytics that go into the front end of this.”

Take the example of the major Indian law firm Amarchand Mangaldas, consistently ranked as the top corporate firm in the country before it split into two separate firms. Around the time of the GFC, the family-owned firm was trying to bring more-diverse owners into the fold to establish a more professional reputation and improve prospects for growth. After a few unsuccessful attempts, Amarchand Mangaldas hired Boston Consulting Group (BCG) to help revamp its strategy to better align with its goals. BCG put together a report recommending specific milestones that the firm could work toward, such as reducing the family’s equity holding to a specific percentage over a five-year span. These goals were not strategies themselves, but starting points around which the firm could build comprehensive strategies. It was then up to Amarchand Mangaldas to act on the advice of BCG.

Firms often look to consultants in this way for help conceptualizing the right strategy. “So if you’ve never really done effective strategic planning, outside consultants might help get that organized and help you develop the process and figure out what it’s going to take,” Boulware continues. “But as almost anybody will say about consultants, you have to have a good idea of what you want to use them for, and you have to provide direction in order to get the most out of them.”

This was difficult in the early days of law firm strategy because often law firm leaders did not know what they wanted from consultants. To be fair, consultants often did not have a thorough understanding of the idiosyncrasies of law firms and the larger legal market. “Most law firms found that process disappointing because consulting firms like McKinsey or BCG didn’t really understand much about the legal market,” says Wilkins, “and frankly the law firms didn’t understand much about consulting firms and how strategy worked, so it was not a very good fit.” This, however, is no longer the case, as many law firms will now at some point reach out to a consultant to advise on strategy. And while the role they play and the advice they offer varies, law firm consultants are often the first gear for the drivers of strategy, presenting leadership with enough information and insight to put strategies in motion.

Strategy for the future

The important thing to remember is that no two law firms are alike—in their culture, structure, capacities, goals, leadership personalities, and so on. Some might rely on consultants throughout the entire arc of one or all of their strategies, while others lean on those experts they’ve brought into the firm from the business world. Still others might use shades of both or neither. At the same time, in any law firm partnership, there will be that individualism-collectivism tension Empson describes determining where this process falls on its partners’ list of priorities—and thus how much of a mandate the firm’s leadership has to act through it. Meanwhile, management professionals, while not all powerful, have clearly gained a seat at the strategy table within law firms.

What you are left with is a complex, constantly shifting picture of how law firm strategy is managed. In general terms, far from the smoke-filled rooms of old, we are moving toward a more business-minded approach to law firm strategy ushered in by experts who are not themselves products of the law firm. No longer just symptoms of competition among firms—“If the other guys have chief strategy officers, then we need one, too!”—these individuals are proving their worth in translating strategies from plans to results. Their influence, however, is given only as much weight as the partnership allows. The question going forward will be whether market forces and other trends persuade partnerships to allow these outsiders to take the wheel in steering law firm strategy.

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How To Create A Strategic Plan For A Law Firm.

June 8, 2023 by Rohin Pujari

In today’s competitive and dynamic legal landscape, strategic planning plays a vital role in the long-term success of a law firm. A well-crafted strategic plan acts as a roadmap, guiding the decision-making process, resource allocation, and goal-setting of a firm. In this article, we will explore the key elements that constitute an effective strategic plan for your law firm.

By understanding these essential components, your law firm can navigate the challenges, leverage opportunities, and position the business for sustainable growth. For an effective plan, use this strategic plan template for guidance.

Define the Firm’s Vision and Mission

The first step to creating a strategic plan for a law firm is defining its vision and mission. The­ vision represents the­ firm’s desired future state­ and long-term aspirations, giving clear direction to all stake­holders involved. Meanwhile­, the mission statement outline­s the purpose of the firm and its core­ values, emphasizing how it provides value­ to clients and society as a whole. When crafting the vision and mission, involve key stakeholders, including partners, associates, and support staff, to ensure alignment and ownership.

Conduct a Comprehensive SWOT Analysis

The next essential step is conducting a thorough SWOT analysis. This strategic e­valuation requires identifying the­ strengths, weaknesse­s, opportunities, and threats of the organization. By obje­ctively assessing internal factors, such as expertise, re­putation, and operational efficiency, along with e­xternal factors, including market trends, compe­titors, and regulatory changes, the firm can gain valuable insights. This review allows organizations to capitalize­ on their strengths while addre­ssing potential weaknesse­s and risks. Additionally, companies can recognize e­merging opportunities and proactively mitigate­ impending threats by conducting this analysis.

Set Clear Goals and Objectives

Setting clear and measurable goals and objectives is a critical step in creating a law firm’s strategic plan. These goals need to align with the firm’s vision and mission and be realistic, specific, and time-bound. Whether the objective is to increase revenue, expand into new practice areas, or enhance client satisfaction, clarity and specificity are essential. Moreover, accompany these goals with key performance indicators (KPIs) that enable the firm to track progress and evaluate the effectiveness of strategic initiatives.

Identify Target Clients and Markets

The next crucial step of strategic planning for a law firm is identifying target clients and markets. This helps define the ideal client profile­ based on factors, such as industry, size, location, and le­gal needs. By understanding the target market segments, the firm can accordingly tailor its services, marketing efforts, and business development strategies. This focused approach not only e­nhances client acquisition, but also leads to de­eper client re­lationships and helps differentiate­ the firm from competitors.

Develop a Resource Allocation Strategy

The e­ffectiveness of a strategic plan re­lies on properly allocating the re­sources of the firm. This involves evaluating the firm’s current resource capabilities and aligning them with the identified goals and priorities. Smart decisions can include hiring skilled profe­ssionals, investing in top-notch technological infrastructure, or re­allocating resources from underpe­rforming areas. Regular monitoring and adjustment of resource allocation e­nsure flexibility when face­d with changing market dynamics, maintaining an agile and responsive­ business.

Implement a Risk Management Framework

Mitigating risks is a critical consideration in a law firm’s strategic plan. A robust risk manage­ment framework offers a syste­matic approach to identify and manage potential risks that could harm the­ firm’s reputation, financial stability, or operational efficie­ncy. To achieve this, establish clear policies and proce­dures, conduct regular risk assessme­nts, and implement strategie­s to minimize exposure to le­gal, ethical, and financial risks. Proactive risk management enhances the firm’s credibility, builds client trust, and safeguards its long-term viability.

