Managing Law Firms in Transition

Managing Law Firms in Transition

Law Firm Succession Planning-Things Small Firms Can Do Just Like the Big Firms

Posted in Law Firm Leadership, Law Firm Succession, Law Firm Transition, Uncategorized

Is the grass greener on the other side?  Some small firm leaders envy perceived advantages enjoyed by bigger firms.  Leadership at big firms likewise can be found yearning for simpler times when their firms were smaller and the issues seemed simpler.  Regardless of size, all law firms must work hard to succeed, especially in a time of industry upheaval.

One area of challenge for small law firms, as cited in a recent survey in the Thomson Reuters piece entitled 2016 State of the U.S. Small Law Firm Study, is the looming issue of succession planning.  Based on the Thomson Reuters survey, approximately 82% of the surveyed firms concerned about succession have not taken any steps towards creating a succession plan.

But succession planning is also a big issue for large law firms.  Various reports and studies focused on the large law firm segment of the market indicate that many large law firms don’t have succession plans.  Thus, the state of the data suggests that succession planning is not just a small firm issue but is an issue that universally is under addressed.

Some leaders at small law firms may feel overwhelmed with the challenge of creating a succession plan.  They may assume, incorrectly, that large law firms are more capable at addressing succession because greater capital, resources, and personnel their larger brethren enjoy make their task easier.  True, those things may help, but the most critical components for succession don’t necessarily depend on those things.  In succession, size or resources do not matter as much as:

Making Succession a Priority on the Firm’s Agenda.  The biggest impediments to developing a good succession plan are procrastination or treating it as a low priority.  If that attitude exists, at best succession will be a matter of luck or happenstance.  Conversely, having the resolve to address succession positions a law firm to tackle the difficult decisions that succession planning evokes. Step one to addressing succession planning is making it a firm priority.

Making the Succession Planning Inclusive.  Succession is a collaborative exercise in which persons on the outside must be let inside the tent.  Not only do many of them represent your firm’s future, but their views and perspectives will be critical to creating a plausible plan.  An inclusive process may also inform leadership that the pool of potential successors is not equipped to secure the firm into the future.  Should this be discovered, adjustments to the planning process and decision making will follow.

Dedicating the Time Needed.  Succession planning is neither easy nor quick.  It takes time, lots of give and take and sometimes, restarts.  As the process evolves, training or the pursuit of future leaders may become a necessity.  Succession planning is not a weekend retreat affair.  It involves many people, a great deal of work and time.  Done properly, years will be invested.

Establishing Milestones. While extolling a firm’s culture can set the right tone for what everyone wants to preserve, it doesn’t get the firm from point A to point B.  Any succession planning should establish milestones, objectives and goals that can be managed to as the succession planning proceeds.  If succession depends on addressing compensation, identifying a pool of successors, training or recruiting the next generation, targets and deadlines must be established.  Without them, succession will be mushy and in the end, likely a failure.

Considering All Alternatives.   Everyone’s ideal in succession is turning the firm over to the next generation possessing great leadership and business generation skills.  That is a recipe for a legacy.  Unfortunately, many times the necessary ingredients for an enduring firm can’t be found.  When the essentials are missing and the future of the firm as a stand-alone entity is in doubt, alternatives may be needed.  A firm prepared for succession will not despair, but will consider the alternatives and select the path that is best.

The difficult task of law firm succession planning can be simplified by doing basic things that every firm can do.  None of these actions require the kind of resources commonly associated with large law firms.  If your firm has not prepared its succession plan, won’t taking these five steps help?

 

Killing the Golden Law Firm Goose

Posted in Law Firm Growth, Law Firm Leadership

The general approach to law firm billing rate increases continues to baffle me. The overall demand for law firm services has been flat to declining for more than a decade while the quantity of licensed lawyers continues to grow.

Traditional economic theory holds that when supply increases and demand falls or remains flat, prices fall.

