Does your firm regularly wrestle with measuring return when it comes to business development efforts? If so, you’re far from alone.
At least one reason is that for many firms, the pursuit of new business is not aligned with any overall, longer-than-this-year strategic plan — one that is guided by a set of core principles, and establishes the basis for strategic growth.
There are exceptions, of course; but for the most part, law firms grow by adding lawyers — one or two at a time, through the addition of a group, or by combining with another firm.
In some instances, this approach to growth is in response to a specific need or opportunity. However, much of the time it is linked to the idea that the addition of partners who possess an existing book of business will serve to increase overall revenue.
With a few exceptions, all indicators point to the fact that while adding billable “books” might boost revenue in the short run, an analysis of a three-to-five year window suggests this is not much of a growth strategy. In fact, adding professionals and hoping business comes along:
- has significant cash flow implications — firms typically experience negative cash flow on lateral hires for the first nine months — often more; and,
- 24% of lateral hires will leave within 3 years — within 5 years the percentage jumps to nearly 50%.
And for all the headlines made by merger announcements, combinations are costly, dilute profitability at least in the short run, and are often fragile.
Organic Growth Is Even Tougher
Meanwhile, efforts to codify the growth of the pie as the responsibility of every lawyer has barely moved the needle. From key client or industry teams and cross selling initiatives to talk of hunting in packs and outright sales coaching, firms continue to search for and invest in an approach that will deliver organic growth.
Yet, in spite of significant investment, many firms actually sabotage their efforts from the word go. For many the investments produce negligible return, year after year.
If this sounds all too familiar, here are five ideas found in firms possessing productive and vibrant business development efforts that, in addition to impacting profitability (yes, it is possible), produce measurable rewards in terms of firm culture and stability.
1. Business Development Is About The Future
The growth of a solid practice does not hinge on finding a silver bullet or learning manipulative techniques. Real growth comes from new connections and newly productive relationships. Every real rainmaker I know will tell you the best business — the work most sought after — comes by way of an existing relationship or a referral.
Strong relationships are the byproduct of shared experiences; and these come with time.
Translation? Business development is a long game — an investment in the future. Every time the pursuit of new business is launched with the need and expectation of near-term return, the potential of the effort is compromised from the outset. Every time the decision to scrap a 24-month plan is made based on perceived results at the 12-month mark, it is a decision based on faulty data analysis.
Effective business development is rooted in clear goals, market intelligence, considered strategy, and a commitment to stay the pursuit.
2. Not Everyone Is A RainMaker
We know this. Yet we continue to try to force the issue.
There is an important reality here. Not everyone possesses the basic skills attendant to rainmaking. An effective (and realistic) firm (or group) strategy recognizes this fact. This is not to suggest that certain partners should be able to opt out. In the healthiest partnership everyone has a role in the growth strategy. However, expecting that every single partner will be equally gifted in every area of responsibility is to set many of your partners up to fail.
This warrants lengthy exploration; however, for example, successful initiatives include research, analysis, and a variety of critical tasks. Partners, it would seem, would strive to construct pursuits in a way that leverages every skill set available. Build a program that involves everyone, but doesn’t expect everyone to do everything.
3. A Focus On Business Development Is Not Punitive
When an emphasis on development is associated only with under-performance, you may as well be saying that a business development assignment is the penalty one will pay missing a mark.
In more instances than I can count, a forced focus on development activities is linked to missing an hourly benchmark or a declining or anemic book of business. Get them a coach to set them on the right path. Bring in a consultant to work with groups that are stagnant. Or adopt the current solution-of-the-month to fix across the board deficiencies.
In one instance, intending to take me into his confidence I’m certain, a Managing Partner let me know that a strident firm naysayer was being named to the Marketing Committee. Implicit in the communication was that, since this wasn’t Compensation, Governance or one of the other “primary” committees, it was a place where the strident voice could be exercised with minimal impact. As a result, meetings of the Marketing Committee were tense and unproductive.
The firm equivalent to a “time-out” isn’t going to turn anyone into an overnight development whiz..
4. Where Programs Flourish, Leaders Participate
Whether an initiative is perceived as punitive will almost always be determined by who opts out. Strong partnerships collaborate on critical solutions, including challenges and opportunities associated with the development of new business.
When firm leaders and/or known rainmakers are not in the middle of growth initiatives two things occur that have negative impact on the overall effort: the message delivered is that the initiative in question doesn’t rise to the highest level of priority; and, the initiative does not benefit from the experience of those with skins on the wall.
If organic growth is a priority, leaders participate.
5. Where Business Development Is Strong, It Is Measured
Inside most law firms there is no question about the need to measure time. It is at the heart of how value is calculated. Alternative billing methodology notwithstanding, to a significant degree productivity is defined in terms of hours worked on billable matters, and the dollar figure attributable to each. Working the requisite number of billable hours is one of a handful of promotion benchmarks.
Yet, some firms are still reticent to employ metrics to gauge progress toward a revenue goal. The management of one firm I consulted went so far as to proudly announce that the firm had never had a budget for business development. Naming targets, establishing goals and tracking progress were unheard of topics. Discussions of such things ran counter to the firm’s professional and collegial culture.
Not coincidentally, the firm’s revenue per lawyer today is virtually the same as it was a decade ago.
A credible growth strategy, it would seem, comes with a definitive set of goals and a clear set of benchmarks against which progress can be defined. And in organizations where growth in profitability is a priority, these things are measured.
By contrast. where the only thing that is measured is hours, the message is clear — do whatever it takes to bill your hours today…before you do anything to build business for tomorrow.
Sabotage or Facilitate?
There are other factors that determine the effectiveness of business development efforts, of course. But the way in which a firm addresses these five areas will have much to do with whether your efforts to grow organically align with a vision that connects to the aspirations of the partnership.
Where to begin?
Business development should be the natural outgrowth of a strategic plan. Most multi-practice firms will, in one way or another, break the pursuit of new business down into group and individual bite-size pieces. The involvement of senior leadership ensures leverage and a unified pursuit.
At the firm level, a strategic plan should identify core principles of the partnership — the nature of the practice the firm aims to build, the platform necessary to support this practice, a roadmap (think 12, 24 & 36 months for starters), compensation, governance, shared aspirations and values. Once identified, these principles provide the cornerstones for a strategic and aligned approach to growth.