Managing Law Firms in Transition

Managing Law Firms in Transition

The Key To Resolving The Lawyer / Marketing Dichotomy

Posted in Law Firm Growth, Law Firm Leadership

I am very pleased that Eric Fletcher has agreed to provide this insightful guest post. Eric is an extraordinary law firm marketing professional who leads marketing and BD at Liskow & Lewis, is the author of the Marketing Brain Fodder blog, and is the co-author of 8 Mandates for Social Media Marketing Success. Eric is a husband, father and a long-time advisor and friend of mine. If you haven’t seen it Eric’s TEDx talk is worth your time.

Enjoy Eric’s post.

Corporate rivalryThere are exceptions; but the fact is that for many lawyers, marketing is an annoyance, if not anathema. And there is good reason.

Talk to either or both sides of the conversation, and at least two possibilities arise.

  • Lawyers, often by nature and certainly reinforced by education and training, are highly skilled at spotting problems, whereas marketing professional services is about the identification of opportunities; and,
  • Historically, the practice of law has been reactive, providing analysis and applying precedent, while business development is based on proactive pursuit.

Yet, notwithstanding the glass-half-empty vs. glass-half-full perspective, neither of these are the reason marketers and law firm leaders frequently seem at odds.

What About Changes In The Industry?

Granted, these are not the good ole days. For years the challenges of legal business development were camouflaged by remarkable growth. But for at least a decade an increasingly competitive marketplace has introduced the legal industry to the uncomfortable reality of disruption.

The once rock-solid cornerstones — the right law school, passing the Bar, hanging a shingle and delivering quality work — guarantee nothing in this new normal. Already wrestling with the practical applications of all things marketing, lawyers now face the challenges of finding new work.

But every industry changes. Even major shifts in the legal space are not the root cause of the lawyer / marketing dichotomy.

The Problem and the Opportunity

At its best, marketing is not about spin, or tag lines. Nor does success hinge on a splashy new website, the colors of a logo or an award-winning ad.

Whatever you might label it — marketing, client relations, business development, or sales — the law firm marketing function is about facilitating and supporting opportunities for lawyers to develop relationships with a strategic market.

The Best Marketing Is Born Of Aspirations

Roger’s most recent post discussed the fabric of successful and enduring partnerships — shared aspirations.

The suggestion is that there are a handful of goals so central to the reason a partnership was formed in the first place, that these aspirations become the backbone of strategic direction. Every critical decision — compensation, growth, practice diversity, where to invest — is measured against this set of aspirations.

And yes . . .shared aspirations — implying they are well known and discussed — provide rich context for a natural approach to marketing.

The pursuit of those universally held, jealously guarded goals becomes a cultural marker. In this environment — where objectives, priorities and the allocation of resources are clear, marketing becomes organic; and the partnership’s marketing professional can lead a calculated pursuit of a clearly defined target.

Organic marketing delivers unique leverage because everywhere the organization touches its market, the DNA of the firm is planted.

If marketing is mystery or anathema in your firm, progress may be as close as examining whether the critical aspirations shared by your partnership are at the heart of why and how you take your story to your market.

More Innovation for Law Firms Coming-How it Will Change Your Practice

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

As staid and conservative lawyers and their profession may seem, it is undeniable that change is a part of their world.  The change that has confronted the legal profession since the collapse of 2008 has garnered a lot of press, but lawyers and their firms have had to adjust to an altering world for a lot longer than just the past seven years.  Even so, most would agree that the economic turmoil of 2008 has been followed by a more demanding client base, the advancement of alternative service providers and increased competition, including from clients.

Recent attention has been directed to non-financially driven developments that suggest a future in which the delivery of legal services will change further, perhaps dramatically so.  Data analytics in litigation is being touted as a tool that will make litigation outcomes more certain.  Algorithms are being used to write articles, which mean that a new communication medium may supplant some of the work that lawyers currently do. “Ross” has been introduced to the legal world and while arguably not much to look at, he (or she?) is an artificially intelligent attorney that does legal research. And the “Uberization” of law firms is also being sighted on the horizon.  If these developments don’t actually take hold, other innovations certainly will come in their wake to impact lawyers and law firms.