Not so in the world of law firm billing rates. According to a recent report released by CEB consulting company and Wolters Kluwer NV’s ELM Solutions, law firm billing rates increased 5.4% last year, double the inflation rate. Law firm billing rates have increased more than the inflation rate annually for more than a decade. How can this be?

One answer is that increased billing rates don’t necessarily mean increased revenue. In fact, as rates have continued to move up, realization rates have fallen. The decrease isn’t in exact proportion to the increase; but there is strong leakage in the billing to collection equation.

I wasn’t surprised by the above report but it included one other finding that was equal part surprising and disappointing. The report describes finding that 21% of lawyers “padded” their bills by rounding up to the nearest half hour or, in some cases, the next hour. A number of descriptors come to mind for this practice. The most appropriate seems to be theft.

The continued push to make more or a lot more money for the same service threatens to significantly weaken the future of the profession.

A great perspective on the issue is offered in this video from Verizon’s General Counsel.

Law firms, like any other business wanting to grow and thrive, must eventually recognize that the path to increased profits and stability is to innovate, become more efficient and/or deliver a higher service level.

Notwithstanding efforts to explain or justify, repeatedly turning to higher rates as the foundation for growth (never mind those breaches of ethics) will inevitably kill the goose, and the legal profession that has been a golden egg for so many.

Adding more value to make more money is old fashioned; but it is the surest key to success!

 

 

Scoping Out Future Law Firm Upheaval-Four Places to Look

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

Law firms perpetually are in transition. In our changing legal environment, transition can arise when business strategy requires adjustment, merger is considered, layoffs are implemented, lateral hiring is pursued, leadership succession is at hand (see Cultivating the Next Generation), crisis arises or firm wind-up is decided and implemented.

In addressing any transitional event and the upheaval that comes with it, the timing of a leader’s decision making is important.  Decision inflection points recognized early can allow a law firm leader greater control over available options and a law firm’s destiny. Failing to recognize timely an existing or impending transitional event can narrow a law firm’s alternatives and squander its legacy.

A disciplined approach to transition recognition can help a law firm leader identify areas of concern that need attention before it is too late. To exercise that discipline, a law firm leader should be mindful of four law firm related spheres that often signal impactful developments looming over a firm and its business.  Remaining attentive to these areas of relevance can help a leader spot potentially harmful and disruptive events early.  Forewarned, he or she is more likely able to design and implement solutions effectively and quickly.

To gain the advantage of time before transition is thrust on a firm, a conscientious leader should continually track:

Internal Performance. Most law firm leaders pay attention to internal law firm performance metrics. Tracking internal performance certainly is useful in making short-term decisions and assessing yearly firm and lawyer performance.  But the metrics can do more.  Often, it is that data that can identify impending matters of concern.  Additionally, once analyzed the data can be used in long-term strategic planning and help leadership change the trajectory of the firm-for the better.  Trends in that data also can be useful in forecasting the advent of business altering developments.  Without question, internal performance reporting can be among the most helpful areas of focus when trying to stay in front of law firm transition (See How One Big Law Firm is Using Data).

Client Performance and Preferences. Without clients law firms can’t exist. Following the performance of clients and the challenges they face provides a good barometer on how your firm may fare in the future. If clients are undergoing changes, your firm should be prepared to react-whether it means finding new clients or serving your existing clients’ needs in a different way. Sometimes challenges a client confronts change its demands or expectations.  It is imperative that those changes and challenges be recognized and, if appropriate, addressed by adjusting the approach to client service.  Keeping abreast of your clients and their travails positions a firm leader for client driven transition.

Industry Trends and Challenges. Being informed about the initiatives and “best practices” of other law firms, especially your competitors, is always helpful. Whether your firm copies their initiatives is another matter, but being up to date on the newest strategies can, ironically, contribute to the recognition and adoption of a better law firm strategy.  Further, surveying the marketplace for the “best practices” of the most successful firms also can be instructive. Thinking beyond law firm practices is useful as well (see Legal Innovation is not an Oxymoron).  The ever-evolving challenges from non-traditional legal services providers, more efficient delivery systems and in some sectors, greater competition from clients taking work in-house must be followed and understood (see Are In-house Counsel Happy with their Outside Counsel?). Any leader directing his or her firm into the future must remain aware of these current industry challenges while trying to anticipate others.

