The challenges of strategic planning in law firms

This article shares recent experiences from Price Bailey’s consulting team on the challenges of strategic planning in law firms. Price Bailey act for around 150 law firms and legal professionals; we have seen dramatic change in the sector and witnessed examples of great success, failure and treading water.

The economic model of most law firms is to sell time. This means that, from an income perspective, the upside is limited by capacity and price, yet the downside is nearly unlimited. Organising and guiding a firm with the right strategy, in changing times, is therefore pivotal.

Strategic planning is effectively the process of agreeing and committing to a plan that focuses on the material decisions that drive an organisation, in an agreed direction. In people businesses with multiple owners this is inherently political as material decisions are often difficult to make unless forced. It requires a careful balance of insight, objectivity, commerciality, medium term thinking and, crucially, engagement and support from key people. Our experience is that many professional firms struggle to access these characteristics and transform them into plans that are delivered and work.

In helping law firms develop and deliver strategies for growth, some common challenges, questions and limitations have emerged. These are anonymously shared below:

Why am I an equity partner (to run a firm or because I enjoy law)?

This is a fascinating, highly individual, common question. However, aggregating the answer to this question from the partner team is crucial. As a partnership team goes through the various stages of growth, the needs of the business evolve and, a tipping point emerges when more than one person needs to focus on the business. The consequences of mismanaging the aggregate answers to this question can be dramatic as this topic is, from a firm’s perspective, fundamentally about sustainability beyond the individual partner. This has implications for succession, the capital account and the tactics used to grow.

The limit of saying “our fees come from relationships:”

Most law firms we meet say fee income is driven by relationships. As the markets shift and a new generation of clients (and fee earners) emerge, this traditional strategy needs to evolve in order to avoid becoming a Curate’s egg. Challenges around accessing consistent profitable work, appropriate leverage and transferring relationships are rarely actively managed by partner teams. Perhaps more worryingly, our experience is that many associates / junior partners look, to their senior colleagues, to be not as skilled in ploughing and reaping their own relationships.

The reality for many sectors of law is that the dynamics of the market have shifted and, what will work in the future may be different to what worked in the past. That does not mean the answer is switch to digital marketing – relationships are still key – but how those relationships are gathered and cultivated to make commercial sense has evolved and this needs to be understood and actively managed by firms.

What really drives profit?

In any firm some partners understand what drives profitability, and others take the view that, “all you need to do is put time on the clock and bill it.”

Working with partner teams to help form a unified understanding on what really drives profitability is crucial to improving performance. Understanding how the firm leverages staff across service lines, and then how utilisation and recovery rate form to drive income, and gross margin is key – especially as staff expect to be paid, and paid well!

Our experience is that firms with 5 to 20 partners in particular struggle with this as there is just enough complexity to mask commercial drivers but, often, not enough capability to recognise or address this.

Leverage: who do clients actually buy and who do we actually sell?

Different areas of law require different staff structures. These structures often represent shapes, for example a traditional triangle, where a partner wins work and pushes it down, and diamonds where the value is delivered by higher calibre mid-tier staff. Sometimes these structures are actively planned, sometimes they exist by accident as department heads are only thinking one or two recruits head and, as a result, find themselves with the wrong leverage and volatile levels of profitability year-to-year.

Each model has a different implication for budgeting, work force planning and ultimately, the type of work that can be delivered. Linked to this are the challenges around recruitment, retention and the debate on why and how to deploy flexible working.

Solving these challenges

These challenges resonate with many firms but should be addressed as part of a wider strategic plan, rather than be tackled alone. We are encouraged to see that, from May 2015, Lexcel v6 set out mandatory strategy requirements for accredited firms and we support firms through this process. Ultimately though, an effective strategy should get to the core of the material issues affecting the firm. Our consulting team help provide the insight, objectivity, and implementation to plan and deliver strategies for growth.


If you would like to talk to us about our experience dealing with the topics above, or to discuss how Price Bailey’s consulting teams can help support and guide you through developing and implementing an appropriate strategy then please contact Chand Chudasama on 020 3829 1739 on email [email protected] for further information. You can also connect with Chand on LinkedIn.


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