The coming law firm revolution (or latest evolution) means, to one group of commentators, more technology and fewer lawyers.  For some smaller firms, it will allow them to “punch above their weight.” In the case of other firms, possibly not. At least one bar leader has warned her colleagues to “get an edge on artificial intelligence.” Do all these advances threaten the future of law firms, as we know them? For law firms that are prepared to meet these changes head on, the answer is “no.”  Other law firms that insist on “whistling past the graveyard” will find the future much more difficult.

Artificial intelligence, algorithm based communications, data analytics and Uberization are groundbreaking in any industry and certainly could be in the labor-intensive business of law.   With the advent of these changes (or ones that prove more effective), law firms should be prepared for at least five consequences:

Clients Will Compete With Firms Even More.  Since 2008, more clients have built up their in-house legal staffs to do the more commoditized work previously performed by outside counsel.  New technologies will reduce barriers to entry and accelerate this trend.  New tools will render the currently complex more routine and clients will compete with law firms more than ever.

Legal Work Will Be Less Labor Intensive Thus Undermining the Value of the Billable Hour.  The new tools will drive efficiency unseen previously.  Firms that base their economies on hourly rates may find it difficult to generate sufficient hours to support their financial model.  Firms of the future will need to migrate to a financial model that generates revenue outside the billable hour.

Firm Investment Must Be Reallocated.  The march of technology has been felt for a long time.  In the future, firms will need to allocate budgets not only for more advanced systems, but also for personnel that will fill a quasi-legal role to generate data and analysis that lawyers can interpret.  An incoming associate class may give way, at least partially, to an incoming tech class (some my be trained as lawyers).

Pricing Legal Services Will Become More Important.  A by-product of increased efficiency and reallocation of resources at law firms will be the need to price services based on product and results delivered.  Pricing will need to adequately blend certainty and client results, return on investment for the firm, and positioning against competition (other firms and in-house) in order to thrive.

Human Resource Management Will Change.  Human resource management will rely more heavily on contract lawyers (or their equivalent) and short-term utilization of outside services.  Whether the legal profession becomes truly “uberized” is subject to debate, but the underpinnings of the Uber model will drive the profession away from long-term personnel decisions and towards managing fluctuating demand by short-term hires.

Law firms with a healthy respect for and curiosity about innovation will adapt as these or other new changes take root.  Firms that fear change will struggle.  Which path will your firm take?

A Singular Predictor Of The Success Of Your Law Firm

Posted in Law Firm Leadership

imageTo what degree do you and your partners share aspirations? The answer may, more than anything else, be an indicator of your future.

Few would deny that the legal market is increasingly complex and competitive. Many suggest the model for success is changing.

But whether you are one of two or three partners launching a boutique, one of a thousand or more in a Big Law venue, or anywhere in between, there is perhaps no greater predictor of stability and sustained success than the degree to which the partners in the venture share aspirations.

Aspirations can cover an array of topics; but these are the very few things that are of utmost importance — to an individual, and to a partnership. A breakdown of categories might include:

  • Profitability
  • Social contribution
  • Reputation
  • Type of work
  • Types of clients
  • Work / Life balance
  • Culture
  • Values
  • Legacy

In an ideal world I guess all lawyers would aspire to:

  • make a lot of money
  • have a positive social impact
  • have a great reputation
  • enjoy the benefits of perfect work / life balance
  • go to work each day in an environment that most would call pleasant
  • and leave a mark on the next generation

You might reorder, add to or eliminate items on the list; but the issue is that one must make choices as to what is most important.

The more diverse the list of things of utmost importance, the more the fabric of the partnership is at risk.

The real-world difficulty is that commitments in any one area are likely to run counter to the priorities and values represented by another. Investments in one priority will, by necessity, deprive other areas of resources.

There is immeasurable leverage and minimal conflict when everyone on a team is seeking to build and accomplish the same thing. This is a basic truth of organizations — whether you are talking about the 2015, World Cup winning, USA Women’s team . . . or your law firm.

Certainly there are policies, procedures and tactics that play an important role in efficient and successful operations. And it is a given that you must assemble a team capable of delivering excellent work.

But when it comes to long term stability and success, the most important question may be — to what degree do you and your partners share a common set of basic aspirations?