Human Resources and the Generational Influence.  As much as industry prognosticators suggest future law firms will be dominated by artificial intelligence applications or other cutting edge systems, processes and technology (see The De-lawyering of Law Firms), law firms will remain a people business.  For that reason, an astute law firm leader will stay attuned to the firm’s changing human resources dynamic being influenced by a generation of younger, more involved and inquisitive lawyers (see Where Have All the Big Law Associates Gone?).  These young lawyers may express a desire to “make an impact,” “understand the plan,” or “seek a better work/life balance (see Big Law Heads for Home-But Will it Work for You?).”  Harnessing this HR animal helps a leader lessen the risk that personnel based transition often brings. A leader that understands the new human resources paradigm will be prepared for transition that is inevitable to follow.

A well-managed law firm law firm anticipates transition and avoids surprise and crisis by staying informed.  Dodging the upheaval that transition threatens is not a matter of luck but a function of knowledge and awareness.  Is your law firm’s management team sufficiently alert to head off the turmoil that transition can bring?

 

 

 

Does Your Law Firm Deserve a “Freshness” Review?

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

There has been a recent flurry of articles regarding law firm “spin offs” some referencing actions such iStock_000002427188Smallas the recent Ropes & Gray IP move which appears practice specific. Others target “spin offs” as a means of getting lean. Seth Godin (who you might consider following if you don’t already) had a great and short post that I found relevant to the topic.

The essence of the Godin post, translated to law firm business, is:

You must routinely and relentlessly monitor the quality of the individuals that comprise your law firm.

My thoughts on the subject are that just as old fish will eventually have a negative impact on business at a fish market, a few stale or stagnant individuals can drag a firm down. Anyone identified as not reflecting the attributes appropriate for building (strengthening) your firm and its brand —  internally and externally —  must be converted or removed.

This process should not be inhumane or reactionary. Successful law firms communicate who and what they are to all concerned, on a daily basis.

I’m not suggesting this is easy. It is not. It is critical that hiring mistakes be dealt with promptly. Personnel (lawyer or non-lawyer) who drift from firm standards deserve an opportunity for corrective change; in the absence of that change,  they have to leave.

Any other approach threatens the future of all.

Does your firm let rotten fish spoil the lot?

Finding Your Next Law Firm Leader-What to Look for?

Posted in Law Firm Leadership, Law Firm Succession, Law Firm Transition

 

The legal services industry is awash with profitability challenges, calls for innovation, and non-traditional entrants.  Long-time law firm clients are expecting more from their law firms at the same time they weigh the option of moving work in-house or assigning it to alternative providers.  Since 2008 flat demand and financial stress have fueled reactive solutions like cost-cutting, consolidation through mergers and growth through lateral hiring.  As these solutions have been pursued, competing alternative providers have raised capital to finance the innovative delivery of legal related services that supplant some of the services traditionally provided by law firms.

While this change confronts law firms, many find their leadership “aging out.” That leadership matured in a decades long seller’s market.  Their leadership style suited their “up market” competitive world.  In today’s evolving legal services market, those tried and true methods won’t likely work as well.  In no uncertain terms law firms must change, in some cases dramatically, if they want to be present tomorrow.  Because change and innovation will be needed, a firm’s next leader must be different than many of those that lead before.

In finding the next law firm leader, what should firms look for? What skills will be important?  Here are five:

Flexible Outlook.  Managing today and tomorrow’s law firm with yesterday’s playbook is unwise.  The changing legal services environment requires a willingness to take sound principles from the past and applying them to new approaches relevant to the future.  Innovative leadership will blend sound fundamentals with forward thinking solutions designed to achieve client satisfaction and institutional strength. But because the dynamic change facing law firms will continue for some time, an individual that is flexible to deal with an evolving industry will be needed.

