Law Firm Planning: Mysteries of the Unknown

My readers will undoubtedly have heard and enjoyed the old story reported so long ago about a western journalist who once asked Mahatma Gandhi, what he thought of western civilization. Perhaps apocryphally, he 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, who is the senior partner in a thirty lawyer plus 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 sixty years old and the firm’s lease is for another five years (taking him to sixty five). 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 my lawyer clients.

However unfortunate, very often the term of the law firm’s 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 utilized by partners and shareholders to try and determine their futures in the practice. Many partners/shareholders measure everything from buy-ins to partnership shares to partnership tenure by the same yard/metre stick. My friend was not the exception but represented the “rule” when it comes to law firm planning.

Some who may 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 and determine what the appropriate course should be in efforts at hiring, marketing, branch office development and capital outlay to mention only a few of the issues which should be considered. Even a larger firm may be entirely absent a plan for the future, however. Our experiences, encompassing over twenty years of consultations with over seventeen hundred law firms in the U.S., Canada and the U.K. tell us that firms of well over a hundred lawyers (and more) may be just as bereft of planning methods as smaller firm environments. 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 are for the most part still flown (managed), as they used to say, “by the seat of their pants”.

There are exceptions, however, and they are always a pleasure with which to work. The distinctions are enormous. Few people in business or law (or consulting) 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 (after all, how does one plan for a complete absence of real estate transactions?) but because of the planning mechanism which had been developed in order to put the plans in place from the beginning. The organized 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 organizational knowledge-base, used properly and with intelligence, will itself generally bespeak the options for the firm to utilize; 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 on-going entity from others is the principals’ ability to think ahead. For law firms that has not generally been on the agenda. 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 in the year 2011 with planning for these inevitable changes.   The second part of this article will outline the basics for a law firm to utilize in developing a workable and pragmatic long term plan within the scope of any organization regardless of size.

Copyright 2011 BERMAN & ASSOCIATES