The reasons why one law firm succeeds while another doing similar work fails, boil down to knowing your market, committing to your sector and its clients, and the partners’ contribution, according to a legal thinktank.
In paper written for the College of Law’s Legal Services Institute, Stephen Mayson, the director and professor of strategy, says understanding why firms succeed is ever-more important in an over-supplied market that is also undergoing structural change.
According to Law Firms and the Formula for Success, the first main factor affecting success is a firm’s choice of market: “Understanding the dynamics of different markets, and making informed assessments of future trends, are key components to sustainable success.”
Examining trends that affect particular market sectors is vital, says Professor Mayson. For instance, observing how the number of litigated commercial claims has declined as clients opt for alternative resolution, or knowing how markets – such as mergers and acquisitions activity – are vulnerable to the economic cycle, can help firms make informed choices.
Being aware of the competitive environment, in a world where reserved activities are limited and increasingly one’s clients “convert to become competitors”, is also vital, he says: “Successful firms understand sources of competitive advantage: they develop and protect their own competitive difference.”
The second key element to success, writes Professor Mayson, is to make a series of commitments to your market sector and to its clients. This may entail keeping up-to-date with developments in the sector and leveraging that knowledge to promote the firm’s reputation through networking and thought leadership.
Committing to clients will mean investing in relationship management rather than paying it lip service, with special “care and attention” being given to clients that are “economically and reputationally important to the firm”. Each area of practice should be carefully structured according to the nature of the work and client expectations, so the firm performs as “consistently and cost-effectively as is possible”.
The last key ingredient to success, says Professor Mayson, is to ensure the contribution of partners is fully in tune with the firm’s strategic and other objectives. This may mean that instead of partners agreeing to an annual total of chargeable hours, they sign up to a overall contribution that includes both chargeable and other time, such as that spent in relationship management, networking, nurturing talent and know-how and so on.
“Those firms that are better at achievement also tend to be better at harnessing and co-ordinating this total partner resource,” he says.
But partners must also measureably contribute to the firm’s bottom line, with profitability being the standard rather than growing fee income. Lessons about where a firm’s profitability lies in turn feed back into the future choices it makes about its markets.
“Successful firms, in other words, make explicit connections between strategy, contribution and profit, and the daily priorities and actions required of partners to make these links a reality rather than unrealised aspiration,” he explains.
Professor Mayson concludes that the formula for law firm success amounts to a “theory of professional relativity”, where the “E” factor of success is a product of market, commitment and contribution. Expressed as a formula this is E = m x c x c, or “E = mc2”.