 Client Centric.  Without satisfied clients, there is little for a law firm to do.  Finding a future leader that is focused on client satisfaction and the delivery of exceptional client service is essential.  But a truly client centric leader will go beyond meeting present demands and will anticipate client needs.  By anticipating a client’s expectations, a law firm can innovatively propose solutions that serve both the client and law firm well.  A leader focused in this client centric way will be critical.

 Profit Orientation.  As much as a law firm may view the practice of law as a calling, it must be profitable or it will not endure.  As the practice of law has evolved, being profitable means more than maximizing hours’ times rates.  A new leader that understands the importance of profit will create measurable performance metrics that guide the firm forward as it pursues new business and profits.  These data points will not only reward attorneys for profitable business landed but also will motivate them to think about client business opportunities in a profit centered way.

 Strategic About Pricing.  While the hourly rate has not gone by the wayside, law firms successful in the future will rely less on its use and move to more flexible and sophisticated pricing models.  Turning to legal process management can help with pricing legal services to clients.  Alternatively, repeatable tasks can be identified and priced more consistently and profitably.  A leader that is to lead the firm must think creatively about providing and pricing the firm’s legal services.  New pricing approaches that work will go hand in hand with achieving firm profitability and client satisfaction.

 Relentless About Efficiency.  Client satisfaction, strong profitability and attractive pricing will all be influenced by greater efficiency in the firm’s administrative functions, eliminating unnecessary services and replicating past work experiences.  Efficiency can come from converting firm services into repeatable tasks clients really want.  It can also come from eliminating wasteful back-office functions by taking a business process orientation or by outsourcing.  In whatever way that efficiency is achieved, it can only come from a leader that is not easily satisfied but that strives to do things better.

It is more important than ever that the next law firm leaders be prepared for an ever-changing legal services market.  Unlike past practices, finding the clone of the last managing partner is not a good solution.  If your firm is in the market for new leadership, will that leader have the skills needed in the years ahead?

 

 

The Challenge of Evaluating Law Firm Leaders

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

Improvement — in any position in any organization — begins with and is dependent on periodic feedback and performance evaluation. Without the objective assessment that comes with these two elements, attention to areas in need of focus is limited. Improvement is left to the realizations that arise from self-reflection.

It is a paradox that organizational health is most tied to effectiveness at the top of the pyramid, while formal evaluation systems are typically utilized only to assess the work of those lower in the structure.

All serious leaders need feedback.

Yet, whether the byproduct of pride, insecurity or simple organizational oversight, few in leadership roles actually receive regular objective assessments of performance.

What A Leadership Evaluation System Looks Like

 In a recent post on Bloomberg Law, Donald Mrozek does a great job of describing an approach to scoring the performance of managing partners. It is a worthwhile read for all who have accepted the fact that evaluation is needed.

I don’t have any quibble with the specific evaluation criteria or weighting described by Mr. Mrozek, though I would suggest the specifics should probably vary by the particular needs of the organization and its priorities. That said, there are three areas in which all leaders routinely need feedback. If nothing else, Managing Partners should seek to determine how the members of the firm feel about their effectiveness on three fronts.

  1. Vision, values and strategy. An effective firm leader ensures these components are developed, communicated, and understood throughout the firm.
  2. Progress. A leader ensures that core organizational objectives are clearly understood, are delegated, and met.
  3. People and needs. The effective leader stays in touch with the “heartbeat” of the organization. This is an intentional process that incorporates listening to a broad cross section, probing diverse perspectives, and engaging in what are often difficult conversations.

 

A leadership-evaluation system need not be public. A private and confidential communication from the firm’s owners to the leader that objectively reviews the job being done by those elected to serve, and provides constructive thoughts on areas for focus. The truth is that effective leaders embrace feedback, value insight from peers, and seek accountability.

 

Does your firm provide formal feedback to its leader? If not, why not?

