Managing Law Firms in Transition

Managing Law Firms in Transition

Law Firm Succession Planning: An Alternative

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

Leon Shapiro’s recent “How to Improve Your Organization’s Succession Planning” in Executive Street: The Business Leader’s Resource, reviewed the state of succession planning among many business organizations. Mr. Shapiro’s article noted the near universal recognition of its importance among business leaders, yet their confession that in many cases not enough is done for its preparation.

Among law firms, the same is often true. The press of everyday business pushes succession planning to the bottom of the “to-do” stack until it is too late. Many firms approaching the time for succession do not know who will succeed existing leadership, don’t have an actionable plan to implement succession, have not executed on succession a plan if it exists and have done too little in terms of developing a roster of future leaders. Some firms that allow their succession planning to slip and end up staring at a looming succession crisis turn to merger as a solution. This is especially true among smaller law firms, and many of them solve their dilemma by merging with larger, more established firms.

No doubt the smaller firms combining with larger firms frequently are being absorbed rather than surviving or entering into the combination as equals. In the case of law firm merger in which a smaller law firm is absorbed, any number of reasons can drive the decision to abandon independence. But given an aging of law firm leaders from the boomer generation, merger in which smaller law firms are absorbed may present an alternative to a more traditional law firm succession plan. Mergers driven by the need to provide for succession make sense for a number of reasons.

For the firm being that has not adequately planned for succession, merger can resolve many succession-planning issues. Without providing an exclusive list, a firm facing succession addresses some of its issues by agreeing to merge, including:

Leadership Dilemma. For some small firms, a future generation of leaders just never developed. Law firm leadership at those firms face the uninviting prospect of turning the reins over to unqualified or uninspiring junior partners. A merger can solve that problem.

Post-merger Continuity. Existing leadership may be concerned that a non-merger succession plan won’t go well and their firm gradually may wither away. Combining with a larger firm with solid leadership may reduce that risk and promise continuity. And that continuity may mean, at least in the mind of the boomer leaders, the law firm they started lives on.

Post-merger Opportunity. Feeling a possible lack of confidence in the leadership readiness of the smaller firm’s lawyers, boomer leadership may believe that a new and larger firm will provide better opportunities for their people for whom fondness remains. Leadership riding into the sunset knowing that they have provided opportunity to their people may feel more content.

Good-bye Worry. It is an overstatement to say that a merger removes worry for the former leaders of the absorbed firm. But a well-negotiated merger certainly can provide some sense of security to law firm leaders that have fought the good fight for so long without an end in sight.

Benefits. The merger agreement may include benefits to the absorbed law firm’s people, including former leadership, that are better than or more secure than benefits currently extant at the smaller law firm. It is inescapable that a law firm that closes due to a lack of succession planning will not continue to provide its people with benefits.

Although a smaller firm’s leadership may be motivated to merge in order to solve some of its succession issues, it is not as if the acquiring law firm does not benefit. The existence of firms with succession issues presents to the larger firm a market opportunity it may not otherwise have. In addition to gaining access to a desired market, the needs of the smaller firm to resolve its succession promptly may improve the economics of the deal and gains for the larger firm market intelligence that may exceed any that could be obtained by hiring a lateral or two to a de novo office.

These considerations already have been enough to propel some firms into merger-do they address the issues your firm faces?

 

Food For Thought. 6 Keys To A Healthy Law Firm

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Warning Signs, Uncategorized

Food for thought

For decades we’ve known two things about personal health: ‘We are what we eat’… and ‘We need to move more.’

Specifics admonitions and instructions change, but the theme is consistent. The human body needs a balance of nutrient rich foods with a compliment of vitamins and minerals. And there are the things to avoid — especially in excess — sugar, bad fats and processed foods. Add some exercise that gets the the heart rate up and tones muscles, and we’re on the road to a healthier life.

But what are the keys to a healthier law firm? This post is about six things that a healthy law firm keeps an eye on — if you will, a diet and exercise program for law firm management.

 It is not complicated. We suspect (or intuitively know) most of this; but not unlike working out and eating right, sometimes the daily grind gets in the way of basic principles. But when it comes to the firm you manage there are a few things that you should really focus on. So here are 6 keys to maintaining a healthier law firm.