Strategic Shrinking-Spinning Off the Struggling Law Firm Office

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

200px-For_Sale_by_Owner_Sign.svgLaw firm growth is a popular strategy or tactic among law firms seeking to compete in today’s ultra competitive legal services market.  Growth often is achieved through mergers, practice group acquisitions and lateral hiring.  And in some cases, the growth initiatives result in new offices being opened in markets previously not served.  New offices create excitement and usually generate visions of success on account of expected synergies, anticipated new opportunities and the adding of a roster of respected lawyers.  Over time however, the excitement can wane and in some cases is replaced with the realization that the new office is more of a burden than a benefit.  The malady is not confined to new offices-long standing offices can become burdensome over time as well.

Fixing the problem office, whether traceable to financial performance or other issue(s), is critical to the health of the firm at large.  Substandard financial performance can not only undermine the larger firm’s bottom line, but it can foment morale and cultural issues system wide.  Finances aside, problems with practice quality risk a firm’s reputation and must be addressed to avoid tarnishing the brand.  Inconsistent cultures can likewise be disconcerting.  Whatever the basis for the problem, prompt action is required.

Unfortunately, not all problems associated with a distant office can be solved easily.  When the solution is too complicated, requires the investment of too much capital or is too formidable due to market dynamics in the city the office calls home, the drastic option of office closure is presented.  But the better approach may be to “spin off” the office and depart the market.  If law firm leadership finds itself dealing with a struggling office that does not seem to be easily fixed, the following thoughts are worth considering:

A Spin Off Should be Done for the Right Reasons.  Just because a distant office struggles does not mean that it should be closed.  Hard work and basic blocking and tackling can correct many a problem.  But if substandard financial performance appears uncorrectable, strategic incompatibility exists, or the culture is not in harmony with the rest of the firm, finding a new home for the office may be a good alternative.

One Man’s Trash is Another Man’s Treasure.   While not all spin offs need to be described so pejoratively, the point is that just because an office is not valuable to one firm does not mean it won’t have great value to another firm.  A large firm deciding to spin off an office can often find suitors for the office if it tries.  Alternatively, sometimes the smaller office is a good candidate to become a stand-alone law firm.   In any event, a struggling office may just need to be put in a position to succeed and a new home may be the right solution.

Timing is Important.   Ignoring the opportunity to affect a timely spin off can subject a smaller office to eventual defections, terminations and an inability to recruit.  A crippled office will end up being unattractive and leave the larger firm with many headaches, including unwanted lingering liabilities.

For Clients and Personnel, It May Be the Best Thing.   A planned and controlled disassociation may be far better for clients and personnel than a painful stream of departures, defections and terminations.  With foresight and planning, the transition of an existing office to a new firm or the creation of a stand-alone firm can be seamless for clients and personnel.  Not only are their interests supported, but also the remaining firm can lessen its malpractice risk and liabilities typically associated with closure.

Once Divested, the Leadership Can Focus on the Firm’s Future.  An office that is incompatible to the firm as a whole takes a lot of leadership’s time and energy and detracts from the efforts to run the rest of the firm.  Once disassociation occurs, however, time previously spent on the now departed office can be dedicated to implementing the strategic objectives of the firm as a whole.  By being able to focus on a unified strategy implemented in a consistent way, the firm optimizes its prospects for the future.  And by eliminating the incompatible competing interests presented by the troubled office, leadership’s message about the firm’s direction not only becomes more consistent, but more credible.

For many firms, a poorly performing office is ignored, bolstered with additional investment or closed.  Yet in some cases, a spin off may be a preferable alternative.  If your firm has a struggling office, would a spin off work be a possible solution?

When Law Firm Expansion Is A Precursor To Fracture

Posted in Uncategorized

growth-strategyRecent posts from Above the Law and Law360 have focused on K&L Gates, and happened to touch on an issue we’ve been wrestling with for some time. The primary focus of the articles was departures from the firm; but it also touched on the challenges that are part and parcel with building large geographically and practice diversified law firms.

The posts suggested that at least some of the departures being experienced by K&L Gates are directly linked to the fact that those leaving the firm have little, if any need for the platform the firm has developed. Their practices didn’t require the capabilities and infrastructure required by a global organization; and they were not interested in paying for something they didn’t want or need.

This post isn’t really about K&L Gates, but it is important to point out that Peter Kalis, the firm’s chairman, had an interesting response to the article. Kalis pointed to his firm’s debt free balance sheet, and the success the firm has had in importing/exporting business from region to region.

