Strategic drift – a risk for partnerships

Posted on: December 29, 2011

In most of the courses I teach and the coaching provided to senior lawyers, accountants and surveyors I talk about the importance of having a firm-wide strategy. Even if it is merely an “umbrella strategy” of some overall parameters about how the equity partners hope that the firm will develop and grow in the future. I also spend a lot of time encouraging individual partners to develop a strategy for their own practice or portfolio – and to align it with the firm’s strategy.

Why is strategy so difficult for partnerships?

Developing a strategy within a partnership in undeniably difficult. There are a host of issues, some firms:

  • lack leadership with an eye on the horizon
  • simply do not have a management board who are inclined to badger all the partners into agreeing a collective vision or mission
  • are so complex – covering many markets and many services – that they don’t feel that they can craft a strategy that addresses such diversity
  • are risk averse and do not want to set goals where they fear there may be a chance that they aren’t achieved
  • value autonomy and do not wish to constrain the aims or actions of any partner or practice area
  • want to avoid the conflict that is likely to ensure when incompatible goals are found or strategic choices are made
  • lack the management training to understand how they go about analysing the market, setting objectives and focusing on a few markets, services or initiatives to receive their limited resources
  • feel that they are “opportunistic” and will pursue whatever opportunities come along. One of the real values of a partnership is that each partner is usually “on the coal face” and in an excellent position to pick up weak market signals and new client needs and translate these into timely business development campaigns. You can have an agreed strategy and still allow emergent strategies to develop
  • feel that the market is so volatile that it is hardly worth attempting to plan (in which case they should think about scenario planning – see the blog https://www.kimtasso.com/book-review-chaotics-the-business-of-managing-and-marketing-in-the-age-of-turbulence 

Strategic drift for the entire firm

However, the danger in allowing all partners the freedom to pursue whatever strategies they wish is that the firm may experience “strategic drift”. For example, if one part of the business is particularly passionate about growing their practice area and is vocal in obtaining the resources to pursue their plans it is likely that this part of the firm may grow at a faster rate than other parts of the firm. This is all well and good in the short term when the new income streams flow into the business – but sometimes the profitability of this part of the firm is lower than other parts – which is detrimental to the firm’s overall financial health. The resources that have been used to pursue one partner’s “pet project” are not available to other partners and often the opportunity cost is not considered – until it is too late.

Another risk of strategic drift is that important markets or services are neglected and wither away. The firm may develop a reputation in one or two areas that make it much more difficult to develop those areas that it considers strategically important in the future. Repositioning a firm is a massive undertaking.

Strategic drift for particular partners

Generating a lot of referrals and recommendations can have a downside too. If you develop a reputation for providing a particular service or for a particular type of client you will generate lots of referrals. This is fine if the work and clients are exactly what you want. But by passively reacting to all of these requests may mean that your portfolio becomes focused on just this type of work and clients and you cease to generate other types of work or clients.

So, if you are looking for a New Year’s Resolution, make it that you will talk to your partners about ensuring that there is a productive discussion about the overall strategic goals of the business – its long term income and profit ambitions, its markets and services of focus, the split of income from commercial and consumer markets, the balance between existing and new clients and its desired branding and market positioning.

 

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