The healthy law firm avoids excessive:

  • Debt. Relying on debt to fund operations is like fast food — convenient; but often detrimental to the firm’s health. Very few law firms that manage their debt appropriately run into severe financial trouble…no matter how volatile the market might become. On the other hand, a little taste of that credit line in order to even out cash flow can be a slippery slope. Borrowing for new furniture and equipment acquisitions, or to finance lateral hiring are warning signs. An increasing reliance on debt can become a crushing burden.
  • People Costs. The cost of excessive staffing — whether attorney or administrative — is like two scoops of double chocolate chip every night. Not only does excess staffing come with a fixed cost; when the human resources exceed the amount of work to be done, morale drops. Financial pressures increase. Layoffs typically ensue. And culture is weakened — not to mention the damage done to those adversely affected. Careful modeling that clearly outlines the cost of adding people is one of the signs of a discipled and healthy law firm management team.
  • Space. (Now we’re going to step on some toes, because we love our office space.) All one need do is check the record. Commitments to expensive or excessive space have been the ruin of many a firm. Increasingly, healthy firms are minimizing the number of square feet they  commit to, and resist the temptation to lease premium space in the shiniest new building in town.

Avoid excess in these three areas, and you’re well positioned to focus on remaining three keys to health.

  • Stay Connected With Each Other. The things that brought you together as a firm are the things that, if nurtured, will create a cultural fabric strong enough to meet challenges, embrace opportunities, and withstand almost anything. It sounds so simple, but quality communication is often like the physical exercise we know we need; it is the last thing we get to…or not.
  • Remember The Sweet Spot. A firm grows stronger by focusing on excellence in work product and service. Stick with what you know. Resist the temptation to be all things to all clients. Unless yours is a most unusual firm, that’s likely not your sweet spot.
  • Stay Connected With Clients. A law firm that consistently maintains an understanding of what clients really think, care about, and need has landed on the formula for maintaining organizational health.

 

How healthy is your law firm?

 

 

Law Firms that Focus on Growth-Where is the Focus?

Posted in Law Firm Growth, Law Firm Transition, Law Firm Warning Signs

FocusDentons and McKenna Long recently announced the intent to merge.  Media reporting of the merger was substantial, including an April 8, 2015 article written by Sara Randazzo in The Wall Street Journal.   In her Dentons, McKenna Long to Merge, Ms. Randazzo quoted Denton’s global chairman Joseph Andrew as stating, “[O]ur goal was not only to make sure we can grow, but to demonstrate the importance of momentum.”  Mr. Andrew also noted Denton’s position in the competitive landscape by stating, “[W]e compete with everyone.  We compete with the largest law firms in the world and the smallest law firms.”

To be fair, the Journal’s reporting on what Mr. Andrew had to say may not have covered all the strategies driving the McKenna Long deal.  Being accurately quoted about the reason for the transaction and the firm’s place in the marketplace still may not have described adequately Dentons’ strategic considerations.   But when given the opportunity to explain the deal’s rationale to the Journal, the impression Mr. Andrew left was that Dentons’ growth was all about, shall we say, growth.  Without more, Denton’s justification for its expansion seems a tad underwhelming.

What is Behind Dentons’ Growth?  Our firm hasn’t worked with Dentons so we are left to wonder what is behind its expansion strategy?  Ms. Randazzo’s article prompts us to think about the possibilities.

·      Nothing was stated (or at least reported) about Dentons’ desire to improve client service.  Service improvement is likely important to Dentons and the expansion may further that goal.

·      Nothing was said about expanding its substantive specialties so as to achieve a first-in-class capability that leads to market dominance.   Although not cited, such motivation certainly could be behind Dentons’ growth.

·      Nor was there a mention from Mr. Andrew about improving efficiency of legal services as a predicate to delivering greater value to clients.  It too could be a strategic imperative behind merging with McKenna Long.

·      Dedication to growing client relations was not mentioned either, but it also could underlie Dentons’ commitment to growth.

·      And while maintaining uniformity of quality levels can’t possibly drive expansion, Denton’s silence about its plans for maintaining professional quality throughout its many offices does not mean that it isn’t an unspoken non-negotiable for the firm.

