General Practice, Solo & Small Firm Division
American Bar Association
General Practice, Solo, and Small Firm Division The Compleat Lawyer
Fall 1997 copyright American Bar Association. All rights reserved.
The Practice Management Consortium Consulting for Solos and Small Firms
BY JANE H. BENSON
Jane Benson is the manager of the Law Firm Consulting Group of Braverman, Codron & Co., Beverly Hills, California, a certified public accounting firm celebrating its fiftieth anniversary. The Group assists law firms of all sizes with strategic planning, forecasting, practice development, and management. The firm can be reached by e-mail at CPA@brav.com.
Firms of moderate to large size have used consultants for decades to help them develop plans for change and greater profitability. Smaller firms and solos have engaged consultants much less frequently, and yet many are starving for professional management advice.
This is especially true when strategic planning for change or developing an area of practice is at issue. Solos in particular often feel financially strapped, constrained by time, and without sufficient management resources for their practices. For these reasons, consultants and small firms have more often than not been strangers to one another.
What Is Strategic Planning?
Strategic planning is a process by which an organization articulates its goals, and the schedule and means for achieving them. Someone once said that a goal without a deadline is merely a wish. The successful strategic planning process turns the collective wishes of the organization into a viable, well-defined, scheduled program of action, often designed to give the organization a competitive edge.
Strategic planning takes on as many hues, and addresses as many issues as there are firms. The planning process is a dynamic cycle; once it is entered, it has no real beginning or end. Retreats (firm-wide or partner/ shareholder) have been the forum most often used by professional service firms for focused strategic planning. Typically, the firm s principals assess current financial and operational status, declare their short- and long-range plans, and air their differences, often agreeing to disagree.
The strategic planning cycle involves data gathering in anticipation of the retreat, retreat-based strategy formulation, post-retreat analysis and follow-up, implementation, feedback from the organization about its implementation successes or failures, modification of the plan (when necessary), and more feedback. -- J.H.B. Creating a strategic partnership - also known as a practice management consortium -can provide the weary and the wary small firm or solo with the desired and necessary help. The concept is a relatively new one in small firm management. The consortium offers small and solo firms a forum in which to retain professional assistance, formulate efficient and effective strategic plans, and improve management practices - all at a fraction of the cost normally expected. The planning process is very similar to that used by larger firms, but the structure is somewhat different. The keys to the process are cooperation and resource pooling.
The strategic partnership is a coalition among small firms with similar management objectives and a consultant with experience working with small firms in strategic planning, practice development, firm administration, and retreat facilitation. The strategic partnership is formed to enable small firms and solo practitioners to:
- Pool the cost of hiring a professional management consultant.
- Provide support to one another.
- Enhance practice development and marketing potential.
- Coalesce a group of professionals with similar management concerns and enable them to take advantage of one another's experiences.
A consultant can assist in forming a practice group or small firm consortium for the purposes of providing a structure for strategic planning and management assistance. A consultant can help to define, and then refine, the purpose(s) of the consortium-based strategic planning engagement.
The Consultant's Role
Consultants generally are used in two ways. The less preferred way is as a technician, whereby the practitioner dictates to the consultant the nature of the project or problem, the specific issue to be addressed, and then says, "Fix it."
The more beneficial way involves thoughtful discourse between the consultant and the practitioner. The consultant is allowed, even requested, to assume the role of an advisor, which is more comprehensive and meaningful than that of technician. In this case, the practitioner may say, "The practice is not profitable. I would like assistance determining what the next few years could look like, or should look like."
The consultant is given the opportunity to address the qualitative and quantitative factors that directly and indirectly impact profitability or otherwise impact the firm and make recommendations for change that will yield benefits far beyond the short term. The consultant to a consortium becomes a facilitator, moderator, devil's advocate, conscience, therapist, and "nudge." The facilitator assists the firms in defining and addressing pertinent issues. The moderator controls the time, tempers, and progress.
The devil's advocate offers another view of the matter on the table. The conscience questions the honesty, integrity, practicality, and likelihood of a plan's viability. The therapist works toward making the firms healthy, self-sufficient, and ultimately independent of outside help. The "nudge" pesters, cajoles, reminds, whines, and does whatever it takes to get the firms moving forward.
Be forewarned: If a firm lacks commitment to the plan that it develops, or the plan is not ratified and adopted by all principals, there will be no success and no benefit. Only frustration, aggravation, and blame will ensue. Failure to commit and follow through constitutes the most common pitfalls to strategic planning in firms of any size.
Firms in Transition
Transition is nothing new to law firms - they grow, shrink, or relocate. Growth is not always defined by merging practices or adding personnel. A firm can grow by developing new or expanding existing practice areas, technology, and practice management systems, to name a few. Short of retirement, many solos scale down by practicing fewer hours and enjoying more leisure time. The scenarios and circumstances are limitless. One thing is common to all of these changes: they are fraught with detail, and they breed chaos if not properly planned. It is helpful to keep the reasons
for the change and the desired goals in mind. If you or your firm is contemplating a transition, the structure set out below may be useful to you in managing the change. Answer the questions. Gather the data. Begin a journal.