Monitor and Review Progress

The final step of creating a strategic plan is a implementing mechanism for monitoring and reviewing progress. Regularly tracking the implementation of the strategic initiatives allows the firm to gauge its performance and make necessary adjustments. This involves setting up key milestones, establishing metrics to measure success, and conducting periodic evaluations. By regularly reviewing progress, the firm can identify areas of improvement, celebrate achievements, and ensure that the strategic plan remains relevant and aligned with the firm’s evolving goals and external factors.

Involve and Engage Stakeholders

Throughout the strategic planning process, involve and engage key stakeholders. This includes partners, associates, support staff, and even clients. By soliciting input and feedback from stakeholders, the firm can tap into diverse perspectives and gain a deeper understanding of internal and external dynamics. Involving stakeholders also fosters a sense of ownership and commitment to the strategic plan, enhancing its implementation and overall effectiveness.

A well-crafted strategic plan is a powerful tool that empowers law firms to navigate challenges, leverage opportunities, and drive sustainable growth. By following these key steps, your law firm can adapt to the ever-changing legal landscape, achieve its objectives, and thrive in a competitive industry.

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Crafting a Comprehensive Strategic Plan for Your Law Firm

  • Lauren Osborne
  • December 27, 2023

A strategic plan serves as a roadmap for law firms, offering direction, defining goals, and aligning efforts toward success. This guide aims to assist law firms—regardless of size or specialty—in creating a strategic plan tailored to their needs.

1. Company Vision and Mission:

  • Vision Statement: Define the firm’s long-term aspirations and purpose. It should inspire and guide the firm towards a specific future.
  • Mission Statement: Clarify the firm’s fundamental purpose, values, and primary objectives. It acts as a compass for decision-making and actions.

2. Strategic Priorities:

  • Identify and prioritize key focus areas for the firm’s growth and development. This could involve expanding into new practice areas, enhancing client services, or increasing market presence.
  • Competitive Analysis: Understand and analyze competitors to identify market gaps and opportunities. This informs differentiation strategies.

3. Goals and Objectives:

  • SMART Goals: Set specific, measurable, achievable, relevant, and time-bound goals. For instance, increasing client base by a certain percentage within a year or expanding services in a specialized legal area.
  • Client Experience: Emphasize understanding and improving client satisfaction throughout the firm’s objectives.

4. Key Initiatives and Action Plans:

  • Define specific initiatives, projects, or strategies to achieve objectives. Incorporate technology and innovation as drivers of efficiency and differentiation.
  • Financial Considerations: Include budgeting and financial forecasting to ensure the feasibility and sustainability of the plan.

5. Evaluation and Adjustment:

  • Establish a system for monitoring progress using key metrics. Regularly review and adapt the plan based on market changes or unforeseen challenges.
  • Encourage a culture of innovation and flexibility to adapt to evolving legal landscapes.

Conclusion: A strategic plan is fundamental for law firms, providing a clear direction, defining goals, and aligning efforts toward sustainable growth. Tailoring plans based on market analysis, technology integration, client-centric approaches, and financial prudence ensures adaptability and success.

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law firm strategic plan

Securing Your Practice’s Future: Why Law Firm Strategic Planning Matters for Small Law Firms

Mark Haddad   General Manager / Small Law Firm business / Thomson Reuters

4 Jun 2019 · 5 minute read

Small law firm lawyers do a tremendous job of running their practice but may be reluctant business owners who don't see the importance of strategic planning

Despite being generally grouped together, small law firms are of such a diverse nature and character that it is difficult to paint them with a broad brush. There is essentially no uniformity in terms of how they choose to structure their practices, what practice areas they decide to enter, the clients they choose to serve, or how they run their businesses. But this last category does start to show some signs of commonality that is worthy of deeper discussion.

Generally, small law firm lawyers do a tremendous job of developing and running their practice. After all, this is why you went to law school, to be a practicing lawyer who helps clients solve their legal problems.

But it’s almost equally universal that small law lawyers are reluctant business owners. A great many of us don’t have business backgrounds, and very few of us went to law school with the intent of starting our own small business. We went to law school to build a law practice to help other people lead their businesses and support their entrepreneurial spirit and enterprise. That’s what we’re good at.

But small law lawyers are increasingly coming to the realization that they are, indeed, business owners, and that they need to improve their business management skillset. And growing, disruptive technologies and ever-evolving dynamics in business are reinforcing the importance of that need by the day.

Small law lawyers are increasingly coming to the realization that they are, indeed, business owners, and that they need to improve their business management skillset.

That is why we are launching a long-term effort to help small law firms grow their business acumen, improve their business planning skills, and identify and improve core competencies that are essential to securing their practice’s future. This post represents the first in a series that will highlight important skills for leaders of small law firms, and how those skills can be incorporated into plans for a prosperous practice.

The first step towards building a future is making a plan for that future. While they won’t often admit it openly, many lawyers will agree that they struggle when it comes to developing and implementing a strategic plan for their law firms. Larger law firms have the luxury of some economies of scale which allow them to hire business professionals for the express purpose of running the firm. This trend in operating teams is not new, with larger firms conducting their business this way for nearly two decades.

Small law firms, on the other hand, generally do not have the infrastructure or resources to hire an MBA whose sole job is to watch out for the firm’s business operations. This job falls on the “owner-operators” of the firm.

It is essential that these owners recognize that a solid business plan is central to the overall health of the firm and is necessary to sustained business growth. And unless that approach is truly well-planned, it will not create a healthy and profitable business over the long term.

There are capabilities and core competencies that are necessary levers to creating sustained financial health for small law firms. For the purposes of beginning this conversation, there are essentially three categories of core competencies that I would like to highlight:

  • Strategic management of firm resources, both capital and human;
  • Effective client relationship management; and
  • Business development with a clear return-on-investment (ROI).

Each of these categories deserves their own in-depth discussion and will be the subjects of additional posts in the coming weeks and months.

Regardless of which core competency your firm wants to focus on, however, you must do things with a reasonable amount of effectiveness. This is the foundation of strategic planning.

First, you must set goals and allocate resources toward accomplishing them. Your goals should be phased. Ask yourself: What do I need to accomplish in the next 90 days? By the end of the year? Next year? And what lies beyond that?

Second, within each phase, ask what it will take to achieve these goals. What will it cost? And what are the dependencies? That is, what do we have to achieve first for our next goal to be successful?

