Law firm planning: mysteries of the unknown
By Thomas Berman, Principal, Berman & Associates
This is the first of a two-part article on law firm planning.
My readers will undoubtedly have heard the old story reported so long ago about a western journalist who once asked Mahatma Gandhi what he thought of western civilisation. Perhaps apocryphally, Ghandi is said to have replied: “I think it’s a good idea”.
That comment came to my mind when, a few weeks ago, a friend of mine, the senior partner in a 30-plus lawyer defence practice, was talking about planning his retirement. Well, really, he wasn’t. He was discussing the firm’s just-signed building lease. My friend is 60 years old and the firm’s lease is for another five years (taking him to 65).
Signing the lease meant that he committed to practice law for another five years and that the firm would therefore continue for at least that long. His plan for retirement was the firm’s long-term plan for everything else. “When the lease expires,” he said, “I’m outta here”.
I often feel like that reporter when discussing long-term planning with law firms.
However unfortunately, very often the term of the building lease is in fact the extent of (long term) planning within a law firm. In fact, for smaller law firms particularly, building leases and tenancy issues are by far the single most common metric utilised by partners and shareholders to try to determine their future in the practice.
Many partners/shareholders measure everything from buy-ins to partnership shares to partnership tenure by the same yardstick. My friend was not the exception but represented the rule when it comes to law firm planning. Some who read this column may know of exceptions, but they are relatively few and far between.
Larger firms, of course, may be more likely to create five or ten-year plans to try to determine what the appropriate course should be in efforts at hiring, marketing, branch office development and capital outlay.
Even a larger firm may be entirely absent of a plan for the future, however. In my experience, firms of well over 100 lawyers may be just as bereft of planning methods as smaller firms.
In fact, this is one of those arenas where law firms, from a purely business perspective, have not come even close to exercising the discipline and/or strategic development of an ordinary business of a comparable size or revenue.
Law firms are for the most part still mostly managed by attorneys themselves and few of those individuals, in a management role, have any business training. In 2011, law firms have, for the most part, still flown (been managed) by the ‘seats of their pants’.
Few people in business or law could have divined the economic devastation visited upon the world economy in 2008. Those with planning in place, however, were more likely to ride out the bad days that existed (may still exist) for many an entity. That’s not necessarily because of the actual long-term plans that were in place but because of the planning mechanism which had been developed in order to put the plans in place from the beginning.
Enacting a plan
The organised and responsible approach required to enact a five-year plan encompasses so much of the knowledge base of the ordinary operation of a law firm that once a thorough-going understanding is made of the many elements involved in the firm’s operation, the creation of the actual plan is almost ‘writ large’.
In fact, the organisational knowledge-base, used properly and with intelligence, will itself generally bespeak the options for the firm to utilise; the plan itself will unfold from that very understanding. It will almost write itself.
One of the most useful metrics designed to separate a successful and ongoing entity from others is the principals’ ability to think ahead. For law firms, that has not generally been on the agenda.
The remainder of 2011 will undoubtedly bring a large number of changes, including partnership interests, lawyer population, expansion, contraction, new practice areas and so forth. It wouldn’t hurt to start the next year with planning for these inevitable changes.
The second part of this article will outline the basics for a law firm to utilise in developing a workable and pragmatic long-term plan within the scope of any organisation, regardless of size.
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