Strategic Growth.  Some may argue that growth is more of a tactic than a strategy.  As Beverly Landais recently wrote for Managing Partner in her Growing Your Law Firm Needs More Than A Focus on Size, “[s]ize does not win loyalty.  Well thought-out value propositions that consistently anticipate and meet client needs do.”  Indeed, in few instances does growth alone meet client needs.  Ms. Landais also thoughtfully points out, growth can bring with it greater challenges to success, not fewer. For that reason, if growth is not intended to improve client service, add critical services required by existing and future clients, improve efficiency and client relationships all the while improving the short-term and long-term financial stability of the firm, its strategic benefit can prove fleeting.  As many, including Ms. Landais, argue, a law firm doesn’t gain strength and stability just because its footprint gets bigger.

What Lies Ahead For Firms That Grow Without an Underlying Strategy in Mind?  For firms that just want to grow to show that they can, the near-term momentum enjoyed does not assure its future.  Nor does it necessarily improve the present.  For those firms, when the momentum stops, what is next?  Momentum can slow, it can stop, and it can be reversed.  Embraced too fully, it can deflect a firm from focusing on the true building blocks of success.  Measuring success by momentum seeks validation through the pursuit of a false positive-a pot of gold at the end of a rainbow.

In today’s legal landscape, law firm growth is all around.  But as hard as it is to compete in today’s legal environment, increasing a firm’s size or footprint without fulfilling a more deeply considered strategic imperative just adds to the challenges a law firm faces.   For firms that think growth is a panacea, consider the words of the infamous Charles Ponzi who stated “I went looking for trouble, and I found it.”

You’ve Lost That Lovin’ Feelin': A Story of Law Firm Failure

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

conflict imagepeopleAs we continue to see law firms fail, and dramatic efforts at restructuring continue at a heady pace, market analysts can’t help but look for a common denominator. Is there a quantifiable predictor of tomorrow’s troubled law firm?

While a number of things can push a firm into a transition mode, there seems to be at least one universal theme. Firms that wrestle with the most traumatic forms of transition once consisted of a group of professionals who found joy and satisfaction in working together, but today, to some degree, that joy and satisfaction is gone.

It may be a loss of confidence in the direction in which the firm is headed, diminished trust in leadership, or just an overall degradation of the pleasure that once came from sharing one another’s professional pursuits.

Repeatedly we see instances where leaders talk of their firm being a cohesive group with everyone committed to growing a firm together.

That’s what we hear.

But what we see is a key partner’s departure one day, the loss of a group the next…… A year later a floor is empty or an entire office closes. And before we realize what has been happening, a once committed partnership finds itself in bankruptcy court.

Admittedly there are economic and industry variables that contribute to the trouble. But it is almost always the case that to the degree that enthusiasm and joy of yesteryear is absent, the firm is at risk.

Is it possible to spot early warning signs? Can the leadership of a law firm monitor a partnership’s feelings?

We believe it is possible to spot the signs of diminished joy and impending trouble. And more to the point…there is something you can do about it.

How To Know

Most law firm leaders feel as though they are “in touch”, and have a finger on the pulse of their organization. Unfortunately, many are sadly mistaken. Follow these steps, and you have a shot at eliminating some of the blind spots and surprises:

  • Make it a routine to query individuals that are representative of segments of the firm. It isn’t easy; but if you’ll make it a habit to communicate often and listen hard, you’ll hear about feelings — personal as well as individual perceptions of the institutional feelings. (Warning: try faking your way through this and those who are most unhappy will spot the insincerity a mile away.)
  • Conduct a confidential survey of the organization periodically. The survey should be short, structured by professionals, and shed light on issues that are of significance to stakeholders of the firm.
  • Involve an outside perspective. The occasional use of independent facilitators at firm events can be a very effective tool in identifying areas of concern, and probing issues of importance to firm members.

What To Do With What You Learn

In order to get to the heart of the matter, you have to go deeper than simply spotting the fact that you have an issue. Addressing concerns in a way that makes a substantial difference requires that the driving force behind the concern or dissatisfaction be dealt with.

Using a drill down method for discovery will typically lead firm leadership to the center of the issue(s) being faced. Once again independent outside resources can be of great value in discovering what is at the center of any trouble that might be brewing.

Don’t wait until the joy is gone. Take steps today, and preserve all of the positives that brought your firm together in the first place.

Law Firm Merger-What Makes Merger Success Likely?