You must be realistic with what you’re trying to achieve. The corporate world loves to talk about SMART goals. These are goals that are S pecific, M easurable, A ttainable, R elevant, and T imely. These could be great “watch words” for lawyers as well.

Many lawyers may contend that they simply don’t have time to implement a strategic plan. To that I would offer the following: Practicing with passion can be an essential part of a fulfilling law practice, but to make the practice that you’re passionate about a sustainable part of your future, you must practice passionately in a profitable way.

Your practice needs to be structured in a way that will last for the long term. And that kind of structure requires forward thinking. To face the long-term realities of running a business, dealing with change, and confronting competition, you need to have a plan.

Follow this series in the coming weeks and months as we discuss in greater detail what skills and competencies you should consider including in your strategic plan, as well as advice around how to bring those plans into measurable action within your own firm.

For a look into some of the topics we’ll be discussing, download a copy of the most recent State of U.S. Small Law firms report.
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  • Legal Practice Management
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Strategic Business Planning for Law Firms

law firm strategic plan

Emerging technology is driving the evolution of today’s business landscape faster than ever. From AI-driven chatbots to cutting-edge digital marketing tools, many new technologies deserve consideration. This evolution holds as true for law firms as any other business. To stay competitive, law firms — especially smaller ones — must employ strategic business planning for survival. Learn how your firm can use strategic business planning to embrace emerging technology and stay ahead of the curve.

What is a Strategic Business Plan?

A smart business plan assesses your law firm’s internal and external environment. It establishes achievable goals and targets. It lays out implementable strategies to reach those goals on a realistic timeline. 

Your law firm can create an actionable business plan by objectively assessing current trends, challenges, and areas to adapt. A well-developed strategic business plan can propel your law firm’s future achievements and act as a roadmap to success.

How Law Firms Can Succeed in Today’s Legal Services Landscape 

As you prepare for the future, some  emerging trends  to keep your eye on this year include:

  • Law firm hiring remains tight, reflecting lowered revenue and client demand.
  • Compensation stagnates.
  • Gen Z lawyers enter the legal field. Their focus on improved work-life balance and job-hopping habits could trigger a culture change.
  • Pressure remains to meet high billable hours, although some firms now credit hours in leadership, mentorship, and firm culture.
  • Attorneys embrace hybrid and remote work schedules while prioritizing in-person conferences.
  • Some firms encourage alternative career progression outside partnership tracks, allowing flexibility for attorneys with different priorities.
  • Artificial intelligence has arrived, and firms are integrating AI in various manners, from marketing to practice management.

These trends simultaneously create new challenges and opportunities for law firms wise enough to recognize them. However, law firm leaders who fail to respond to critical  market changes  and pivot effectively could be left behind by the changing times.

One of the  biggest challenges  facing law firms is increased competition. Law firms that adapt to these realities focus on separating themselves from their competition by embracing change and adopting new technologies and innovations. However, limited resources can complicate matters. It is imperative to review budget distribution and reallocate resources appropriately when priorities shift.

Law firms  can succeed  by prioritizing their digital presence while balancing the demands of effective business management. Firms must evolve to meet clients’ changing needs while leveraging new technologies to streamline operations and attract new business.

Creating Your Law Firm’s Winning Business Plan

A successful business plan must set clear, achievable goals. Once you have thoroughly assessed the current trends and challenges relevant to your firm, your next job is defining success. Success could mean increasing revenue, expanding your client base, or boosting your reputation. 

The next steps include:

  • Mapping:  Set clear goals and  SMART objectives .
  • Market Analysis:  Understand your client base and competition and integrate these facts into your marketing strategies.
  • Marketing Strategies:  Design and implement client acquisition strategies utilizing appropriate technology.
  • Technology Integration:  Stay abreast of emerging  legal technology  that can enhance your law firm’s efficiency and grant you a competitive edge.
  • Risk Management and Compliance:  Stay updated with emerging compliance issues impacting your law firm and develop strategies to mitigate risks and adhere to regulatory standards.
  • Financial Planning:  Budget wisely and consider financial projections.

As you set your objectives, diversify your short- and long-term strategies to ensure your business plan meets your needs today and in the future.

Future-Forward: Long-Term Strategies

You can implement various strategies for long-term results, including:

  • Vision-setting for long-term growth
  • Leadership development
  • Client relationship management

By implementing immediate objectives and those focused on healthy future goals, you can ensure your strategic business plan can guide your law firm through the necessary stages, moving you toward long-term success.

Navigating Change

Of course, even the best-laid plans are subject to change. Stay agile and aware of technological developments. Tips for keeping your law firm nimble and adaptable include:

  • Embrace the digital transformation
  • Keep abreast of and adapt to  regulatory changes  and legal reform
  • Encourage strategic continued learning and development within your law firm

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Strategic planning for law firms - the key steps

Strategic planning for law firms - the key steps to getting it right.

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ILFS regularly act as a trusted advisor in the formation and implementation of strategic and organisational initiatives facing our law firm clients. We help Partners and management take a step back to look at the bigger picture, consider the competitive dynamics, develop their strategy and grow their businesses internationally.

Despite this and regularly preaching to our clients the importance of carrying out a Strategic Review of their business, we – like many of our clients - found that we had been too busy doing the day-to-day job to carry out a root and branch review of our own business.

Last year, we therefore decided to conduct our own (rather overdue) Strategic Review.

Self-appraisal – an uncomfortable experience

A strategic review starts with an evaluation of your own business. This is not an easy task. It can be very hard knowing what to cover in that evaluation (what should we include, leave out, how deep should it go?) and to do it impartially. No one like critiquing themselves, especially if they know it may uncover issues outside their comfort zone that they would rather not deal with. Of course, as well as looking at the internal strengths and weaknesses of your firm, you also need to consider the external threats and opportunities and how you are going to mitigate or exploit those.

And once you have completed a review, the next step is how do you turn your findings into a plan to drive ‘change’ forward within your firm that allows for real growth? If a strategic plan is just consigned to a document that is never read or implemented it will never deliver meaningful change.

Key steps in a Strategic Review

So, having run and participated in numerous strategic review and planning initiatives for law firms all over the world, here are the top pointers we think are essential to getting the most out of valuable Partner time and ensuring strategic improvements can be identified and implemented.

