Law Firm Strategic Planning

This year marks 25 years since my first law firm strategic planning project, and my, how things have changed. While I have always been an advocate for fact-based planning and attempted to arm clients with the most relevant data for effective decision-making, it has not always been easy. And in ancient times (my early career), it was not uncommon for law firm leaders to develop strategies based on the sheer will of a Managing Partner or prominent rainmaker or based on the anecdotal evidence of a member of the Strategic Planning Committee.

While I am excited about how generative AI is driving and will continue to drive operational efficiencies, improved service delivery and potentially, the quality of professional and personal satisfaction for lawyers, I find the opportunities provided through the power of predictive analytics even more intriguing. They provide a myriad of opportunities in terms of case outcomes, pricing and more.  However, their influence on strategic planning may have an even greater impact on law firm growth.

Predictive analytics uses statistical techniques, artificial intelligence and machine learning to analyze historical data and forecast future outcomes. In the context of law firm management, it enables firms to move from hindsight-based decision-making to foresight-driven strategy.

Following are some possible use cases for predictive analytics in Law Firm strategic planning:

  1. Revenue and Profit Forecasting.
    Instead of just looking back at historical data: revenue, profits, hours, rates, realization, leverage, practice area performance, etc., firms can analyze trends over time, consider various market scenarios and more accurately predict revenue and profitability going forward. This will empower firm leaders to set realistic targets and anticipate upturns and downturns and their impact on financial, hiring, growth, space and other important decisions.
  2. Talent and Capacity Planning.
    Predictive models can evaluate associate performance and career progression, attrition, partner retirements and expected workload to inform recruiting, promotion and lateral hiring decisions. Done successfully, firms can use these models to ensure they have the right talent to meet client needs and firm growth goals.
  3. Client Retention and Growth.
    Using historical billing data, engagement patterns and external market data, firms can identify which clients are at risk of leaving and which are likely to expand their legal spend. No more educated guessing as to why a particular client is slowing their case volume or “quietly quitting” your firm. Predictive models can accompany client feedback programs and enable targeted business development and proactive relationship management.
  4. Practice Area Expansion and Contraction.
    Predictive analytics can help law firm leaders to determine which practice areas have the most opportunities for growth or the greatest chance of decline, thereby driving informed decision-making regarding practice investment. Resources can be allocated thoughtfully, supported by quality data.
  5. Real Estate and Space Planning.
    Analyzing attorney office utilization, team collaboration metrics and geographic client demand can help firms to right-size their office footprints and conduct effective space planning. This data can also help to plan for effective hybrid and remote work models.

Of course, much of the above is still aspirational for many firms at this point. Firms and service providers continue to develop the technology as we speak, and there are many challenges to be sure. Reliable forecasting depends on clean, comprehensive and consistent data, and many firms have siloed systems and incomplete data sets. Market data can be hard to come by for clients that are middle market and not publicly traded. Firm leadership needs to buy-in to the value of these predictive models and trust that the data is accurate and reliable. Finally, convincing the partnership that the “evidence” provided by these models is useful will likely require change management and shifts in firm culture.

Nonetheless, law firms who embrace predictive analytics, effectively incorporate them into firm management and utilize them to develop firm and practice strategy will have a competitive advantage going forward. Partner intuition was the way of the past. Predictive analytics present exciting opportunities for the future of law firm strategic planning.

For additional information regarding law firm strategic planning, please email marci@mantralegal.com.