It is not an exaggeration to say that 2020 was different. As unanticipated as it was, it is notable that for many law firms this past year has been financially okay, if not good. But with the challenges still playing out and uncertainty looming as the year comes to a close, what kind of planning makes sense for 2021?
One lesson from the past year is that fundamentals do not change even when the unpredictable occurs. So rather than trying to predict the ways that 2021 will be similar or different from 2020, focusing on the fundamentals of success is a better approach to controlling your law firm’s future. Attention to these essential building blocks help drive lasting benefits and the ability to overcome unforeseen challenges. So as the New Year dawns, five areas should receive a firm’s focus:
Client-Relationships. Without an adequate client base, a law firm’s prospects are dim. For that reason, it is important to annually (if not more often) take stock of the firm’s client portfolio as well as the firm’s strategy. And just because the last year may have caused change, a focus on client relationships, whether new or old, is essential. A top to bottom review may indicate many things, including whether a different client profile for the future should be pursued to better align with a newly emerging firm strategy. If there was ever a time to review the firm’s client relationships, it is now.
Financial Performance. Understanding your firm’s financial success and prospects for the future is more than asking whether everyone made enough money last year. A surprisingly good 2020 may mask red flags sure to wave soon. Was your firm’s financial success in 2020 “earned” or was it was “gifted.” Even with recent success, focused firms perform an objective assessment to determine financial strengths, weaknesses, trends, and strategies for improvement. In the middle of a pandemic the scope of the review should include a look at productivity trends, market reliance, margins, expenses, investment levels and financial risk. In the wake of a tumultuous 2020, don’t be fooled by false positives/negatives.
Talent. Just as a law firm is nothing without clients, it is nothing without talent. Successful law firms usually are blessed with talent, but positive talent levels in the future are not guaranteed. Doing a talent review in light of the pandemic means reviewing each person, each practice segment, and the back of the house. Once performed, leadership should consider possible improvements and whether a boost in talent can be realized in-house (through training, focus, or otherwise) or by acquisition. If the review identifies gaps in the firm’s talent profile, the firm should act to fill the holes. In the shadow of industry disruption, 2021 could be a year of talent improvement.
Culture. The quality of and commitment to a law firm’s culture is often cited as critical to success. Yet the pursuit of high financial performance or growth can undermine a firm’s culture. An annual review of the firm’s culture can identify whether short-term initiatives or successes have come at the expense of the firm’s valued culture. Moreover, has the firm strayed in its efforts to survive the turmoil of 2020 and is now misaligned culture-wise? A thorough review of the firm’s culture allows the firm to correct unwitting detours, embrace good changes, and plan for a future in which the firm’s culture is aligned with its strategy.
Succession. Every year that passes brings a firm closer to the need for an effective client relationship and leadership succession plan. Whether succession is more client-relationship driven or leadership based, annual attention to the topic is vital. Even firms that have planned previously must pause in the shadow of the pandemic to see if the path makes sense. Has the pandemic upset the firm’s succession plans? A firm cannot be comforted simply because it has addressed succession in the past. Existing plans should be reviewed to determine whether a refresh is required and whether implementation elements need updating.
Successful years at law firms seldom occur due to happenstance. Rather, they require leadership focus. After surviving an unscripted 2020, how will your firm plan for 2021?