1. Establishing a clear strategy and developing a plan for achieving it is best accomplished using a structured process. Set up a framework before you start so everyone knows what is expected of them and you have all the raw information you need on which to base decisions.

2. A strategic review can cover numerous law firm functions including business development, human resources, compensation, technology, pricing, financial management and leadership. Trying to address all of these areas at once is too broad and leaves little time for implementation. Decide on your immediate priorities and set realistic objectives.

3. Get outside specialist help when devising your strategic plan. An impartial third party can address difficult issues candidly, challenge pre-conceived bias and apathy, keep discussions on track and share the benefit of their experience of what works and what doesn’t.

4. Don’t be tempted to just copy the competition. Differentiation is key. The strategic planning process must be customised to your firm, its culture and stage of development.

5. Set goals that are both ambitious and pragmatic: Your strategic plan should have a meaningful payoff, while remaining grounded in a realistic understanding of what can be accomplished.

6. Don’t underestimate the resources needed to drive strategic improvement. You need to appraise your firms’ existing resources (skill sets, available time etc) to decide if you have the in-house capacity and capability to put your plan into action.

7. Invest time planning your implementation process and don’t delay putting it into place, otherwise your strategy will lose focus. Immediate successes are critical to building momentum.

8. At every stage in the development of the strategic plan you should consider how you will track it. Your strategic goals should be clear, time based and measurable. Quarterly reviews are a good time to see whether you have over or under-estimated what you have accomplished and if necessary make adjustments.

9. Remember that changes in the legal market – and in client expectations – are constant. Plans made only a few years ago may no longer be relevant in today’s dynamic and ultra-competitive environment so keep your strategy flexible and current.

Time to practice what we preach - ILFS Strategic Review

At ILFS we face a lot of the same issues that our clients do - we are mainly lawyers, we work (deliberately) in a similar way to law firms, use similar technology and need to drive our business internationally.

We spoke to our clients, looked at the work we had been doing over the last 12 years and considered the issues we had faced along the way. Whilst we had a clearly defined client base ‘independent firms that wish to develop international business’ - we realised we weren’t being as clear when it came to our service offerings.

Our main conclusion was that we weren’t effectively leveraging our extensive experience in international business and the type of advisory work we provide to clients on a daily basis. In addition to our core directory support service we found that, as a trusted advisor, we gave clients extensive support in a wide range of areas that were not mentioned on our website or presented as part of our offering to new or existing clients.

We categorised these as follows:

  • Independent Review of Marketing and Business Development Plans
  • Ongoing Support & Help Desk
  • Relationship Building Programs / Roadshows
  • Advice on Networks and Associations
  • Media Planning & Buying (which we did previously offer)
  • Drafting Legal Award Submissions
  • Conference Planning & Support
  • Content & Distribution Strategy

We also realised that although each of these services was consistent with our main objective of helping independent firms develop international business, there was no ‘one size fits all’ solution. Some firms would want holistic support, other just assistance in 1 or 2 areas. In addition, we recognised that we could add greatest value to clients that we worked with on a regular basis.

Pulling all of these issues together we created the International Business Builder (IBB) service – a formalised structure we can use to clearly articulate the breadth and depth of services we have been providing to clients for years.

The IBB looks holistically at all the main ways independent law firms could help grow their international business. By packaging the IBB service we can give our clients a much better deal – in return for a modest retainer they can benefit from free or heavily discounted services.

To read more about the International Business Builder service click here

Contact us to see how we can help you grow your law firm:

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law firm strategic plan

Law Firm Strategic Plan Template

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Running a successful law firm requires careful planning and strategic thinking. That's why ClickUp's Law Firm Strategic Plan Template is a must-have for any legal team looking to stay ahead of the game.

With the Law Firm Strategic Plan Template, you can:

  • Define your firm's long-term vision and objectives
  • Identify key areas for growth and development, such as expanding practice areas or acquiring new clients
  • Streamline operational processes to increase efficiency and profitability
  • Track progress and measure success against your strategic goals

Whether you're a small boutique firm or a large corporate practice, ClickUp's Law Firm Strategic Plan Template has everything you need to create a roadmap for success. Get started today and take your firm to new heights!

Benefits of Law Firm Strategic Plan Template

A strategic plan is essential for any law firm looking to achieve long-term success. With the Law Firm Strategic Plan Template, you can:

  • Set clear goals and objectives that align with your firm's vision and values
  • Identify growth opportunities and develop strategies to expand your client base and practice areas
  • Improve operational efficiency by streamlining processes and implementing technology solutions
  • Enhance client satisfaction and retention through targeted business development initiatives
  • Stay ahead of the competition by staying informed about industry trends and adapting your strategies accordingly.

Main Elements of Law Firm Strategic Plan Template

When it comes to strategic planning for your law firm, ClickUp's Law Firm Strategic Plan template has got you covered with its comprehensive features:

  • Custom Statuses: Keep track of your plan's progress with 5 different statuses including Cancelled, Complete, In Progress, On Hold, and To Do.
  • Custom Fields: Add 8 custom fields such as Duration Days, Impact, Progress, Ease of Implementation, and more to capture important details and monitor the execution of your strategic plan.
  • Custom Views: Choose from 6 different views including Progress, Gantt, Workload, Timeline, Initiatives, and Getting Started Guide to visualize your plan, track tasks, and stay organized.
  • Project Management: Utilize ClickUp's powerful project management capabilities to assign team members, set due dates, and collaborate seamlessly to achieve your strategic goals.

How to Use Strategic Plan for Law Firm

If you're a law firm looking to create a strategic plan to guide your organization's growth and success, follow these steps to effectively use the Law Firm Strategic Plan Template in ClickUp:

1. Assess your current situation

Before diving into strategic planning, it's important to understand where your law firm currently stands. Evaluate your firm's strengths, weaknesses, opportunities, and threats (SWOT analysis). Identify your target market, competitor landscape, and any external factors that may impact your firm's success.

Use Goals in ClickUp to document your SWOT analysis and identify key areas for improvement.

2. Define your vision and mission

Establish a clear vision for your law firm's future and define your mission statement. Your vision should outline what you aspire to achieve in the long-term, while your mission statement communicates your firm's purpose and values.

Create a Doc in ClickUp to articulate your vision and mission statement.

3. Set strategic goals

Identify the strategic goals that will help you achieve your vision and mission. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART goals). Consider areas such as client acquisition and retention, practice area expansion, technology adoption, and professional development.