What this post is about is the cost of building an infrastructure that doesn’t create value for a super-majority of partners of the law firm.

Many firms in the legal profession continue to suffer from an all too often reckless and ill-advised bias for growth. One must conclude that there is a basic belief that adding more practice areas and more offices in more countries on more continents will somehow make the firm stronger.

As a general rule it does not.

In fact, when the steps taken to precipitate this type of growth are taken without the support of the super majority of the owners mentioned above, one must wonder whether this kind of growth is about anything more than feeding the ego of a chairperson or management committee.

The cost associated with expansion, the increased operational complexity and the varied support requirements all put pressure on a law firm. This kind of pressure can certainly be dealt with and effectively managed if it stems from a shared goal, priority or aspiration.

When the complexities of expansion are encountered in a culture characterized by splintered goals, no one should be surprised when partners elect to depart.

Any investment, and especially those that come with the consequential changes of expansion, should pass a rigid and objective test of the value associated with it. Does the investment clearly benefit the super-majority of the firm’s partners in a verifiable fashion that would pass a review by an outside analyst?

If not the investment should be passed on. Or at least sent back to the drawing board.

How are your firm’s investments evaluated?

Lawyer Exodus From the Law Firm: Don’t Get Mad, or Even, Get Focused

Posted in Law Firm Crisis, Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

Unexpected lawyer departures from a law firm are a far too common occurrence as noted by Above the Law’s recent reporting on K&L Gates.  It can happen at any time during the year but many times peaks around the end of a fiscal year.  Whether it be disappointing financial results, political infighting, loss of confidence in management or plain staleness at the old firm, the end of year stimulates thoughts of leaving.

A typical reaction from management is to consider the departed as disloyal or misguided.  Casting a shadow (throwing shade?) on the stated rationale for departure can provide reassurance that all is not bad at the firm or that the firm is better off free of such selfish people. But for the most part, there are more important things to do.  In other cases, thoughts percolate about making the departure more painful or difficult for the firm’s newest alumni.  While the enforcement of fiduciary or contractual obligations has its place, extracting tribute from the departed takes on a life that seldom plays out well and usually delivers little benefit.

A more rational response is to focus on the things that really matter-the nitty gritty that determines the future health, if not survival, of the firm.  So when confronted with an unanticipated lawyer departures, leadership should:

Determine the Short-term and Long-term Financial Impacts.  Leadership must take stock of the financial impact caused by departures.  For firms that have borrowed money under credit facilities, the departures may create a non-monetary default.  Assessing this possibility is very important.  The next step is to analyze the short-term financial impact of the departures.   In many cases, the departures actually provide a brief cash-flow respite since financial obligations to the former lawyers are reduced or eliminated.  From a long-term standpoint, the departures always have a financial impact.  Whether the outcome is positive or negative typically turns on the profitability of the practice that left with the attorneys.  Finally, if the firm has an obligation to return capital to the former owners, the impact may be short-term, long-term of both.

Be Alert to the Tsunami.  Like the first guest at a boring party announcing the need to leave only to be followed by the entire guest list, lawyer departures can create a Tsunami of defections.  When more than an isolated departure is experienced, wide spread discontent may be gurgling beneath the surface-ready to turn a slow trickle into a gargantuan wave.  The first departures could well be a signal.  See it as such and take steps to stem the potential for more.

Secure Your Information and Assets.  A firm’s assets can be many, including client relationships, ongoing legal matters and proprietary information.  At the same time you are putting on the full-court press to retain your clients and open matters, be sure to secure the firm’s information base.  As legally and contractually permitted, cut off the departed parties’ access to sensitive information.  It may be too late since most resignations are preceded by surreptitious preparations (including collecting data, work product and vital information), but sound management must act to minimize access once departures are announced.

Notify and Reassure Those That Matter.  While you are reacting to the crisis, leadership must avoid becoming so insular as to ignore other interests that need reassuring.  Staff, associates, owners, clients, banks (remember the possibility of a non-monetary default) and landlords all have an interest in the firm’s well being.  An information vacuum can cause these parties in interest to assume the worst.  Getting out in front of the news quells the possibility of overreaction.