J.H.B. Forming the Consortium
- Why are you considering the transition? What is your present state of mind, or status of the firm?
- What do you hope the transition will accomplish?
- What transitional options do you have? Brainstorm. Have you considered all of the possibilities?
- Why have you rejected other options in favor of the course you have chosen? You should be committed to the chosen course of action and be able to articulate why other options are less desirable. The course(s) of action you have chosen should be practical, measurable, and coordinated.
- Every action should have a date/deadline, and you should state by what means you will effect the transition(s). Constantly reassess that the chosen dates are realistic considering the demands both inside and outside of the practice.
- Begin to rebuild the budget considering the transitional period. If you have no budget, create one. If necessary, get assistance. Reflect anticipated changes in the revenue stream, and not just expenses. Budget for the next three years.
- If the transition requires changes in personnel, who will be responsible for training and supervision? Budget their time, and the effect of their learning curve, as well as their cost, on income. Consider training in the areas of client retention and development, policy, procedure, and practice management, as well as the substance and procedure of the law.
- If the transition requires changes in procedure, state in detail how you envision the new processes will work.
- If the transition contemplates merging practices or personnel, have you assessed attitudes and values? Determine by what means the new entity will allocate power, status, and compensation. What is the magnitude of changing client responsibility? Are there unresolved conflicts of interest?
- How will the transition in the practice affect the rest of your life, and for how long? Consider the cost in energy, time, money, and relationships. Expect aggravation. Psychological counseling during periods of transition often is a good idea.
- Reassess and modify as necessary.
The consultant will help seek consortium partners for or with the individual participants. Sometimes, the firms will have similar substantive practices and similar management issues. For example, many family law firms have difficulties with collection and realization and can benefit from a combination of one-on-one consulting and joint discussions about managing the issues.
If a firm is concerned about entering a practice management consortium with other firms competing for the same clientele, the consortium partners may have a different profile. They may have a mix of different substantive practice areas, or they may hail from different geographical areas. It is the consultant's job, in part, to make the successful match.
After the consortium is defined, the consultant will assist each consortium partner in gathering the data necessary to assess internal and external market forces and management concerns; and in defining the issues to be shared, or not, with other consortium partners. This data gathering comprises part of the one-on-one, confidential portion of the relationship with the consultant.
Data gathering in small firms is frequently executed via carefully crafted interviews or questionnaires sent to critical personnel. The questions are designed to ferret out preliminary and rough-hewn statements about goals and desires for change in direction, operations, personnel, client services, etc. After the data is gathered and analyzed by both the consultant and the practitioners, all consortium members are "called to the retreat."
The consortium is structured to provide a combination of private, confidential, and individual coaching and scheduled group follow-up and implementation activities. This kind of format serves several purposes. Individual practitioners can address confidential issues with the consultant in private without the practitioner having to bare his or her soul about highly charged emotional or sensitive issues that should not be exposed outside the firm.
However, where issues are not sensitive, the consortium partners can provide one another with the equivalent of the exercise or diet "buddy" many of us need to motivate us to get to the next level of a program. Most importantly, the relationships between the consortium partners can lead to mutual support and practice coverage for the solo, as well as valuable networking, cross-referrals, and practice building.
Hammering Out a Plan at the Retreat
A consortium retreat often takes the form of an intensive workshop in which the practitioners work both alone and in groups to define individual courses of action. The workshop format allows each firm to achieve distinct and explicit goals in a given time period. It follows the key stages of formulation for almost any strategic plan.
The mission statement. This step requires that you state what your practice is about. David Maister, renowned consultant to professional service firms, has observed that all mission statements for professional service firms basically are the same. They address technical excellence, devotion to clients and employees, and all the things necessary to build a world-class organization. In stating your mission, try to define what makes you and your firm unique. If nothing makes you unique, then try to define what you must do to make your firm unique. Differentiation and focus are essential, though difficult to articulate. As an example, one way to differentiate the practice is to narrow the definition of, or retarget, the client base by changing the types of services you would like the practice to provide.
Personal goal setting. What do you want for yourself, your life, and your practice? It is easier for many of us to describe things we do not want. Articulating goals often is difficult. However, goal identification is critical to creating a strategic plan, irrespective of the size of the firm. So, what do you want? An example of a personal goal-setting exercise may look similar to the following (try it now):
Begin with a blank sheet of paper. Time yourself. Allow three to five minutes to list every single thing you remember ever saying you wanted to be, do, learn, or have in your life. Number them.
Take a second sheet of paper. For each numbered item, write a corresponding entry showing what you can do, today, to begin making progress on each of these items. Calendar every entry. Example: I want to learn Japanese. Today, I can price tapes to listen to in my car. Today, I can call the community colleges and find a language class. By Friday, I will have procured what I need to begin the process of learning a foreign language. Calendar the tasks for today and Friday. Calendar a reassessment of the entire list in six months. There is a natural bridge between your personal and professional goals. They should be examined together, in tandem.