 

No Law Firm Succession Plan? Five Options

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

A Forbes article entitled Law Firm Leadership Survey:  Top Strategic Initiatives of 2017 shared some interesting information about the burning and not so burning issues for today’s law firm leaders.  The information was assembled through the work of David J. Parnell (the author of the Forbes article) and noted legal consultant Patrick J. McKenna.

The two recently presented to a group of managing partners some of the industry’s most timely and topical issues and surveyed them for their feedback.  The survey revealed the important and less important issues faced by many of the law firms that focus on management issues.  The leaders surveyed were from firms between 100 and 1,000 lawyers in size so the impressions shared were from a broad spectrum of law firm profiles.

Important to the assembled leadership were issues related to strategic focus, succession planning, “management matrix,” and cultural identity.  While all four of those identified issues are worthy of much discussion, the focus here will be on the issue of succession planning.

Respecting succession planning, the Forbes article noted that some leaders expressed concern that their succession issues were imminent, that leadership incumbency is a perceived problem, and that present law firm demographics are not conducive to effecting law firm succession.

The concerns expressed are not surprising but at least they come from firms that have done some succession planning.  As has been observed here and elsewhere many times, far too many firms have done far less and have not adequately prepared for succession.  If your firm is one, what are its options?

Start Planning.  Even if a firm has been idle in preparing for succession, initiating a succession planning process is an excellent option.  Not only does succession planning generally move a firm forward in preparing for organic succession, but it helps leadership understand the firm’s specific succession challenges so action can be taken.  The planning process may also stimulate the firm to consider options other than the traditional organic succession model.

 Find a Savior.  If organically turning the firm and its clients over to the next generation is not feasible, the firm may want to consider merging its practice with a more generationally prepared firm.  Moving the firm’s practice to another firm may be difficult for some firms and their partners to accept, but the other options may prove less palatable.

 Slide to Mediocrity.  Doing nothing to prepare for succession is not a good option.  Unfortunately, too many firms go this route. If the next generation of leaders or business developers don’t exist, or are not ready, willing and able to take over, the future of the firm will, at the least, slide towards mediocrity.  As bad as it may seem, in some cases the fate of mediocrity could compare favorably to firm collapse and failure.

 Prepare for Closure.  An objective analysis about succession may lead to the conclusion that the firm should close and wind-down.  Making that tough decision early enough can help a firm wrap up its affairs responsibly and with the least amount of suffering by the greatest number of people.  Closing a firm requires planning and execution but done can typically delivers a result far better than the alternative.

 Be Grateful.  In some cases, historically well-run firms have not planned for succession but have done all the right things that are needed for succession.  Those firms have hired well, trained their attorneys well in lawyering and administrative roles, and have introduced clients across the generational strata of the firm.  Firms that fit this profile are usually well positioned for succession.  For these firms, their bright futures are the result of more than luck but can be traced to a past heavy investment in good management.

A firm that has not planned for succession but is progressing towards a succession event still has options.  While it should not despair, it has no time to waste.  If your firm is in that predicament, is it ready to think about its options?

Growing A Law Firm Into Decline

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

Don’t confuse cause with coincidence. – W. Edwards Deming

Conceptual image - rise and falling

In Jim Collins’ book How the Mighty Fall, he describes phase two of business decline as “Undisciplined Pursuit of More.”

When it comes to law firms, we might call this phase of decline a period of Ego Driven Growth. This type of growth is always presented as in the interest of the firm and its partners. In fact, it serves to weaken the firm, and puts it at risk.

In most discussions about businesses that are in decline, it is typically assumed that the root cause of decline is either management complacency, or the failure to innovate and respond to market changes.  The Collins research debunks this theory. In most cases, the root cause of decline is over-reaching and growing in a reckless manner.

Brobeck – A Case of Reckless Growth

There are countless cases of law firms growing into decline but one of the best illustrations is still Brobeck. When the charismatic Tower Snow was elected as the firm’s chairman in 1998, Brobeck was coming off 72 years of steady growth. The firm was a highly regarded San Francisco based operation that proudly sat in the AMLAW top 50.