Use the Gantt chart in ClickUp to visualize your strategic goals and set timelines for their achievement.

4. Develop action plans

Break down each strategic goal into actionable steps and develop detailed action plans. Assign responsibilities, set deadlines, and allocate resources to ensure that each action step is implemented effectively. Consider utilizing recurring tasks and Automations in ClickUp to streamline and automate your action plans.

Use tasks in ClickUp to create action plans for each strategic goal and assign them to the responsible team members.

5. Monitor progress and adapt

Regularly track the progress of your strategic plan and monitor key performance indicators (KPIs) to ensure that you're on track to achieving your goals. Review your plan periodically, gather feedback from stakeholders, and make necessary adjustments as circumstances change.

Use Dashboards in ClickUp to monitor and visualize your firm's progress towards strategic goals and make data-driven decisions.

By following these steps and utilizing the Law Firm Strategic Plan Template in ClickUp, you can effectively align your firm's efforts, drive growth, and achieve long-term success in the competitive legal industry.

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Get Started with ClickUp’s Law Firm Strategic Plan Template

Law firm management teams can use this Law Firm Strategic Plan Template to help guide their firm's goals and initiatives, ensuring alignment and progress towards growth and profitability.

First, hit “Add Template” to sign up for ClickUp and add the template to your Workspace. Make sure you designate which Space or location in your Workspace you’d like this template applied.

Next, invite relevant members or guests to your Workspace to start collaborating.

Now you can take advantage of the full potential of this template to create a comprehensive strategic plan:

  • Use the Progress View to track the progress of each initiative and ensure alignment with the overall strategic plan
  • The Gantt View will help you visualize and manage the timeline and dependencies of each initiative
  • Utilize the Workload View to allocate resources and manage team capacity for each initiative
  • The Timeline View will provide a high-level overview of the strategic plan, highlighting key milestones and deadlines
  • Use the Initiatives View to organize and prioritize the different strategic initiatives
  • The Getting Started Guide View will provide a step-by-step guide on how to use the template effectively
  • Organize initiatives into five different statuses: Cancelled, Complete, In Progress, On Hold, To Do, to track their progress
  • Update statuses as initiatives progress to keep stakeholders informed of their status
  • Monitor and analyze initiatives to ensure maximum progress and success

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5 Steps to Successful Strategic Planning for Law Firms

law firm strategic plan

Strategic planning is vital for law firms. It enables them to identify their current and long-term goals and objectives, as well as the resources needed to achieve them. It also helps firms develop a well-thought out plan for how to allocate resources and make decisions that will help the firm succeed.

Strategic planning also helps law firms to identify potential risks and develop strategies to mitigate them. It allows them to assess their current market position and develop strategies to improve it. By using strategic planning, law firms can develop and implement plans that will help them achieve their goals and improve their operations.

Here are five steps to successful strategic planning for law firms:

1. Set Clear Objective for Your Firm

A law firm strategic plan should define the goals and objectives that the firm wants to achieve over both the short and long term. It should outline the specific actions the firm will take to achieve these objectives.  For example, a law firm strategic plan objective could be to increase market share by 10% within the next 12 months. This could be achieved by launching a targeted marketing campaign, increasing the firm's presence at legal industry events, and developing relationships with new potential clients. 

2. Assess Your Firm’s Current Situation

A strategic plan should include an analysis of the firm's current position, including its market share, competitive landscape, areas of expertise, and financial performance.

A competitive analysis of a law firm may involve looking at the firm's current market position, their competitors, and the legal services they provide. This analysis could include an examination of the firm's size, the number of attorneys they employ, their areas of expertise, the pricing models they use, the technologies they use, and their marketing strategies.

Additionally, the analysis could examine the firm's online presence, their customer reviews, and the awards they have won. By analyzing the firm's strengths and weaknesses in comparison to its competitors, the law firm can develop strategies to improve its competitive position in the market.

3. Identify Strengths and Weaknesses

A strategic plan should also identify the firm's internal strengths and weaknesses, including its personnel, operational efficiency, and financial resources.

For example, a law firm can perform a SWOT analysis . A SWOT analysis is a strategic planning tool used to identify a company's strengths, weaknesses, opportunities, and threats. It helps organizations to identify areas where they can improve and capitalize on competitive advantages. Through this analysis, law firms can determine which resources are currently available and which could be used to strengthen their competitive position. Furthermore, the SWOT analysis helps law firms to understand the legal landscape and develop strategies to capitalize on opportunities and mitigate threats.

An example of a SWOT analysis for a law firm can look like this: 

  • Strengths: Experienced team of attorneys, strong reputation in the legal industry, extensive network of contacts. 
  • Weaknesses: Limited financial resources, lack of specialized expertise, weak online presence. 
  • Opportunities: Growing demand for legal services, potential for expanding into new markets, potential for developing new services and areas of expertise. 
  • Threats: Increasing competition from larger firms, changing legal landscape, potential for new regulations.

4. Develop Strategies

A plan should set out the strategies the firm will use to achieve its objectives. This should include a marketing plan, a plan for developing new services or areas of expertise, and a plan for capitalizing on opportunities.

One example of a law firm strategy to help achieve objectives is focusing on developing an online presence. This could include creating a website, launching a blog, and utilizing social media to promote the firm. Additionally, the firm could create a business development strategy that nurtures relationships with potential clients through networking events, seminars, and conferences. Finally, the firm can look into developing new services, alternative fee arrangements, and areas of expertise to meet the needs of potential clients. 

5. Monitor Progress

The firm should review and evaluate its progress on a regular basis and make adjustments to its strategies as needed.

Law firms can monitor the progress of their strategic plan and initiatives by setting up regular reviews and evaluations to track the progress of the plan and adjust strategies as needed. They can also use a variety of metrics to measure success , such as market share, client satisfaction, and financial performance. Additionally, they can solicit feedback from clients and other stakeholders to ensure that the plan is meeting their needs.

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Why You Need a Strategic Plan to Guide Your Law Firm

law firm strategic plan

As a legal professional, you understand the importance of having systems and processes in place to ensure that the firm is running smoothly. However, there is one element that often gets overlooked: having a strategic plan. A strategic plan can help your law firm stay on track and reach its goals by providing direction and focus. Here’s why it’s important.   