Develop a Plan for the Long-term Health of the Firm.  By the time the foregoing steps have been taken, or at least started, designing a long-term plan for the health of the firm becomes paramount.  Things that are learned as the crisis is addressed (the financial impact, the risk of added departures, loss of clients and third party reaction) will be the guideposts for a plan.  Soliciting input from key players still at the firm, from important clients and, in some cases, outside parties, can be very important to not only create a sound plan, but also one that has good prospects for “buy-in.”

For most firms, year-end is still months away.  If the end of your firm’s fiscal year brings with it “moving day,” immediate focus on the crisis is critical.  Is your firm prepared?

Why Do You Want To Grow Your Law Firm?

Posted in Law Firm Growth, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

growth 2Ask the Managing Partner of any 100 law firms to list their top 5 objectives for their firm, and 99 or more will say something that relates to growth in the number of lawyers, locations or practice disciplines.

Ask the same Managing Partners what is driving the need for this expansion and the response will most likely be something like:

  • To send the right message to the firm — if we’re not growing we’re shrinking;
  • We have excess office space to fill;
  • Bigger means we’ll be better positioned to seize opportunities that might come our way;
  • We must be bigger in order to be competitive.

Now, there isn’t anything inherently wrong with growth. And though there is no denying the fact that talking points like those noted above are almost always going to be part of a discussion, nothing about this kind of conversation is strategic. None of these reasons are likely to lead to long term success for the firm, its lawyers or those that you seek to hire.

A Better Conversation

There are strategic reasons to grow. Two of the best are:

  • To respond to the expressed needs of a client(s) — real, not inferred or imagined;
  • To position you to do more of the type of work you aspire to do.

Let’s unpack these a bit.

Client needs

To meet the needs of existing clients is a great reason to grow. But, be careful with your conclusion. The fact that a client has a need for legal support in a practice area or location that your firm doesn’t practice doesn’t necessarily translate to an opportunity. The client may be very satisfied with existing counsel — and not inclined to make a move. Be clear about the amount of work and the likelihood that your firm will capture it.

Before considering growth in response to what you believe to be the needs of a client, have a conversation with the client. Explore their needs, desires and any current concerns. Let them know of your desire to be in a position to more completely serve their needs.

Only after receiving strong encouragement from the client should you proceed to further consideration.

Work you desire to do

In the formative days of most law firms, the founders possess a strong sense (or even written mission) of what type of work the partnership aspires to do.

To actually land that work is a different story, it is difficult to convince a client to send you work of a particular type if you have little to no experience in that area. But after having an opportunity, and performing well, you should find yourself in a position to do more and more of that type of work.

One additional approach to getting desired work opportunities is to hire someone who already has a reputation and developed practice in your targeted area. This accelerated approach to acquiring the desired work can be dangerous. If the person doesn’t share your values and aspirations the opportunity should be passed on.

Growth is alluring, and I am not sure why. The bottom line is that far, far more firms have failed because of an unstrategic (and rushed) approach to growth than from growing too slow. The importance of caution in growth can’t be overstated.

 

How and why is your firm growing?

 

Meeting the Challenges Ahead: Law Firm Success in Transitional Times

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

Challenges ahead warning road signFor followers of the law firm industry, there never is a shortage of opinions about its current state or what the future holds. True to form, the recent publication of Professor Ben Barton’s Glass Half Full: The Decline and Rebirth of the Legal Profession is a provocative take on where the law firm world is today and where it is headed.  Professor Barton’s book has stimulated discussion already and no doubt more will come.  Whatever one’s view regarding whether the industry is in decline, on an upswing or just treading water, few would argue that the last 10 years have not been a time of significant change.

The challenges facing law firms (not to mention the battle being waged by solo practitioners to keep pace as noted by Professor Barton) cause some law firms to abandon past practices in favor of trying something new and more effective.  Indeed, The Wall Street Journal’s Sara Randazzo profiled Quinn Emanuel’s new approach to finding fresh lawyer talent (Quinn Emanuel to Scale Back Summer Associate Program).  The highly regarded firm has decided to greatly scale back its summer associate program.  Instead, Quinn Emanuel is focusing its new attorney recruitment on third year students and graduates headed for or coming off judicial clerkships.

