Politicians and the business community are taking first steps towards easing the restrictions on public life and social interaction. With today’s article on medium-term measures, we focus on the time when these restrictions will have largely disappeared, at least domestically.

The mind-set of the future is being determined now. In the medium term, it is key to find a way back to growth, increasing competitiveness and emerging from the crisis stronger than before. This means in terms of

• Clients: Strengthen the link with key target groups.
• Positioning & Strategy: Evaluate the market and competitive forces affecting the firm and understand the degree of change required.
• Law firm organization & leadership: Analyse the firm’s current underlying financial- economic structures, change or adapt them where necessary to lay the foundation for further development.

1. Clients

As a short-term measure, we proposed in the previous article to identify the group of clients representing 80% of the turnover and to collect information on current and future needs through the partners who serve these clients, in order to then evaluate these needs in a steering committee.

The medium-term goal of further strengthening the link with these clients requires:

• An in-depth review of those needs and the according alignment of the firm’s resources.
• More cooperation & communication.

1.1 In-depth understanding of important clients’ needs

Successful partners are part of their most important clients’ ecosystem. Thereby, they understand their clients’ requirements faster and better than the competition. By providing good advice very timely they continuously strengthen the relationship – a virtuous cycle.

This approach of individual successful partners can be replicated by the entire firm in order to increase the firm’s link into these clients. The basis for this is to understand for which clients and with which advisory products the law firm:

• provides a relevant service.
• can enhance its own reputation.
• ensures its profitability.

In the medium term, the aim is to collect this data in order to focus client development on profitable clients and mandates, to address these clients in a targeted manner and subsequently to provide focused advice. For this purpose, it has proven to be helpful to concentrate on:

• Analysing the existing relationship with decision-makers at the client
• Identifying existing profitable areas of advice
• Determining, based on the client’s business objectives and matching law firm expertise, growth areas for collaboration.

These points read easy, but require a lot of analytical work, which then still needs to be complemented by identifying relevant content for approaching the clients. In our experience, however, this effort is worthwhile. After all, the results of this exercise form the foundation for successful client development and the long-term decision on which target groups the law firm wants to focus on.

1.2 Cooperation & Communication

The enormous digital push that communication has received in recent weeks will continue to change the way we interact with clients.  This includes access to and sharing of information and documents, as well as other forms of digital collaboration, from instant messaging, to video conferencing and interactive workshops. Depending on firms’ current levels of digitalization, there is a greater or lesser need for technical solutions, training of partners and employees, and process-related and cultural adaptation. This does not only apply to the cooperation with individual clients, but also to firms’ broader corporate communication.

2. Positioning & Strategy

Even if our proposed review of a firm’s positioning[1] has been carried out and no need for change has been identified, practically every law firm will have to rethink and adapt its strategy.[2]

Strategies usually fail because of insufficient partner support within the respective firm. In nearly all cases, the reason for this is that the process associated with the change of positioning and strategy is not sufficiently prepared, understood, communicated and framed.

The medium-term task will therefore be to prepare the partners for the upcoming changes. In change management terms this means:

• To create an understanding of the need for change by providing data and facts about the external forces affecting the firm. This process should not be underestimated in terms of content and time and is a major task for management and communication experts.
• To establish a core group of partners and business services professionals to initiate and design the change process, at least at the beginning. The group should include the key opinion leaders and be appropriately diverse in its composition to avoid the danger of group thinking.[3]

The central task in this phase is to analyse:

• What the long-term consequences of the crisis will be.
• How they affect the firm.
• Whether and how the firm is currently set up to respond to them.

The most underestimated but crucial moment of any change project is to create awareness of necessary changes in the partnership following the analysis of data. We therefore recommend including communication professionals into the process from the very beginning. The success of the preparation/activation phase is very much dependent on the content, timing and format in which messages are communicated into the partnership and the rest of the firm.

As the behaviour of the members of a law firm directly influences the business success, culture as the sum of all accepted behaviours and the underlying values that determine this behaviour is one of the hardest and most neglected success factors in change processes. Against this background, we recommend conducting[4] a culture analysis now for the following reasons:

• With the culture analysis, the firm’s management signals an interest in the members of the firm – and that change is imminent. It raises awareness for the process internally and beyond the partner group.
• Defining the status quo of the culture allows a gap analysis to be made at a later stage: How big is the difference between the behaviours and values that will be required in the future compared to the current culture? Which aspects of the culture does the firm need to work on in order to enable the desired changes?
• Communication professionals need to ensure in a timely fashion that the members of the firm understand the context and objectives of the culture analysis.

3. Firm Organization & Leadership

It is highly likely that the time has now come to adjust financial-economic structures: First of all, it is important to understand the current structures, as many law firms serve several target groups with different requirements in terms of staffing (number and experience of lawyers), ways of working and pricing models. This often results in different levels of efficiency / profitability as well as several business models within one firm. Our experience is that such a firm set up leads to high costs, does not allow a clear positioning and becomes less and less sustainable in times of crisis and consolidating markets – because the idea of hedging through diversification[5] does not work long term. Against this background, a firm’s financial-economic structures need to be analysed at practice group and individual partner “department” level in terms of

• Type of work (and its market value).
• Age structure and succession planning (!).
• Ratio between Junior Associates – Senior Associate (- Partner).
• Utilisation / Realisation / Profitability.

On this basis

• management should carry out a long-term resource / needs analysis and allocation. This could potentially also include secondment planning for fee earners that the firm intends to retain in the medium term but is currently finding difficult to fully utilize. Under certain circumstances, this can create a real win-win situation: a happy client, (at least) reduced salary cost and a higher level of client understanding.
• it quickly becomes apparent where there is a fundamental need for restructuring, i.e. where expertise is missing, and fee earners might need to be recruited and where layoffs might be unavoidable.

In all of this, appropriate and transparent internal communication plays a central role in making management decisions understood and helping to ensure that everyone in the firm is pulling together. Here, the task of the communication experts is to develop with the firm’s management dialogue formats that enable an exchange between the firm’s members to reflect together on the future of the firm and make decisions easier to understand.

In summary, the medium-term measures aim to develop long-term the basis for a new/adjusted positioning and strategy plus the appropriate business model for firms to emerge from the crisis stronger than before. In addition to the above-mentioned aspects, other central elements to be considered include:

• Digitization
• Operational Excellence (incl. Legal Project Management)
• Purpose / Sustainability / Culture.
• Operating Model / Sourcing

More on this in our next article on long-term measures, which concludes this series.

Stay tuned, stay healthy!

[1] The positioning is the target image which a law firm wants to achieve in the market. It includes, among other things, what the firm stands for, what basic services it offers and why clients instruct the firm, i.e. where the firm stands out from the competition. Currently, the positioning’s validity needs to be reviewed given the changing market environment.

[2] Strategy here means to align the available resources with the agreed goals and to define an aligned set of actions to achieve these goals.  

[3] Group Thinking has been identified as the cause of events such as the Bay of Pigs debacle or the explosion of the NASA shuttle Discovery. It refers to the phenomenon of a group actively ignoring all conflicting information regarding a decision to be taken and silencing or excluding group members who deviate from the prevailing consensus.

[4] There are many approaches to culture. We recommend using a scientifically validated model and survey tool such as check-it.legal from DeepWhite, which we use for culture analyses.

[5] That’s a moot point. We do not consider diversification on a broad scale and without a genuine internal reference to be a future option. If you are interested, we would be happy to discuss this point in depth with you. Just give us a call.