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

A headline from last week announced the law firm merger of Dykema with Texas’ Cox Smith.  Although Michigan based Dykema already had a foothold in Texas, its merger with well-regarded Cox Smith represents a significant commitment by Dykema to its Texas strategy.  The Dykema/Cox Smith combination also is further evidence that law firm mergers are a popular way for firms to grow in promising legal markets.

Numerous reasons propel firms towards merger but for many firms the significant step of merger is particularly worth considering because (i) it solves succession plan issues, (ii) client needs dictate a broader platform, and/or (iii) financial or market dynamics demand change. Getting from the step of being “receptive to merger” to the step of “closing a merger” is a long process that requires careful and in-depth analysis. While due diligence, merger term negotiations, who is included and internal selling can occupy firm management for weeks if not months, the analytics ultimately come down to five areas of compatibility. If the fit is right, or reasonable measures can be taken over a reasonable period of time to assure a good fit, the merger has a much greater chance of success.  Thus, there is a much greater chance of success if there is:

Cultural Compatibility. Culture is more than being comfortable with your new partners. Culture involves many things that you may take for granted, including employment arrangements and practices with legal and non-legal personnel. How one firm hires or fires an employee matters. Promotion practices, performance evaluations and decision-making processes say a lot. These everyday interactive things define a law firm’s DNA and its personality. Being compatible culturally avoids a schizophrenic result.

Financial Compatibility. Seldom do two law firms display the exact same financial metrics. Two firms with a wide gulf in metrics like profits per partner, revenue per lawyer, productivity per lawyer, capital, and realization are not likely to mesh. Metrics that are more closely aligned nonetheless need to be scrutinized to avoid a false positive based on apples being compared to oranges. Disparity in billing rates, firm debt, unfunded pension obligations and space utilization undermine financial compatibility.

Client Compatibility. Clients make a firm. Besides the all-important question of legal conflicts, a firm needs to know the philosophical and strategic approach of its betrothed to business conflicts, client profiles and the proposed billing rates. While it is easy to see the incompatibility of a law firm with a huge union clientele trying to merge with a firm that represents management, other more subtle problems can lurk beneath the surface. These subtleties need to be studied. The respective firms’ clients that are “competing to the death” in the marketplace may not see the benefit of being represented by the single firm the merger creates.

Compensation Compatibility. The setting and paying of compensation is tough in any circumstance. But trying to blend two systems in which one firm’s lawyer behavior is different than the other firm’s due to different compensation system induced motivations is even tougher. Moreover, if one firm’s lawyers are used to being paid a larger draw every month than the other firm’s lawyers, something will have to give. An otherwise compelling merger may be saved with phasing in the two systems, or better yet, a new system that utilizes compatible best practices.

Operational Compatibility. No firm can succeed if it does not operate smoothly. Technology or other operational concerns need to be understood and dealt with up front lest they create undue frustration post merger. Not all these issues can be resolved as of the merger’s effective date, but understanding the issues, developing a plan for dealing with them and communicating about them and their planned resolution helps greatly.

Mergers can be risky, but they also can propel a firm to places not realistically possible if left to organic change. Prior to getting too deep in the merger discussions, strong law firm leadership will study the two firms’ compatibility in these five areas. When considering a potential merger, is there anything more important than making sure the fit is right?

How Healthy is Your Law Firm

Posted in Uncategorized

As we conclude the first quarter of 2015 it occurs to me that now is a great time for law firms to conduct a quick self-assessment. Here are 5 areas that, ifHealth carefully analyzed, provide a preview of what the future may hold for your firm.

  • Turnover, any unexpected turnover is a sign of potential trouble. Law firm leaders should regularly monitor turnover levels with a process that quickly identifies any material uptick. Rapid change is destabilizing, even when there is an excellent business explanation. When spotted, decisive action in one form or another is likely in order.  What does your turnover pattern look like over the past 36-months?
  • Dissatisfaction, this metric is a key indicator of business risk.A growing number of law firms find significant management value in systematically monitoring the satisfaction of their lawyer and non-lawyer employee base. And with good reason, growing dissatisfaction is an indicator of future trouble. Do you have growing dissatisfaction in your firm?
  • Falling profitability, can quickly lead to stress for any business. I am not a believer in the Profits Per Partner (PPP) metric as a be-all-end-all; but if your law firm is paying progressively less for the same performance, it is at risk.