Change needed to meet today’s challenges is not always as simple as replacing a summer associate program with different hiring practices.  The challenges faced by law firms today are so varied that no “short-list” of solutions exists or is even imaginable.  Meeting today’s challenges is more a question of process-dealing with transition methodically and with a purpose.  For today’s law firms and its leaders, five fundamentals are essential to success in the days and years ahead:

Develop a Long-Term Plan and Stick to It. Smart firms have developed a long-term strategic plan after careful and thoughtful consideration. If such a plan does not exist, it is time to get one. But any long-term plan’s value is undermined if it is cast aside in favor of the latest trend. So develop a long-term strategic plan (sound strategy) and couple it with the discipline to see to its execution (strong leadership). If it begins to appear flawed, recognize the flaws, rethink the plan to make necessary fixes and create a new or better long-term plan. It likely will represent a tweak of the earlier plan, not an entirely new direction. But above all, don’t manage “on the fly.” It will only disappoint.

Emphasize Your Strengths. Face it, not every practice area at your firm is a world-beater. Play to your strengths and consider phasing out anything that is weak or not critically complimentary to your strengths. As Basha Rubin wrote for Forbes in her The Business of Law: Is the Mid-Tier Law Firm Dying [?], specialization allows you to distinguish yourself in today’s ultra-competitive world. In contrast, little that a generalist does is unique.

Recognize that Growth is Neither a Solution Nor a Strategy-It is a Tactic. Refrain from thinking that growth itself is a great plan. Too often growth plans are viewed as a strategy that solves problems or stimulates opportunity. Unfortunately, growth is mostly a tactic, not a strategy. If growth implements a firm’s strategy, great. If not, it is action packed but aimless.

Understand that Not All “Best Practices” Suit Your Firm. Another law firm’s success with an initiative does not mean it is something to be emulated. Studying industry best practices is good, and thinking about them introspectively is better, but implementation should only happen if the fit is right.

Be True to Your Firm’s Culture. Trying to be something you are not is destined for disaster. A firm that has a distinct culture should manage, hire and practice consistently with that culture. If lateral hiring occurs, leadership should give as much attention to integrating the new hires as catching them. Integration means inculcating the additions into the firm’s culture. They will benefit, your legacy people will benefit and the firm will benefit.

Strong leadership and sound strategy will guide law firms through challenges and transition.  While there may not be any easy answers to the difficulties faced by law firms, these five fundamentals can go a long way towards guiding leadership to the right result.  When your law firm has faced challenges, what approach has worked best?

 

Law Firm Decline and Leadership Mistakes

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” – Charles Darwin

iStock_000026355793XSmallThese days, scarcely a week passes without news of another law firm in decline. From high-profile names to less-known partnerships, the leaders of each face pivotal decisions. Some of these firms will restructure or otherwise embark on a turnaround strategy. Others opt for merging with another group or offering themselves as an acquisition target in an effort to avoid dissolution. In recent years we have seen far too many end in a messy liquidation.

Identifying The Path That Leads To Decline

The decline of a once vibrant partnership rarely has much to do with the quality of lawyers engaged in the practice. And though the marketplace is certainly tumultuous, what is at the heart of survival and success for some, and the dire straits of a struggle to survive for others?

In his book Corporate Turnaround, Dan Bibeault identifies four key mistakes that lead to organizational decline. These mistakes, paraphrased to the legal profession are:

  1. Failure to respond effectively to a changing competitive environment
  2. Poor control over operations
  3. Over-expansion
  4. Operating with excessive financial leverage

Let’s look at each one a bit more closely.

Failure to respond to change effectively

Every leader knows that the only constant in business is change. And no one need tell the leader of a law firm that our industry is changing at breakneck speed. Specifics of the changes virtually every firm leader must contend with include:

  • Increasing mobility and declining loyalty of attorneys
  • Client imposed pressure on pricing
  • Non-traditional competitors and alternative service providers
  • Technology’s role in driving certain lines of service to commodity status
  • Consolidation

Counsel/Advice – Effective law firm leadership establishes a formal mechanism through which change is routinely addressed. These mechanisms identify emerging changes to the business of law, and collaboratively craft appropriate responses.

