Are you experiencing a gradual loss of work being received by your firm? Have some of your clients been using other law firms despite your best efforts to provide a quality service? Is competition from non-traditional legal firms such as banks, insurance companies, auditing firms and so-called "In-house" legal counsel diluting your source of ongoing or new work? If this is the case, you will agree that the market for commodity legal services is changing at a rapid speed.
This perception of work dilution, increased competition and client dissipation has, among large law firms in the US, UK and Australia, been met with a targeted response over the past several years. Lawyers and law firms alike have restructured their practices to provide for strategic re-positioning, branding and adoption of a streamlined service offering. Part of the process of re-structuring has also ushered in a new way of thinking among progressive lawyers in what I like to call "The Business of Law". Several of these forward-thinking firms have introduced new departments and/or director-level appointments to manage the firm's business processes. These departments have included, among others, the integrated IT, Human Resources, Marketing and Business Development departments. Each department is not a traditional profit centre but is, nevertheless, regarded as a necessary evil (on the income and expense statement) to secure a potentially profitable future for the firm.
Debra Rhodunda, in her article, A Sales Director at my firm(Altman Weil Inc, 2003), says that while sales departments have existed for aeons in the corporate world, the idea is just beginning to emerge in the legal profession. Debra attributes this to the growing understanding by lawyers that their practices are, to a large degree, businesses that need to market and build "sales" to keep up with competition. Closer to home, we see that several of South Africa's leading firms have started the process of re-structuring to provide for the acquisition of skilled business professionals and/or the creation of marketing and business development departments. Herold Gie Attorneys (Cape Town) is an example of one of the first firms to employ a board- appointed Marketing Director, while other local firms have appointed marketing managers and public relations staff (another name for sales executives) as well as outsourcing media companies to manage brand creation and corporate visibility strategies. The strategies are all a response to remaining competitive and profitable in an over-traded environment.
Concern among today's law firms is always the status of their market share. Where market share is diminishing, the question to pose is "what should be done to arrest the situation?". Too often the firm, acting through its partners, has a stab at marketing and business development but ultimately lets it slide into nothing due to the pressure encountered in having to apply one's mind to generating fees. The vicious circle results in the firm losing market share with fewer instructions. As a result of this, lawyers work harder trying to generate fees out of a smaller circle of clients and, before you know it, the clients leave to be serviced by a bigger or more efficient firm. Unless the partners can afford to give equal attention to both the generation of actual fees and the management of a business development initiative to secure the firm's future, it may be time to consider bringing in professional managers to manage, among the firm's other important business processes, the firm's marketing and business development needs.
Business development and marketing compared
If a law firm is to gain a competitive advantage by introducing a business management team made up of marketing and business development professionals and staff, it must be remembered that these two business disciplines each require a different set of skills and expertise. Debra Rhotunda says that the firm's Business Development Team is not hired just to close deals. Their job includes assisting attorneys through the business developing process, preparing the client pitch, participating in client team meetings (with the managing attorney concerned) and the client relationship management of the firm's key accounts. While this skills base may seem to "fit" into marketing, and while some marketing departments do handle some aspects thereof, marketers should be more concerned with strategic issues of branding, positioning and market research. Each one of these skills is unique and should be separated in terms of function to secure for the firm the best possible competitive advantage.
The suggestion of creating and developing (and employing) Marketing and Business Development departments would no doubt raise many eyebrows amongst partners who view such initiatives with circumspection. This viewpoint is understandable given that its introduction is a fairly new approach to law firm management. It may be that issues of set-up costs will be high and that the salary of such professionals will equal that of the partners' profit-share. This may not sit comfortably where such partners are generating fees to pay the salaries for these professionals and management costs of their departments that are seen as nothing more than cost centers.
In the short term, measurable returns on investment will be difficult to gauge until the marketing and/or business development team have established the firm's business plan and been afforded reasonable opportunity to implement their strategies. An effective strategy should be able to render measurable results within a few months to a year depending on the size of the firm and the strategy roll-out concerned. However, the short-term cost must be measured against the long-term gain and the potential opportunity cost of not implementing such a strategy. Forward-thinking firms will realise that such an investment is a long-term investment not only in the profitability of the practice, but in its ability to survive in an ever-changing market.
Law firm readiness
I believe that the process of distinguishing between the Practice of Law and the Business of Law, in so far as the provision of legal services and the effective business management of the practice is concerned, will evolve naturally over time. Lawyers and law firms will begin to realise that the practice of law is not only a profession but a business that demands the same time, energy and management skills afforded to big corporations. Lawyers will also realise that the skills they possess are not necessarily enough to strategically manage the business of the firm with the same skill, time, energy and experience as a full-time business development and marketer can devote. Such firms may want to consider the employment and introduction of business professionals to manage the business of the practice while the lawyers do what they do best: lawyering!!!.
However, not all firms are ready to employ the services of such high-end professionals. This does not mean that law firms and lawyers cannot do something about preparing themselves and their practices for the eventual introduction of such new departments and professional directors. Debra Rhodunda says that law firms can champion the need for and acceptance of such professionals into the firm by beginning to understand what resources will be needed by such departments/individuals, to educate both partners and staff of the need for such professionals and/or departments and to champion the appointments of such professionals among the doubting Thomases of the firm.
If you are not ready to hire business professionals or create the departments as suggested, do not worry, many other firms are not ready either. However, to remain competitive and to educate fellow partners and staff in the art of the Business of Law, I suggest that you commence with a training program for your lawyers and staff to communicate the core concepts. As a start, the following ideas can be considered for introduction to your firm:
- Create a staff newsletter every quarter that informs staff of projects and initiatives being undertaken by the firm (or at partner level) to grow the practice. This will help to create a culture of learning and of understanding of the pressures that firms face in a competitive market as well as what can be done (or is being done) to take advantage of the situation for the betterment of the firm;
- Give regular talks, presentations and workshops to your professional staff and highlight areas of business, the economy, competition and industry regulations that are encouraging the firm's profitability/survival or that are adversely affecting it. A greater understanding of external factors impacting on the firm will create an understanding of business management and an appreciation, later on, for the creation or employment of professional Business Development/ Marketing staff;
- Marketing/Business Development training programs must be introduced to teach them hands-on business development skills. Debra says that such a program will help them:
a. Increase their comfort and skills in identifying and capturing business opportunities;
b. Help them distinguish between commodity work and value-based services to identify areas where clients are willing to pay full rates or premium rates;
c. Identify cross-selling opportunities;
d. Improve their presentation skills; and
e. Develop strategic marketing and business development skills and experience.
Law firms are at long last waking up from a timeless sleep only to find that the world, their clients and competitors are passing them by. The strategies needed to become the law firm of choice are many and require time and money. The hiring of professional business managers and directors may not be on the cards for your firm right now, but it does create a talking point for your next board meeting or strategy session.
Think about it.
Sean Bosse is an admitted and practicing attorney with Herold Gie Attorneys in Cape Town. Sean has a strong passion for what he calls "The Business of Law" and the marketing of law firms. Sean is a regular contributor of strategy and marketing articles for GhostDigest as well as for a UK legal publication. Prior to returning to practice, Sean completed an MBA and worked as a strategic business manager for an international Internet service provider. Please feel free to mail him using firstname.lastname@example.org