Defining your Goals

  Your first step in creating a strategic plan should be to identify your firm’s long-term goals and objectives. This process involves looking at what you want to achieve over the next 3-5 years and setting targets for yourself in terms of revenue, profitability, client satisfaction, etc. By clearly defining these goals upfront, you will be able to create an actionable plan for reaching them.     

Creating an action plan  

Once you have defined your goals, it’s time to create an action plan for achieving them. This means taking into account any resources or personnel needed as well as any obstacles that could stand in the way of success. For example, if your goal is to increase profits by 10%, then your action plan should include steps such as increasing prices or expanding services where feasible. It should also include contingencies for overcoming potential challenges such as increased competition or budget constraints.     

monitoring performance 

The last step in creating a strategic plan is monitoring performance against your goals and objectives on an ongoing basis. This will help you identify areas where improvement is needed so that corrective measures can be taken promptly. It also allows you to adjust course if necessary due to external factors such as changes in market conditions or customer demands. By regularly tracking performance against targets, you can ensure that your firm remains on track toward meeting its long-term objectives.    

building buy-in from all stakeholders

Having a solid strategic plan can also help build buy-in from all stakeholders within the firm, including lawyers, staff, clients, and investors. This buy-in helps create an atmosphere of collaboration and accountability that can help drive results. For example, if everyone understands what the goal is, then they are more likely to work together toward achieving it. Additionally, building buy-in from stakeholders can lead to better client relationships as clients become more engaged with your mission and strategy.   

Creating a strategic plan is key when it comes to guiding your law firm toward success. It helps define the firm’s long-term goals and provides direction for achieving them through an actionable plan with contingencies for overcoming challenges along the way. Regular monitoring of performance against targets is essential for ensuring that progress remains on track and corrective measures can be taken when necessary; this makes having a solidified strategy even more important! With all these elements in place, you can rest assured knowing that your law firm has the best chance at success!   

If you’re ready to create your firm's strategic plan, contact us now to help you get started!   

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Strategic Planning: Not Just for Big Law Firms

Question: We hear about big law firms and their strategic planning processes, but what about smaller firms and solos? What process do you recommend? Do we need to hire a consultant?

Peter Giuliani

1. What is our vision/mission? What do we aspire to be? What is our reason for existence?

2. What three or four things do we have to excel at to achieve that vision and mission? These usually involve areas like client development, service development, attracting and retaining talent, financing the practice and so on.

3. What specific strategies will we undertake to build excellence in the areas we just identified? For example: Grow an associate staff, find a merger partner, hire a lateral who can take over the firm, become expert in XYZ area of law.

4. What action steps need to be taken to implement the strategies? Who will take the action steps, when will the work be completed and what metrics or milestones can we apply to each action step?

This is a highly condensed version of the thought process. The actual process needs input from the owners of the firm, associates and, possibly, some key administrative people. It should also be based on input from clients and other outsiders who are familiar with the marketplace and the law firm’s competitive standing in that marketplace.

With smaller firms, the planning process is more streamlined because fewer people need to be involved and the internal analyses are much simpler. That said, everything hinges on execution. Even the best plan in the world is useless if nobody has the guts to implement it and execute on hard decisions. This is the big danger in smaller firms, because they often don’t have the management structure in place to stay on top of execution. Sometimes the job of the consultant is to guide the planning process and provide the necessary nagging to make sure the plan is executed.

Peter A. Giuliani is a Partner at Smock Law Firm Consultants. His law firm management experience spans more than 43 years, both as a management consultant to law firms and other professional service firms and as Executive Director of Cummings & Lockwood, a 180-lawyer law firm based in Stamford, Connecticut. 

John Remsen Jr.

But change is all around the legal industry. Increased competition. More demanding clients. Sweeping changes in technology. Law firms must adapt or they risk extinction. Every law firm needs a plan, regardless of firm size and practice mix. In fact, a solid, realistic plan is even more important for solos and smaller law firms than for their larger brethren.

In a strategic plan, you look out five years into the future. Are you all on the same page as to where the ship’s headed? Are you achieving buy-in and support from future owners and key support staff? Are you taking action steps to get where you want to go?

A law firm’s strategic plan should be simple, realistic and achievable. Focus attention on just three meaningful priorities at a time. If you can’t fit it on a 3×5 index card, it’s too long. Set deadlines. Establish accountability. Then, make it a regular practice to step back and update the plan from time to time, based on your progress and on the continued evolution of your marketplace.

Here’s a good collection of resources  on the topic from the Managing Partner Forum.

John Remsen, Jr. is President and CEO of The Managing Partner Forum , the country’s premiere resource for managing partners and law firm leaders. He is also President of TheRemsenGroup, a leading consulting firm for smaller and midsize law firms. Follow him @JohnRemsen .

Questions About Management?

Not every law firm has a full-time administrator or professional management to guide them.  Send us your questions via email , or use the comment section below, and we’ll pass them on to the experts at the Association of Legal Administrators. Watch for the best ones here in “Ask the Experts.”

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The Law Firm Strategic Plan – How to improve growth & profits per partner

by Chris Catapano, CFA, CPA | Law Firm Strategy

Law firms participate in a maturing market.  Growth is becoming more difficult to achieve. Corporate clients keep more legal matters in house. The emergence of “virtual” law firms is now a reality. The migration of talent from law firms that fail to provide a high quality culture and incentive-based compensation is a reality facing many firms. We are experiencing the early innings of change. A high quality strategic plan can be your law firm’s road map to success in a changing marketplace.

The legal services industry is markedly different from almost any conceivable professional service. Nevertheless, law firms are not immune to the invisible hand of economics. While the financial crisis certainly impacted a large number of law firms, even more disruption will take place over the next decade as a result of evolving industry dynamics.

How Companies Grow

Outside of the world of law firms, we are often asked what enables certain companies to grow faster than their peers. Typically, high growth companies have three things in common:

  • A product or service that has a distinct competitive advantage
  • High barriers to entry
  • A lower cost of capital than their competitors

How Law Firms Grow

The legal services industry is no different. The same economic principles apply, with one distinct nuance: all of the growth drivers are (in-part) driven by profits per partner.

Regardless of a law firm’s size, profits per partner will be a significant factor in determining whether the firm will be able to achieve above-average growth.