There are a number indicators of declining profitability besides the exalted PPP metric. These include:

  • Falling productivity
  • Loss of a key client(s)
  • Increased aging of payables
  • Increased aging of receivables
  • Falling client billing

How is your firm’s profitability holding up?

  • Debt, an increased use for operations is a clear sign of stress. Most law firms use some amount of debt, whether to smooth out collections cycles with a line of credit, or to finance growth and fixed asset purchases.  Any firm increasing its use of debt to cover basic operating cost has embarked on a treacherous path.
  • Litigation, of any type, against the firm can be enough to create instability for a law firm. Monitoring the frequency and size of claims against the firm is a must. If your firm has seen an uptick in claims activity, careful examination by leadership is essential.

The thing about organizational risk is that the sooner potential trouble is identified the greater the probability that a viable solution can be identified and implemented. The more serious the trouble, the greater the need for outside support, which can bring an unbiased perspective.

Do you know if your law firm is at risk?

There is a Lot More to Law Firm Succession Planning Than Just Planning

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Transition

A recent ABA Journal article reported on the demise of a successful law firm that had been in business for 60 years. The story about Harding & Shultz of Lincoln, Nebraska noted comments from one of the senior partners whose departure from the firm allegedly contributed to its demise. Seems that the senior partner, still full of desire to work as he always had, left because the firm’s mandatory retirement policy gave him no choice but to leave and work elsewhere. His departure, as well of that of another senior partner, generated other departures, and the firm could not keep going.

Law firms close for many reasons, including because inadequate planning for succession leaves a firm unable to continue once its founders retire, die or simply move on. No doubt a lot of things contributed to Harding & Shultz’s closing, but the mandatory retirement policy may have sparked the fire that burned its house down.   If so, there is a little irony in the Harding & Shultz end because its inability to manage succession was, at least in part, triggered by the mandatory retirement initiative that was probably originally designed to stimulate future succession. Typically, mandatory retirement marks an effort to institutionalize opportunity for the next generation so that succession is more likely. In the case of Harding & Shultz, however, it looks like all the planning for succession failed because the next generation did not or could not step forward. When a law firm’s plan for the next generation fails, what is the reason?

In most cases, failure gets traced to a lack of execution. With utmost deference to the poet Robert Burns, the best-laid plans of law firms (and men) are not a solution but merely a step towards a solution. A law firm with an eye to the future must not only plan for the future, but it must consistently work to build for the future. In his Consistency of Execution, David Brock argues that effective execution in sales has three elements: knowing the right thing to do to drive expected results; doing those things consistently, day after day; and, continually sharpening the execution.   For a law firm wanting the next generation to take over, a similar focus means that law firms must:

Hire Talent With Long-Term Promise. Law firms seeking long-term sustainability hire the top talent they can find. Every associate hired or lateral added should possess skills, personality and drive that show leadership potential. Settling for less will dilute the premium prospects in a firm’s talent pool and will dummy-down its future. Hiring to this standard should be disciplined-every candidate should be viewed through this lens. While not every person hired will work out, settling for a lesser hiring standard reduces a firm’s long-term chance for success.

Develop the Talent Hired Day-in-Day-out. Even athletes with the best natural ability need to be coached and challenged to realize the All-Star dream. After a firm has hired its promising talent, it should not assume that he or she would develop in due course. Every day should be a day in which the talent pool is nurtured, stimulated and grown. Remember, a firm never knows which stars will disappoint it by leaving-so all must be trained with a daily dedication. Doing so provides greater protection against an inevitable attrition. No firm wants to be left with talent that no one else wants.

Reward the Talent While Continually Raising the Bar. Talented people leave if not rewarded. Rewards can take many forms: money, professional development, conferring responsibility and valuing institutional contributions. To have talent truly grow, rewards cannot be expected or a given. If they are, rewards have morphed into entitlements and the future is undermined. Constant challenge that raises the bar builds a reward system and culture that maximizes personal and professional development. Everybody wins and the prospect for effective succession is enhanced.

In preparing for succession, law firms can plan all day long. But all the planning in the world won’t do much good if no one is around to take over when the time comes. Effective succession is not just a question of planning, but it owes a lot to dedicated execution. How well is your firm executing on its succession plan?