Snow had high aspirations, and sought to accelerate the firm’s rate of growth.  Focusing on the emerging technology sector, he had visions of building Brobeck into one of the world’s largest and most prestigious firms – quickly.  His strategy of hyper-aggressive lateral hiring was launched in the middle of the dot.com craze, a time in which it was difficult for law firms to go wrong.

And then the market cooled dramatically.

Instead of moderating the approach and battening down the hatches, Snow pressed ahead with his growth strategy. With profits falling and partners and clients leaving, Snow stepped down as chairman. His resignation was followed by the firm’s decision to close its doors. Ultimately, Brobeck was forced into bankruptcy.

In my experience, the needs of clients and working lawyers drive a very small percentage of law firm growth.  Rather, a leader who has determined that success is defined by size is almost always at the heart of a relentless appetite for growth.

When growth outstrips a firm’s ability to integrate and ensure quality, the firm is in decline.  The longer the trend continues the greater the firm’s risk of permanent damage.

Disciplined growth of a law firm — or any business for that matter — is not a problem; but growth that threatens an organization’s future is.

Common indicators of this kind of problem include:

  • Growth in size that has outpaced the experience of leadership and management
  • Disproportionate growth in debt
  • Additions are not being 100% integrated
  • Profitable areas of the firm are not receiving appropriate investment
  • Support systems are strained

On the other hand, disciplined growth is measured, strategic in nature, and the product of partner consensus and shared aspirations.

Jim Collins says it so well, “While no leader can single handedly build an enduring great company, the wrong leader vested with power can almost single handedly bring a company down.”

How is your firm managing growth?

 

 

 

 

Four Signs Your Law Firm is Not Ready for Leadership Succession

Posted in Law Firm Leadership, Law Firm Succession, Law Firm Transition, Law Firm Warning Signs

At many law firms that recognize the need for succession planning, preparation for leadership succession receives too little attention. Succession planning can languish for various reasons. In some instances, the press of regular law firm business distracts existing leadership from the issue. In other cases, the topic is an uncomfortable one so discussions are avoided. Even if these circumstances aren’t present, a firm can be so overwhelmed by the challenge that it can’t get out of the starting blocks. A form of paralysis can set in.

Another subset of firms simply doesn’t recognize the need to plan for succession. Not realizing the need, they miss the signs that should tell them that their state cries out for immediate attention.

For firms unsure where they stand on leadership succession, there are four clear markers that suggest and even show that a firm is unprepared. Not all four of these indicators need be present, but if more than one exists there is substantial reason for concern. Four indicia that a firm is unready for leadership succession are:

Demographics at the Firm are Unfavorable. A firm that faces a noticeable age gap between senior leadership and the rest of the firm’s attorneys is likely to struggle with leadership succession. If senior attorneys that have been running the firm are leading a firm of junior attorneys, the younger attorneys likely are not ready to step into any kind of a leadership role. A missing layer of lawyers between the ages of the young and senior attorneys is usually a problem. By taking a look at a firm’s demographics, a firm may see signs that it is not ready for leadership succession.

Control by Existing Leadership is Squeezed Tight. Far too often senior leadership grips control too tightly over most firm decisions. A firm lacking in shared decision making, even if major decisions are still reserved for senior leadership, is failing to provide needed experience to its future leaders. Sharing a role in decision-making is crucial to preparing for succession. If decisions are not shared now, a dearth of experience will make leadership succession harder in the future.

Training and Mentoring is Weak. A close corollary to sharing decision-making is having leadership mentoring and training programs that can aid in the preparation of the next leaders. Leaders are not always born-they often must be developed. If your firm has not created a way to mentor and train persons that will need to follow existing leadership, the firm is setting itself up for disappointment when the leadership torch needs to be passed.

