Does law firm success equal commitments + uncertainties + calibrated focus?  (I didn’t say the formula would be simple.)

I hope top blogger Guy Kawasaki will not mind my using his entire question #7 from his post today featuring Michael Raynor, author of The Strategy Paradox.

Please take a moment to read it in its entirety and then look at my law firm questions below.  I think there may be a profound lesson here if we are willing to transpose. 

In order to be thinking “law firm”, substitute the words “Management Committee” for “Board”, “Managing Partner” for “CEO”, “Department Heads” for “Divisional or business unit vice-presidents “ and “Practice Group Leaders” for “Managers”.

Guy Kawasaki’s 7th question: What’s the proper role in strategy formation for each level in a hierarchy?

Michael Raynor’s answer: I’ve found that it helps to think about strategy in two halves: the commitments that all successful strategies entail, and the uncertainties attendant to those commitments. Commitments and uncertainties are only half the answer. The rest of the solution lies in calibrating the focus of each level of the hierarchy to the uncertainties it faces. It is common sense—if not common practice—that the more senior levels of a hierarchy should be focused on longer time horizons. What hasn’t been as widely recognized is that with longer time horizons come greater levels of uncertainty, and strategic uncertainty in particular. This fact has some profound implications for how each level in an organization should act.

  • Board members should ask: What is the appropriate level of strategic risk for a firm to take? What resources should be devoted to mitigating risk? What sacrifices in performance are acceptable in exchange for lower strategic risk? This allows the board to be involved in strategy without getting involved in strategy making, which is correctly the purview of the senior management team.
  • The CEO should ask: What strategic uncertainties does the company face? What strategic options are needed to cope with those uncertainties? In other words, it falls to the CEO, and the rest of the senior team, to find ways to create the strategic risk profile the board has mandated for the firm.
  • Divisional or business unit vice-presidents should ask: What commitments should we make in order to achieve our performance targets? For these folks, it’s no longer about mitigating strategic risks, but making strategic commitments. Someone has to take the actions that create wealth, after all.
  • Managers should ask: How can we best execute on the commitments that have been made in order to achieve our performance targets? To put it on a bumper sticker, they have to “show us the money.” There are no strategic choices to make at this level, because the time horizons are too short—six to twenty-four months. Strategies simply can’t change that fast.

Now, here are my questions:

Do the various levels of your law firm’s management think like Mike Raynor suggests?

Is your law firm strip-mined every year (every penny available is distributed to the partners less the investments that are made over the kicking and screaming of individual objectors)?  If so, is your firm deprived of the luxury of long term planning/investing (or even medium term)?

It has been predicted that China will dominate earth by 2050 because of its long term orientation.  A recent article in the New York Times, From 0 to 60 to World Domination, shows how Japan’s Toyota leads the automobile industry with its long term thinking.

PUNCHLINE:  So, I wonder if the extraordinary success of a few large firms is due to the fact that they have grown big enough to be business-like and the individual partners simply don’t have enough relative power to mess it up?  I wonder further if a courageous firm will emerge that will operate as Raynor suggests and with Toyota’s winning long-term orientation.  Should that occur, a lot of today’s law firms will have a lot to worry about.

Your thoughts?