Establishing Standards For Growth – A Key to Building a Better Law Firm

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Transition

 

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The number one factor in determining the day-to-day joy in one’s work life is the culture of the organization of which you are a part.

Savvy law firm leaders know this; and they apply serious standards to increase the probability that everyone that becomes part of the organization makes a positive contribution to its culture.

Weaker leaders tend to operate as if an increase in the number of lawyers is indicative of growth. As a result, far fewer and much less stringent standards are employed in pursuit of “bigger” — incrementally fracturing their firm’s culture in the process.

Some Standards of Success

It is instructive to look at a few of the standards employed by three successful individuals/firms.

Wachtell Lipton, perhaps the most consistently successful law firm over the last 50 years, is also the most difficult when it comes to landing a position. The firm’s unique culture has been aided, if not preserved, by a consistent approach to growth, the recruitment of talent, and its leadership.

Lateral growth, let alone the increasingly popular tactic of combining firms, is almost unheard of at Wachtell Lipton. A slower, perhaps less glamorous but much less volatile approach, is fostered by hiring the best young talent, and then proactively helping them develop and mature within the firm’s culture.

Even though a few laterals have been brought into Wachtell Lipton over the years, the firm has a demonstrated strong preference for recruiting new attorney candidates from premier law schools. Consistent with its pursuit of only the most challenging work, they consider only those students whose academic record demonstrates the ability to excel at the highest level.

But Wachtelll’s recruitment process doesn’t stop there. Candidates are put through a rigorous internship in order to assess the mental strength, work ethic and collegial personality. Even when an intern passes those tests, only individuals who project as future partners at the firm will be hired.

Mark Zuckerberg, the enormously successful founder of Facebook, in a recent interview in Barcelona made headlines when he spoke of his standard for hiring someone. Zuckerbrg said “I will only hire someone to work directly for me if I would work for that person.” He continued, “business owners should resist the urge to settle for lesser candidates in the name of manpower. Over the long term, you’re only going to be better if you get someone really good.”

Jim Collins, the author of the classic Good to Great, says “leaders of companies that go from good to great start not with the where but the who…by getting the right people on the bus, the wrong people off…They stick with that discipline –first the people, then the direction—no matter how dire the circumstances.”

Contrast this long-term philosophy with an approach that revolves around filling spots…getting bodies at desks…all the while expecting (and settling for) a turn-over rate that prevents any continuity or real cultural fabric.

Building an enduring organization — one that brings long-term joy and career satisfaction — is a choice. One cornerstone of this choice is to do all one can do to ensure that those on the bus will strengthen the firm’s culture.

The other choice is to simply add bodies that make the firm bigger.

 

Law Firm Departures: A Likely Source of Disputes

Posted in Law Firm Crisis, Law Firm Leadership, Law Firm Transition

Most law firms approach their practices optimistically-with a kind of “glass is half-full” outlook.  Getting business, building client relationships and creating a brand typically are a firm’s focus rather than thinking about failure or disaster.  That is especially so when law firms form.  Future developments like mass departures or dissolution usually do not enter into the discussions at inception.  Inevitably, when those transitional events occur the thorny issues that can arise, some of which could never have been predicted, finally receive the attention required.

A recent law firm dispute in the news was sparked when a group of lawyers from Nelson Brown Hamilton & Krekstein of Pennsylvania picked up and left.  The controversy surrounding their departures demonstrates that disputes can take any form.  As is usually the case, a number of the lawyers leaving took with them various client matters.  While there is nothing particularly remarkable about lawyers leaving and clients following, the dispute has focused on the fact that the departing lawyers left with laptops and their former firm cried foul.  The dispute touches on numerous issues, including the possible violation of the Computer Fraud and Abuse ActTransition-Planning-Sign, and even though resolution by mediation was been attempted, it remains unresolved.