Professional goal setting. The data collected prior to the retreat will be used to help frame and then tackle the questions for the firm. The practitioner should state not only what she wants as the outcome, but also by what means she thinks she might achieve it. The goals should express the direction and priorities of the plan.
Example: "I want to narrow the niche of my practice area/specialization to one I find especially engaging and that will enable me to increase my value to my clients, raise my billing rate, and make the practice more profitable..." The statement is still unfinished. It should also address by what means.
"...and I will do so by merging with another firm having that expertise" or "...and I will do so by procuring a certification or establishing myself as a specialist, to shift the focus of the practice."
Goals address issues such as market standing, performance and development, attitude, public responsibility, etc. The list can be as long as your concerns, interests, and imagination.
Objectives. State how the goal is to be attained: by what date, by whom, and at what cost. State several objectives for each goal, and assure that each one is measurable, realistic, and practicable.
Example: By November 1, 1997, I will find another sole practitioner:
- With a specified practice.
- Who would like to retire in five years.
- Who would like to create a relationship with my firm whereby each of us supports the other's practices, and each addresses mutual management concerns.
- With whom I might consider a merger in three years.
- To locate this sole practitioner, I will expend a maximum of 50 hours, and $1,500.
Strategies, tactics, and work plans. These items refer to the actions necessary to support the objectives, and delineate how the strategy will be carried out. How will you seek the sole practitioner you referenced in the objectives? How will you find out whether his or her practice is an appropriate candidate for a strategic alliance?
All aspects of the plan should be committed to paper, journalized, calendared, and readdressed every quarter, if not more frequently. Schedule a time to review the plan with the consultant on an individual basis. The consultant will coordinate, plan, and schedule the group meetings for resolving common and well-defined issues for the consortium members.
What Kind of Help Do You Need?
Consultants can assist small firms and solos in dealing with a wide range of management and administrative issues, and as resources in handling client matters.
Accounting, bookkeeping, tax, and payroll tax management.
Accounts receivable management and collections.
Budgeting and forecasting.
Business and financial planning.
Communications skills consulting and coaching.
Compensation issues - professionals and support staff.
General business management, including accounts payable.
Human resource management; policies and procedures.
Litigation consulting and forensic accounting.
Litigation support - document control, trial management, and strategy.
Mergers, acquisitions, buyouts, and winding down professional service firms.
Needs assessments or operational audits.
Public relations and media management.
Recruiting temporary and regular hires - staff and lawyers.
Time and billing matters - assessing, locating, installing, and managing. - J.H.B. Post-Retreat Follow Up and Implementation
Think you've finished? Not yet! Now comes the need for patience and long-term commitment. Just as you would "tickle" critical dates for substantive practice, you will calendar reminder dates for reviewing the plan. You already have "calendared" the critical dates, but we all know how practice and life can interfere with a great plan. Make the plan a part of your time management system. Do what it says.
The consultant will be your coach, guide, and alarm clock. Follow-up sessions with the consortium and the consultant should be scheduled on a regular basis. Following each session, your decisions and plans, including modifications, should be committed to paper and acted upon. Maintaining a journal is very helpful. Keeping this kind of record enables you to look back to the beginning of the process and gauge progress, or the lack of it.
Engaging a Consultant for the Consortium
Locate a consultant who has the experience and resources to form a consortium for you by asking for referrals from your local bar association's small firm and solo practice section or law practice management section; or from the local chapter of the Association of Legal Administrators. The best referrals come by word of mouth from satisfied lawyers. National referral sources are less effective, as the consortium is most frequently a local phenomenon.
Ask for references. Negotiate an engage-ment letter. Specify the objective of the engagement, the scope, cost, mutual responsibilities, and timing. Remember, the objective of forming the consortium is to share fees, ideas, and expertise, so the pricing of the consultant's services should make sense to you and your firm. Likewise, it should make sense to the consultant. The consultant is no different from the practitioner in that recurring work generated from an established relationship between client and professional is preferable to work limited to a one-time-only engagement. The fee-sharing aspect of the consortium comes from the group activities the consultant can arrange and coordinate among the consortium members. Out of these group meetings, and the individual coaching time, the consultant hopes a continuing relationship will result.
Those participating in a consortium should agree to a maximum cost for a given period, usually a year. If additional consortium members are added prior to the first group meeting or workshop, the cost of the consortium can be reduced to each member. Fees usually cover the consultant's time for pre-retreat planning, the group/consortium retreat workshops, firm-specific workshops, post-retreat facilitation, and a stated number of hours of individual phone or in-person consultations each month. An integral part of structuring the consortium is to determine the fee and billing arrangements.
It is essential that the consultant and consortium members review the scope of their collective and individual engagements and modify them in writing when a significant change in scope and responsibilities occurs. This is particularly critical when one (or more) of the firms desires additional individual consulting outside of the consortium arrangement.