Why Broadening Input is Key to Effective Law Firm Strategy
Per previous posts, strategy is the single most determinative factor in law firms’ success or failure. People, culture, operations and marketing can seldom compensate for weak or dysfunctional strategy. So who’s responsible for formulation?
Effective strategy is an ongoing process of analysis and exploration. Nevertheless, it's frequently rolled up into static, five-year planning cycles and cascaded down from top management. This assumes 1) that the medium-term future is predictable, and 2) that intended and realised strategy are the same. Both are bad assumptions.
The pace and enormity of ways change can impact firms suggests that, if only for extra resource, strategy shouldn’t fall exclusively to top management. But there are better reasons to broaden input.
Strategy rests on imperfect, ambiguous and sometimes contradictory information. None of us thinks alike, but diversity is an asset. Suitably managed, the broader the range of perspectives, the more information is brought to the table. Therefore the quality of discussion and outcome are proportionally better.
Groupthink among substantially homogenous management teams is real, and should be acknowledged and guarded against. There is growing evidence of what Steven Pinker calls ‘my-side bias', in which tribal allegiances exert so powerful an influence that individuals become wholly impervious to facts and data. Instead, and unconsciously, they defer to group ideology.
Likewise, senior management should acknowledge reluctance to report bad news up the management chain, and remain (at least inwardly) sceptical. At the same time, managers become inevitably more internally focused, and their awareness of the external environment can, without due cultivation, diminish. Both dynamics presage poor outcomes. Diverse input, and critical self-reflection can be a valuable counterbalance.
So, how should law firms allocate responsibility for strategy?
Compare a law firm's fat-bottomed org chart with that of practically any other organisation, and the problems with a wholly top-down approach to strategy are glaring. The view that law firms comprise tens or perhaps hundreds of micro-businesses holds true for strategy, and muddies conventional delineations of responsibility.
Strategy, ultimately, concerns two questions:
That means first landing in industries or practice areas that offer attractive rates of profit, and secondly, establishing competitive advantage over rivals. Easy, right? The former is 'corporate' strategy, the latter is 'competitive' or 'business' strategy, but both, obviously, influence the other.
Much of corporate strategy falls to the management committee and comprises the headline-grabbing stuff: diversification, acquisitions, new ventures, new offices, vertical integration, and the prioritisation of resources within the firm. This answers the question ‘where?’ and should be governed by practice/industry attractiveness (posts on this topic to follow).
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The 'how' (competitive strategy) is for departmental heads and individual partners. Top management should have set a direction: capex priorities, growth modes – organic, M&A, alliances – but the rest, individually and collectively, is for you and your team. That's right: competitive strategy is a team sport.
But for law firms, it's rarely so simple. Corporate strategy-type questions about industry/practice area attractiveness are also matter for individual partners. And therefore the firmwide analysis that should be executed by top management, should also be replicated at partner level.
If, for example, I'm in intellectual property. Do I specialise in litigation or non-contentious work? Patents, copyright, or trade marks? If I decide that patent litigation is my thing, do I specialise further into, say, medical devices, or telecoms patents? To what degree do I specialise or generalise? Should I be in IP at all? Most partners are guided by a sense of where the money is, but long-term superior performance necessitates answering broader questions about competitive rivalry, industry structure, and the ability of third parties to diminish profitable growth. This is the essence of strategic thinking.
The benefits of cultivating more and better strategic thinkers extend not only downwards into practice areas, but upwards to senior management. Partnership strategy negotiations are notoriously contentious, too often pitting those who can’t properly articulate and justify strategy against those without the tools to evaluate proposals.
If your firm’s strategy discussions boil down to a contest of wills, or victory through force of personality, they needn't. Giving lawyers the tools to formulate and evaluate strategy from first principles is an easily resolvable source of friction with unmatched knock-on performance benefits.
Follow along to become a #strategiclegalthinker
Next post:
Can you plan and realise strategy, or does it simply emerge only after you've done every other dumb thing imaginable? Can you do both? What does strategy analysis look like? What tools are available?
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