Would you take a trip on a luxurious Ocean Liner which was complete in all respects except for the steering equipment or the rudder? Of course not, too much of a risk yet many firms are prepared to risk their business lives by conducting their practices without one, no strategy!
Strategy
Why a strategy is so important is because it will define who you are, why you are in business and what your ambitions are. The partners will have confirmed their commitment to the strategy and the role of the managing partner (see below) before it is implemented. It is worthless exercise if all those concerned, who for the purposes of this note I will call partners, do not agree with it and give it whole hearted support.
Above all, it must be realistic and affordable.
Partners
The partners are a firm’s main asset and it is essential to know their likes and dislikes, personal strengths and weaknesses and ambitions and these have to be built into any strategic plan. For example, any governing document such as a partnership or shareholders agreement or similar should contain provisions dealing with retirement, goodwill and repayment of capital account as well as conduct of the business, profit sharing etc. all vital information.
The whole purpose of introducing the strategy will become pointless if partners are able to ignore or countermand the agreed policy and thus undermine or subvert the project for matters the partners have already discussed and agreed.
Managing Partner (MP)
A managing partner will be responsible for the devising and implementation of the strategy once it has been agreed? How will a managing partner be appointed? This will not be the partner who has been in the firm the longest nor the partner who has some time on his hands but the person most suited to the role. It is essential that the person appointed will be able to take tough decisions when necessary and have the time to manage the business. (Remember two of the ten mandatory principles of the SRA start with the words, “Run your business….”).
The MP will probably have to give up some client facing work, which may be a major issue when considering the appointment.
Senior Partner (Optional)
This role is suitable for a figurehead like a president or constitutional monarch and someone who is well known and respected in the profession.
The Strategic Plan
The strategy must not be overlong or too complex because if it is a number of partners will just not read it or if they do they will “file” it after reading 3 pages!
The strategy must be written in a way that reflects the fact that it has been carefully thought out, is realistic and has the approval of the partners. It must not be over ambitious, vague or unrealistic in any way and above all must be affordable.
A general practice can often include a collection of practice areas that make no sense strategically and are likely to be unprofitable. Therefore, concentrate on those areas where the partners have greatest expertise, where they have their best reputation and make the greatest profit. Seek a reciprocal arrangement with another firm which may be weak in areas where your firm is strong and vice versa.
SWOT Analysis
To aid in the formulation of the strategic plan, it will be important to know the strengths and weaknesses of the practice?
A good way to find out is to complete a SWOT analysis, Strengths, Weaknesses, Opportunities and Threats.
All relevant information about the firm must be referred to viz: partners, individual skills, ambitions, retirement strategy, clients, competition, support staff, fee earners, business development, marketing and any other matter a partner may wish to add. There should be no limits and this will help shape the firm for the future.
It will be noted, the list includes retirement strategy and therefore the general strategy must include succession planning. Often a firm’s clients will reflect the ages of the partners. A good strategy will include a business development programme and marketing.
Partners should feel they are members of a team and a climate of partners running their portfolio of clients of the practice their way, almost like a separate practice, will inevitably lead to problems. Ensure more than one partner is involved with a client, it will help maintain the client relationship and encourage the collegiate feeling.
Financial section
This is a very important section of the strategy as funding is key to the performance of any firm and the implementation of any strategy.
If the financial affairs of the business are not kept under control, the firm could find itself under pressure from its bankers and have difficulty paying its debts. This in turn will have an adverse effect on professional indemnity premiums let alone the SRA with its financial stability tests.
Being successful can still lead to collapse as cash flow is vital. The firm has to fund expansion which is why a regular, timely, supply of good quality financial informationis vital to the health of any practice to ensure there is enough cash in the business. Cash flow is not profit.
Reporting
As part of the overall review of the firm incorporated into the strategy, the MP will report to the partners on the structure of the firm and whether it reflects the current need. If necessary, outside expert advice should be taken on the advantages and disadvantages of partnership, LLP or limited company. The strategy may be to take the firm into other areas and so an Alternative Business Structure (ABS) may be on the agenda. Once again, outside advice may be necessary.
Conclusion
Managing a law practice today is much more like running a corporate business than ever before and it must be managed on similar lines.
You can contact Eric Golding at eric.golding@sdgpracticesupport.co.uk
Connect with Eric Golding on;
LinkedIn uk.linkedin.com/in/ericgolding
and on twitter: @sdg_41
Eric Golding FCA
Stanley Davis Practice Support Services Ltd
41 Chalton Street, London, NW1 1JD.
Phone: 020 7554 2222; Mobile 07854 755935
Stanley Davis Practice Support Blog 
From Martin Pollins MD at BIZEZIA
I agree with everything you say. One big problem though is this: in many firms, even if the partners were to perform at their best (and make no mistakes), the final result would still be very ordinary.
The trick is to get ordinary people to produce extraordinary results. It can only be achieved by either recruiting the best people in the market or by using technology.
Getting the best people will be too costly and will take too long for most firms.
Using the best available technology is probably the best way forward but it is often too advanced (“over my head stuff”) for many partners.
A good example of applying technology and great techniques can be found at Seyfarth Shaw, a giant US law firm operating out of Chicago. They devised a method that uses the principles learned in Six Sigma and Lean manufacturing in something they call Seyfarth Lean. You can read about it at: http://www.seyfarth.com/seyfarthlean-background
I love the Marketing Philosophy penned by Mike Markkula, the marketing and finance man recruited by Steve Jobs to help prepare a business plan for Apple. Markkula made the point that you should never start a company with the goal of getting rich. But today, most accountants and lawyers focus on their potential earnings first and their long-term goals second. Markkula put his principles in a one-page paper titled “The Apple Marketing Philosophy” that stressed three points. The first was empathy, an intimate connection with the feelings of the customer: “We will truly understand their needs better than any other company.” The second was focus: “In order to do a good job of those things that we decide to do, we must eliminate all of the unimportant opportunities.” The third and equally important principle, somewhat badly and confusingly named, was impute. It emphasised that people form an opinion about a company or product based on the signals that it conveys.
If a law firm or accountancy practice started with these principles, a lot of other sensible strategic issues would fall into place.
I hope my comments are helpful.