As the dispute involving Nelson Brown shows, predicting and/or pre-planning for every kind of controversy is an impossible task.  Nonetheless, history has shown that in many cases disputes arising from transition have common origins or are traceable to things that are present in every law firm.  How a law firm and its departed attorneys deal with these things can be the difference between a smooth transition for all concerned, or a dispute that distracts both sides from the goals of getting business, building client relationships and maintaining or building a brand.  Any law firm facing transition caused by departure will experience a favorable or unfavorable outcome depending on how it fares in these four key areas:

Partnership Rights and Obligations.  Clarity in a partnership agreement (or shareholder’s agreement) can be critical to a smooth transition.  Moreover, if the agreement philosophically seeks to minimize partner claims against the law firm, disputes that arise tend to resolve quickly.  Experience tells us that the more recent an agreement has been drafted, the more likely its provisions will follow state-of-the-art trends designed to favor the law firm.  If your applicable agreement is simply basic or dated, a revision may be in order.

Client Obligations.  Because clients are the life-blood of all law firms and their lawyers, it is not surprising that departing lawyers try to take clients and their former firms try to keep them.  Because clients almost always have absolute discretion regarding who will be their lawyer, client retention is mostly a matter of client choice.  If a client leaves after having made a reasonable attempt at retention, move on or try to win it back when the next opportunity arises.  But don’t put the client in the middle of any dispute.

Ethical Considerations.  Fighting with a former attorney over obligations may be justified-after all being a lawyer does not immunize one from fulfilling contractual or fiduciary duties.  But disputes can get out of control when the combatants lose sight of their respective ethical obligations, especially when fighting over a client.  Many disputes are prolonged because ethical concerns are forgotten.

Emotions.       Too many disputes are fueled by emotion and start out or grow to be irrational.  In many instances, far too much money and human capital is spent in the controversy before a sense of proportion prevails.  Enlisting someone early in the fight to objectively assess or mediate the dispute can save the parties not only a lot of money, but a lot of angst as well.

Law firm departures can conjure up many reactions.  In far too many instances the reactions lead to disputes that seldom end with total victory for one side.  Firms with foresight and sound judgment tackle the key areas that foment ill will, seek to resolve them quickly and then try to move on.  Do you think there is a better approach?

Is Your Law Firm Choosing Bigger Over Better?

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

 

As an interested observer of the legal landscape, there are three baseline realities that are especially interesting to explore:Quality_not_quantity

• The rapid rate of law firm growth through mergers and lateral additions;
• The rate of law firm failures; and,
• A continuing level of unhappiness in the profession.

Given these three somewhat extreme data points, one wonders the extent to which the leadership of law firms proactively evaluate the choice of better versus bigger.

I have been reading a new book by Bo Burlingham – Small Giants: Companies That Choose To Be Great Instead of Big. The book is an in-depth review of companies that have confronted the issues of getting bigger or better.

The book is describes as an examination of “extraordinary, privately owned companies that made strategic decisionos to forgo revenue or geographic growth, in order to achieve other remarkable ends.”

I recently ran into an interesting example of the type of company Burlingham wrote about. Cousins Kevin and Chad Brown grew up working in their dad’s construction businesses. By the time they reached their early 20s they decided to start their own construction company, Brown Construction in NE Texas, focusing on framing new and remodeled homes. The guys had two goals: to establish a new level of quality for their type of work; and to have fun together.

As often happens when quality and competence come together, success followed. The guys experienced the typical new business challenges including wondering where the next project would come from; but as the growing pains subsided, the duo realized they had more business than they could handle.

After talking about it, Kevin and Chad decided to split their group in two and add a few more crewmembers and further grow their business.

What the cousins found was that their work product, when working separately, wasn’t as high as when they were working as a team. They also found that they weren’t having nearly as much fun.

Kevin and Chad did what few in their position have the clarity of vision to do; they decided to forgo the addition revenue and profits associated with a bigger business, and — instead — limit projects to those that they could handle while working together.

The result?

• The cousins’ reputation for high quality work continues to grow;
• They continue to land increasingly interesting (and profitable) projects; and,
• Their customers have beome raving fans.

Theirs is an all too rare example of choosing to get better instead of bigger.

Law firms, young or old, would be well served to stop and determine what is most important to them. And possessing that knowledge, routinely evaluate growth related opportunities.

Smart decisions are much more likely when framed in the context of what we care about.

I’m betting that if this simple process were followed we would see a lot fewer mergers, a lot less lateral movement, and many more lawyers who genuinely enjoy their work.

There is a lot to be learned from the cousins Brown, a law firm considering merger should not lose sight of what made it great and only pursue merger if those fundamentals can be preserved.

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