If you have higher profits per partner than your competitors, your law firm can:

  • Attract higher caliber partners
  • Attract more productive associates
  • Spend more money incentivizing your lawyers to achieve the firm’s productivity and financial goals
  • Invest in systems, tools, and solutions that make your law firm more efficient, liquid, and productive

This has always been the case. Law firms that have superior financial performance have been able offer better compensation, attract higher caliber talent, and grow at rates higher than the industry average.

But the industry landscape is changing. Growth is slowing. There are more law firms with which to compete. Technology and innovative law firm strategy have allowed a select group of competitors to enjoy a more favorable cost structure.

Industry Implications:

Industry change will take time, partially because law firms have limited access to the capital markets. The pace of change will be dictated by two things:

  • The rate at which industry-level growth slows
  • The degree to which law firms continue to use PPP as a vehicle to attract partner-level talent

What does this mean for my law firm?

Not all law firms desire to grow their business at high rates. Nonetheless, law firms that employ strategies to consistently achieve top-line growth will cause an industry-level rift that will leave stagnant law firms at an impasse. They will be left with limited opportunities to achieve revenue and PPP growth and/or will have difficulties attracting partner and associate-level talent.

Stagnant law firms could face a difficult future. Talent will slowly gravitate to firms that offer an attractive culture and compensation package. Strategies that drive PPP provide both of these elements.

If such firms are not readily available, top-level talent will continue to establish new law firms – further disrupting the industry. Either way, stagnant law firms will ultimately be faced with declining performance & compensation.

Profits per partner – the key to law firm growth

Law firm rankings have cast a proverbial spotlight on profits per partner. However, industry dynamics and competitive strategy are immune from rankings. If industry-level growth slows, law firms (both large and small), with higher profits per partner will grow faster than those with below-average PPP metrics.

Improving PPP has little to do with cost cutting. Cost cuts should be limited to firms with unsustainable expense ratios. Law firms that consistently grow at above-average rates will be those who continuously reinvest a portion of their free cash flow back into their businesses.

Law firms that invest a portion of their free cash flow into endeavors that will improve profits per partner over the long-term increase their chances of enjoying higher revenue growth, a positive and productive culture, and higher profits per partner.

Develop A Law Firm Strategic Plan

Successful law firms have a strategic plan that is unique to their business. Develop a strategic plan that addresses industry dynamics, your local market, and your individual business. The key to a successful law firm strategic plan is to:

  • Define your law firm’s growth strategy
  • Define your expected profits per partner over the short & long term
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law firm strategic plan

Enterprise risk management (ERM): An overview

February 20, 2024 · 12 minute read

Establish resilient enterprise risk management (ERM) with strategic planning, comprehensive risk identification, and effective communication, ensuring business sustainability and growth.

This blog is part of this series.

law firm strategic plan

Not long ago, retailer Bed Bath & Beyond was a Fortune 500 company. In 2023, it filed for Chapter 11 bankruptcy, closing its last store at the end of July. The reasons for its closure are numerous and complex. But it’s clear that it didn’t or couldn’t plan for all the dangers that brought down its once-booming business model.

As events such as the pandemic, the decline of many economies, and rapidly rising interest rates have demonstrated, even solid businesses can be disrupted. Companies of all kinds face numerous risks that could damage their operations, their reputation, their profitability, and even their viability. This makes the implementation of an enterprise risk management (ERM) initiative absolutely crucial. The goal of ERM is to help businesses make informed decisions about risk in order to operate more efficiently and profitably. But to be effective, an ERM initiative needs careful planning and enterprise-wide participation.

What is enterprise risk management?

Enterprise risk management (ERM) is a systematic approach to identifying risks associated with running a business, assessing their likelihood and potential impact, and developing strategies to manage and mitigate them. Most businesses have some kind of risk management program in place. But in “traditional” risk management, the management is typically left in the hands of separate divisions or departments. By contrast, ERM is a holistic approach, requiring communication and coordination between business units to identify and manage risks across the entire organization. Many companies have established an ERM team that includes stakeholders from several key departments.

This is because of the risks that enterprise risk management (ERM) addresses across departmental boundaries. These include strategic risks, which involve activities related to achieving business objectives. They also include financial risks that need to be managed such as debt levels, cash flow shortfalls, or investments that could harm the business’s bottom line. New technologies, notably generative AI technologies such as ChatGPT, could disrupt many companies’ business models and open them up to possible compliance challenges. Insufficient cybersecurity can cause crucial company or customer data to fall into the hands of cybercriminals. There are legal risks that would need to be managed such as lawsuits involving contracts or other business agreements. Then there are the risks associated with compliance–not meeting regulatory requirements such as Sarbanes-Oxley regarding financial reporting, for instance.

Enterprise risk management (ERM) also includes operational risk management (ORM) , which focuses specifically on identifying, assessing, and managing risks related to the organization’s day-to-day operations. These can include risks associated with technology, regulatory compliance, and onboarding vendors . Like ERM, ORM seeks to reduce risks. However, the risks ORM addresses are unintentional risks, such as employees who accidentally open up company data systems to cybercriminals. Besides managing all types of risk, ERM can also help an organization to optimize certain intentional strategic risks —those that could bring in new customers, new product lines, and new ways to reduce expenses and improve performance.

In addition, enterprise risk management (ERM) incorporates the use of key performance indicators , or KRIs, with metrics that track risk assessment performance. It also typically includes the development of a “risk register” that outlines potential risks associated with certain activities or operations.

There are numerous reasons why enterprise risk management (ERM) is essential. Most notably, it allows organizations to be proactive in identifying and monitoring potential internal and external risks rather than simply reacting to them after they occur. It also establishes protocols for mitigating those risks that an enterprise simply can’t avoid.

Another key reason a business should establish an ERM program is to enhance its ability to operate more efficiently and profitably. By raising the profile of the potential dangers a company faces, ERM protocols can help inform strategic decision-making and implementation while also minimizing losses from potentially damaging risks.

By openly and transparently sharing information about risk and mitigation, a company-wide risk management initiative can keep all employees and other stakeholders aware of risks and risk management protocols. This can be beneficial when employees interact with customers about potential risks. That in turn can reassure all stakeholders about a company’s resilience and durability.

Steps to the enterprise risk management process

Crafting a successful enterprise risk management (ERM) initiative requires careful thought and rigorous execution. That thinking informs the following ERM components, which were developed by the Committee of Sponsoring Organizations (COSO), a private-sector group that helps organizations provide guidance on internal control, risk management , and fraud deterrence:

Setting goals

This involves defining the organization’s goals and objectives and aligning them with its tolerance for risk. A business should recognize that long-range strategic plans are fraught with risks that could translate into opportunities–or dangers.