 There is a Shallow Pool of Leadership Successors. It goes without saying that leadership won’t be passed on to the next generation effectively if successors can’t be identified. Having an adequate pool of potential successors is often the fruit of recruiting wisely so a deep roster of talent exists. If the pool of talent is there, leadership decisions can be shared with up and coming attorneys, their leadership skills can be refined further with mentoring and training, and the next leaders likely will emerge.   On the other hand, if the firm’s pool of potential successors is not very deep, the firm may not be adequately prepared for succession.

If any of the four circumstances noted above are present at your firm, there is room for improvement as the firm prepares for future leadership succession. If more than one of the indicia exists, much more work needs to be done before the firm can feel comfortable in its leadership succession preparations. Are there other signs to consider?

Is Your Law Firm At Risk?

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

One ought never turn one’s back on a threatened danger and try to run away from it. If you do that, you will double the danger. But if you meet it promptly and without flinching, you will reduce the danger by half. Never run away from anything. Never!

Winston Churchill

 

iStock_000034719304Small
The first key to managing the transition of any law firm to a more productive and stable position is the early recognition of a potential problem. A declining market position is almost always indicative of underperformance. The challenge for leadership is to recognize the condition early enough so that decisive action is taken.

This begs the question — What are the most common signs that a firm’s position is beginning to slip? Consider these nine.

1. A sudden unanticipated loss of lawyers – We’re not talking about normal “comings-and-goings” here. The propensity for frequent movement of individuals is the topic for another post. This is about a greater-than-normal degree of movement. During a measured period, the greater the percentage of lawyers lost, or the more prominent those departures, the stronger the signal.

2. The loss of key clients (or increased difficulty in winning new business). Continuity of critical relationships is one of the greatest assets of any firm. While savvy management works hard to avoid the too-many-eggs-in-one-basket syndrome, a portfolio of clients central to success almost always exists. The loss of one or two key clients, or the departure of a large number of clients from any group should set off an alarm.

3. The absence of strategic organic growth. If you are increasingly unable to win the new business targeted in your firm’s strategic plan, take heed. Either the competitive landscape may be shifting in a way that directly impacts your position, or your planning needs some scrutiny. Either is an early warning sign.

4. Increasing turnover in key positions in the firm. I often refer to Jim Collins principle of having the right people on the bus. If you begin to lose significant non-attorney personnel, this can be much more than an inconvenient (and costly) loss of continuity. See Judy Capco’s article on causes of employee turnover.

5. Flattening or declining profits. On one hand, this seems simplistic, if not painfully obvious; on the other, the degree to which profit can, at the same time, be the source of consternation and ignored as a signal of issues is baffling. If profits are flat or declining, it is almost always time for action.

6. Falling revenues. Often declining profit is preceded by shrinking revenue…but not always. Whether profits decline or not, falling revenue is an early reason for concern.

7. A worsening relative debt position. Debt, in and of itself, does not spell trouble. Most law firms rely on debt to some extent to finance growth and manage cash flow. That said, an increase in a firm’s relative debt position should be closely monitored. Absent alignment with strategic moves, this is often a sign of impending decline in market position.

8. Negative external visibility. Many firms receive some degree of bad press; loss of a case, a high-profile departure, or litigation filed against the firm. But leadership must resist the temptation to ignore what can be viewed as uninformed voices. An increase in negative visibility via local, regional or internet distribution channels is an early indicator, and cause for concern.

9. Difficulty in attracting talent. When your firm finds it increasingly difficult to attract lawyers it is either the sign of a declining market position or an increase in the perception that the firm is in decline. And this perception is, itself, an early indicator of decline. If strategic talent believes your firm may be in decline, each day brings increased danger that the perception will become reality.

All well-run firms monitor benchmarks and maintain performance data. The best routinely evaluate performance in critical areas – carefully looking for any sign or signal that the landscape is shifting.

The more comprehensive our list of early warning signs, the more accurate our assessment of existing and future market position. What would you add or take away from our list? Does your firm monitor the early warning signs?

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