The Law Firm CFO’s Role in Strategic Planning

In today’s consolidating legal industry, it’s more important than ever for law firms to develop a strategic plan that can help them gain and maintain a competitive advantage. The CFO should play a key role in the planning process – checking that the vision of the future financial performance of the law firm is realistic, consistent with market conditions, and reflects the desires of the partners.

Today’s law firm CFO takes a proactive approach to planning by not only providing financial information, but also analyzing data, comparing scenarios, testing assumptions, and recommending changes. For example, the CFO can evaluate whether the compensation structure is properly rewarding desired behaviors and actually enhancing profitability. Cost-reduction measures will likely be part of this plan, but it should also include other ideas, such as expanding profitable practice areas or targeting a broader client base.

One of the most effective ways for a CFO to communicate a desired change or vision to the management team is through the lens of financial performance. For example, increasing profit margins by 10% is a specific, measurable goal that can be clearly articulated to firm partners. The CFO should use his or her leadership skills to influence the management committee and persuade them on desired changes, without ignoring possible consequences.

After working with the managing partner to establish a strategic vision and gaining support from the management committee, the CFO will lead the development of a detailed project plan, which should include the following 10 steps.

1. Scheduling a project kickoff meeting (led by the managing partner) to gain support from other top leadership while explaining the objective and phases of the project
2. Interviewing partners to better understand their needs and expectations
3. Identifying key performance indicators (KPIs) for the firm through financial analysis and comparing those KPIs to benchmarks, along with a true measurement of top line and bottom line profitability by service line
4. Interviewing staff to better understand daily tasks and lawyer utilization of firm resources
5. Reviewing organizational structure and areas such as human resources, information technology, marketing and accounting to identify synergies or duplication of efforts
6. Looking at all vendor agreements and service contracts to identify renegotiation opportunities
7. Drafting preliminary recommendations, including measures that can produce short-term savings (4-6 weeks), near-term savings (3-6 months), and long-term savings (1+ years)
8. Sharing the recommendations with practice group leaders to gain their input
9. Reviewing final recommendations with the managing partner, while addressing any future concerns
10. Formally presenting recommendations to the management team, potentially divided into the following categories: organizational changes, changes to the operating model, implementation plan, and metrics

A deep understanding of the firm’s financial performance, risks and opportunities, along with project management and leadership skills, positions the CFO to be a valuable strategic partner.  Today’s law firm CFO can build credibility within the firm and succeed as a change agent by collaborating with the managing partner on the vision for the firm’s future, recommending changes that enhance the bottom line, developing and executing a strategic financial plan, and demonstrating measurable results.

Contact us to learn how Kaufman Rossin helps law firm CFOs maximize their impact.