Control over operations

Operational challenges are varied, and abound. If the leaders of a firm are continually surprised to find threats to profitability and stability, the firm is well on its way to a potentially painful transition process. On the other hand, keeping an eye out for these early warning signs can result in averting crisis:

  • Loss of a significant client relationship resulting from continued service delivery issues, or the departure of a key partner
  • Firm-threatening malpractice claims resulting from failure to engage in client problem management
  • Shortage of working capital resulting from continuing cash flow deficits.
  • Excess capacity in terms of space and people resulting from failure to manage attrition of clients and or lawyers

Counsel/Advice – Leadership must establish control mechanisms that spot these (and any evolving) early warning signs. These mechanisms may include:

  • Operating and capital budgets
  • Client feedback systems
  • Attorney and non-attorney review systems such as 360 reviews that register building frustration

What might law firm leaders be doing today, to better predict where firms end up in the coming months and years?

Law Firm Succession Planning 2015: Leadership’s Hidden Challenge (Part Two)

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

As discussed in my last post, Law Firm Succession Planning 2015: Leadership’s Hidden Challenge (Part One), the confluence of upbeat economic news with generational differences in the lawyer ranks presents a problem for law firm leaders not having an institutional succession plan.  The issue is not just theoretical-Altman Weil’s 2015 Law Firms in Transition report warns that the many firms not having a succession plan (Altman Weil projects the percentage at more than 65% of firms surveyed) will feel the economic effects imminently.   For law firms in this predicament, the task of adopting a plan can be difficult but not impossible.

Contemplating a future without a well-designed succession plan, or just thinking that its preparation can be deferred to later, amounts to playing high stakes poker with a lousy hand. But it does not have to be that way. Five steps can be followed that can fill the void. A firm facing the risk Altman Weil warns about must:

Pursue a Prompt Solution. Do not wait. Altman Weils report tells us what everyone knows; many law firm partners are resistant to change (Altman Weil concludes that resistance to change is “a persistent threat to law firm success”). Today, the general resistance is compounded by the good times enjoyed by many law firms. Despite the significant challenge involved in rolling out a succession plan in that kind of environment, today’s management must steel itself to the task and forge ahead. While other problems may receive management attention, leaders must be resolute and prioritize the formidable task of succession now rather than wait until later. Excuses or preferences should be cast aside-unyielding attention should be directed to development of a plan and seeing to its prompt implementation.

Communicate. In times of change or transition, clear and constant communication is vital. When the Boomer with the client relationships is approached, the firm’s objectives should be explained and he or she should be encouraged to become an architect of a plan that provides for succession. The Boomer’s nominee as successor should be solicited. Likewise, a discussion with the client is needed to learn its preference. Views about fears, concerns and benefits of all concerned should be exchanged. Reconcile divergent thoughts, and then refine a plan that reflects that the firm has listened.

Create a Plan That Harmonizes Individual Self-Interest with Institutional Longevity. Whether the succession plan is management focused or client retention focused, it must answer each participant’s bottom line question of “what is in it for me?” All players in the succession plan, especially in light of the generational interests at play, will wonder about the benefits to be gained from cooperation. The Boomer, whose practice or position in leadership needs to be transitioned, must feel that the plan is fair, benefits generous and future secure. Promises must be more than words-they much be backed by commitments that are tangible, evident and secure. Similarly, the successors need to see reason to invest in the plan, even though today’s attention to the plan may seem like it asks for too great a sacrifice. These potentially conflicting interests must be managed by leadership with the goal of furthering the interests of the firm.

Make it the Key Players’ Plan. For change of any magnitude to succeed at a law firm, partner “buy-in” is required. In the case of a client succession plan, it is critical that the Boomer aging partner and the selected successor be deeply committed to the plan and its success. Again, harmonizing the ideal of key player self-interest (what are the “must haves” for the aging partner and the selected successor?) with the firm’s long-term objective is essential to making the plan work. Management should strive to develop an appealing plan that is executed by the two key players without constant prodding from up on high. If the plan becomes the key players’ plan, it has a great chance of success.

Earn Trust Every Day. Like an anti-biotic, a succession plan won’t be effective if not followed to its prescribed end. And just as the key participants must be fully committed, so too should management. To show its commitment, management must daily reinforce its unyielding support for the plan and its participant’s. By doing so, management will earn the requisite trust that is essential to success. Failing to earn that trust, or taking it for granted, will create doubt that deprives the firm of its ultimate goal.

If your firm is without a succession plan, there is no time to waste in taking these five steps.   Even so, are there other things to do that you think are equally important?

 

 

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