Internal workflows

Internal factors that influence the organization’s risk management include its management structure, governance, and company culture. These factors determine the enterprise’s risk appetite and what kinds of risks it needs to manage. While it is senior management (and, in many organizations, the company’s board of directors) that typically identifies what risks require managing, many organizations also engage employee input.

Identifying risks

This involves identifying risks, defined as events or situations, that could affect the organization’s ability to achieve its objectives. These impacts can be either beneficial or harmful to the company’s future operations. An ERM program should identify high-risk events that could be particularly damaging. An example of such an event might be the current backup at the Panama Canal, which is snarling numerous companies’ supply chains.

Assessing risk

In this step, a company determines how likely the risks it has identified risks are likely to occur. It also prioritizes them based on how significant an impact they might have. The COSA ERM framework suggests that companies assess both the percent change of occurrence and the dollar impact of a potential risk. In addition, COSA advises that an organization assess not only the direct risk (COVID-19 social distancing) but also residual risks (employees resisting returning to the office). There are many types of risk assessments depending on the industry, but overall, risk assessment tools have their benefits .

Responding to risk

The organization then develops and implements strategies for managing the risks it has identified. One strategy is avoidance. An example would be shedding a business line where the potential dangers outweigh any benefits. A second strategy is maintaining that business line while establishing protocols to reduce any potential damage. A third option is acceptance. A company may choose this route if it determines the possibility of a risk event occurring is low and the costs of reducing potential negative impacts are too high.

Controlling activities

Also known as internal controls, these activities involve implementing policies and procedures to mitigate the identified risks and monitoring their effectiveness. Control activities can be classified as preventative (preventing or mitigating a risk event) or detective (recognizing the risk event and responding appropriately).

Monitoring risk activity

This involves continuously monitoring the organization’s risk management processes and controls, and making adjustments as needed. A company may wish to contract with an external consultant to evaluate its risk management practices. Whether the monitoring is conducted externally or internally, it should determine how well the ERM process is working, and whether the company is leaving itself vulnerable to any risk despite the processes and policies in place.

Communicating information

This step ensures that the organization’s risk management processes and results are communicated to stakeholders. Those within the business overseeing its ERM initiative should gather data and design metrics regarding the company’s risks and how they’re being managed. Sharing this information with senior management and affected employees can ensure their involvement in any needed mitigation.

Benefits and challenges to enterprise risk management

What are the benefits of enterprise risk management.

A rigorous, thoughtfully developed enterprise risk management (ERM) program can help avoid financial losses, reputational damage, compliance failures, and legal liability. It also improves business decision-making because it provides more complete information on the risks a company faces. As a result, an ERM program can strengthen corporate governance and oversight and reduce instances of fraud.

Enterprise risk management (ERM) also boosts internal communication and interdepartmental cooperation. The regular risk reports that a firm’s ERM team delivers to upper management include a list or “matrix” of the risks, how these risks are being prepared for or mitigated, and how the risks are being prioritized. This information is crucial for management decision-making and guidance regarding risk response and preparation.

An enterprise risk management (ERM) program can help a company’s operations and profitability in numerous ways. It can uncover areas where a company is vulnerable to theft or embezzlement. It can be useful in discovering markets and product areas to enter or to avoid. ERM also can strengthen a business’s supply chain by identifying areas where that chain might be weak. An example would be the recent semiconductor shortage, which slowed production for many companies. All this can result in better management of strategic risks that could lead to new opportunities (such as acquisitions and new products) or dangers (such as new competitors and disruptive technologies).

What are the challenges of enterprise risk management?

Despite all the advantages of enterprise risk management (ERM), getting a program established is by no means a slam dunk. For most companies, ERM requires culture, process, or system changes that can be costly, time-consuming, and disruptive. ERM can be particularly costly to businesses that have limited resources. As a result, it may be difficult for supporters of an effective ERM program to get buy-in from upper management.

Company leaders may believe that the investments of time, talent, technology, and capital needed to implement an enterprise risk management (ERM) initiative don’t pencil out, and that those costs exceed the potential benefits. They may argue that it’s difficult to project a program’s effectiveness, including a legal project management tool , because it involves assessing the probability and impact of risk events that may or may not occur. Establishing metrics is often one of the most significant challenges an ERM initiative wrestles with. In addition, ERM also could result in organizations becoming reliant on particular digital technology tools, which could be a risk in itself.

If a company does go forward with establishing an enterprise risk management (ERM) program, there are other risks it will need to anticipate. It makes perfect sense that the risks an enterprise will seek to manage will be those that the company has already faced or is currently facing. But the most potentially dangerous risks are those that it hasn’t encountered. The recent pandemic is a particularly notable example. How many companies not only anticipated the pandemic but also had metrics in place to measure its effect on the business’s customers, employees, and other stakeholders? And how could the potential costs of mitigating the risks associated with the coronavirus have been determined?

Best practices for enterprise risk management

Companies need to consider both the benefits and challenges of enterprise risk management as they craft their own enterprise risk management (ERM) program. This can help them determine the best practices they should follow.

The components of enterprise risk management (ERM) discussed earlier reflect many of the best practices of an effective ERM initiative. Clearly, such a program needs to identify, assess, and prioritize all risks an enterprise might face. It needs to develop consistent action plans that eliminate or reduce the most significant risks, as well as processes to continuously monitor risk and risk-related metrics–and then enforce risk management policies.

For this to succeed, a company should also develop a culture that includes open communication about risk and risk management throughout the organization. It should also assign risk management responsibilities to appropriate employees. And it should determine whether there are ways to automate risk management processes.

Final words

In an unpredictable, fast-changing business environment, an enterprise risk management (ERM) initiative is essential. An ERM program includes assessment, prioritizing, and mitigation of any potential risk to a company’s future health and success. And wherever necessary, it solicits the participation and input of all stakeholders—senior management, board of directors, employees, and customers.

The benefits of a well-crafted risk management strategy include thorough regulatory compliance, a clearer sense of how strategic risks can help or hurt a business, and improved decision-making about operations, opportunities, and future planning. It’s not stated too strongly to say that an enterprise risk management program could mean the difference between maintaining a successful business—or going out of business entirely.

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