Strategy in a downturn - MP of Top 100 law firm - 27 March 2008
Q10: Utilisation is holding up and we are probably just about on budget, yet the economic environment is less than positive. Are down-turns opportunities to invest or should firms be looking to 'batten-down the hatches'? All thoughts welcome, please!
RESPONSES
27 March - Business Manager, Regional commercial law firm
It's a question of tight management but investing against the trends to get best value and exploit opportunities that may be closed of when the pendulum swings back the other way
27 March - Director, Professional practices group, Leading commercial bank
As a banker to professional service firms it is clear budgets (mostly set at a time in early 2007 when the outlook was far more positive) are coming under pressure with shortfalls on top line revenue budgets being frequently evident. Even so they are equally often still ahead year on year. The common problem seems to be one of taking on extra costs which are now impacting on profit levels in some cases quite hard. Thus margins are getting hit.
Strategy
Review the current year budget even if its just for the last quarter and identify EARLY the likely out turn.
Early start to 2008 / 9 budget
Be prepared to move quickly to batten down the hatches - know the cost areas that can be addressed without creating a bigger problem
Know what your lock up is doing - do partners need to be targeted on collection and provisions in wip
Keep your banker informed - even provide monthly info on KPIs
27 March - MP, Top 50 law firm
Our approach is to be cautious and not see the uncertainty in market conditions as a reason to invest. Having said that, we are keen to retain trainees who qualify in September, due to the investment we have made in them and because, in the longer term, we think this will be a sound investment.
27 March - Principal, management consultancy
Down-turns are opportunities to invest Å not necessarily financially, but give opportunities to invest the spare/additional time of the underutilised lawyers. This is a good time to develop and strengthen relationships with current clients, even if they are going through a rough patch; renew contacts with people whom the lawyers know they should have been in touch, but just not had the time and to develop relationships with referrers. It is also an opportunity to use this lull as an opportunity to increase the profile of the firm, practice areas and individuals in the market place of your clients.
I suggest that all this investment should be analytically and systematically targeted, time-recorded, and objectives set in terms of activities and results. This is a long-term investment but when the up-turn comes (as it will) then your firm will be the first on-hand to help your clients.
28 March - Finance Director, Magic Circle law firm
As with other businesses it depends where you are relative to the competition. If you have a strong balance sheet (in law firm terms probably that simply means profitability) you have an opportunity to pick up some bargains (again, in law firm terms that translates more into actually having the opportunity to recruit laterally from a population that in better times may not have looked outside their own firm rather than into a cheap price). But you better not do too much because any investment dents returns in the short term and you can easily move your business from a position of strength to relative weakness. Investing in markets that are still growing robustly doesn't have the same advantage of investing in a less benign economic environment because prices don't really move down - there may still be opportunities for laterals but you better make sure any investments are strategic rather than a tactical response to current conditions or you may end up with a big White elephant.
31 March - MP, Top 25 Accounting firm
It depends who you speak to! I think it is an opportunity to find people who can drive the business forward after the downturn but it is essential that any new party pays their way (if nothing more) from day 1.
Some of my partners, however feel that we should retrench and view the next 12 to 18 months on a very conservative basis. Don't think there is a definitive answer but my personal feeling is that it is an opportunity.
31 March - CEO, Scottish law firm
I think effective management is about aligning your people to your opportunities at any one time. In a market where some services are slowing down, others (eg. insolvency, re-mortgaging etc) may be picking up. Having said that, a difficult market is a true test of the firm's strategy - like shares, you should be investing for the long-term and it might force fee-earners to focus on what they should be doing rather than just reacting to the next piece of work that comes in the door as they tend to do in a busy market.
1 April - Director, Top 5 property consultancy
Thoughts -
Downturn is all about wise investment and careful cost control; allied to Positioning for the future
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