Comes December, come familiar rituals. Every year law firms have to approve a budget for the next year, promote new partners and, every couple of years elect new management and discuss partner compensation. Part of this annual recurring ‘circus’ is requiring partners and practice groups to produce a business plan. This may sound like a sensible thing to do, but it is not.
I do not recall ever having met a single partner that is looking forward to producing a business plan. Here’s what typically happens: the Managing Partner, the Practice Group Leader or Business Development sends out a template for the business plan, to be completed before a certain date. Partners have no clue how to deal with this and it is about the busiest time of the year, so they just leave it. When, after several reminders, the deadline approaches, they ask their assistant to pull up the business plan from the year before, make a few alterations and submit. A few weeks later, all the plans are discussed. Lawyers are highly skilled in discussing things that have been put on paper, so the discussion of the plan is navigated without any hick-ups or consequences. Shortly after everyone gets back to work as usual as if nothing has happened. A useless ritual performed once again and home-free until the next year.
Just like they did it back in the days in the USSR
Remember the Soviet Plan Economy? Under Joseph Stalin's close supervision, a complex system of planning arrangements had developed since the introduction of the first five-year plan in 1928. For every enterprise, planning ministries defined the mix of economic inputs (e.g. labor and raw materials), a schedule for completion, all wholesale prices and almost all retail prices. The planning process was based around material balances—balancing economic inputs with planned output targets for the planning period. On the whole, the plans were overoptimistic, and plagued by falsified reporting. In short: in theory plan-economy may have sounded like a great idea, but in the real world it did not go well.
Every time I see a law firm requiring it’s partners to produce a business plan, I cannot help thinking of the Soviet Plan Economy. You will have to admit that the similarities are striking: a pre-defined mix of economic input (billable hours) and retail prices (rates), with planned output targets for the planning period and the resulting plans being over-optimistic.
Requiring partners to produce a business plan, provides a rational false sense of control. Businesses are supposed to make business plans, that’s what we are taught. Law firms are businesses and should also make business plans. Never mind that these plans are almost invariably a mix of wishful thinking and a clear lack of market intelligence. Just like in the good old Soviet times, partners are required to put on paper how they are going to produce let’s say 2.5 million in revenue and what new clients and markets they are going to develop. Sound remarkably similar to “We are going to produce 10 million tons of potatoes that we are going to sell in South East Asia”. For the Soviets we know, this notoriously did not work well, so how has this been working for you so far?
So if not a business plan, what should you do?
Let’s start with highlighting that your firm should have a strategy. A strategy that clearly outlines where the firm wants to be after a period of five years. The strategy should describe at a minimum, what type of clients, what markets and what type of matters the firm is looking for. Preferably the strategy should also set clear targets and milestones against which progress can be monitored. This strategy is valid for let’s say a period of five years and should not be changed in the meantime unless a true Black Swan event occurs (which usually is not the case).
Once you have a viable and realistic strategy, everything else is execution. Execution is a permanent process and not an annual ritual. This indicates that instead of the annual business plan, it makes more sense to work with quarterly targets for every partner and every practice group of which the execution is permanently monitored and evaluated. Execution and evaluation should be a joint orchestrated effort and not individual actions that could well be scattered all over the place.
Law firms do not need business plans, they need a strategy and a permanent framework for execution. This execution needs to be supported by data. This would be accurate and up-to-date data on progress, and current data on external economic and business developments. Every month partners should sit together in small groups and discuss where they are and what should be done and/or could be improved in the month to come. At the end of every quarter there is a formal meeting with all the partners to take stock and define goals for the next quarter.
Business development originates in the strategy. It focuses on the execution needed to reach the strategic goals. It is a permanent process that needs to be deeply embedded in the day-to-day workflow of the partners. The execution should be closely monitored and supported by internal and external data. No other method will help you reach your goals and targets, certainly not copy-pasted business plans done once a year. That is a pointless habit, that you should stop repeating as of today.
If you need help with setting this up, or with your strategy or the execution thereof, drop us a note, we are happy to assist!