Managing Law Firms in Transition

Managing Law Firms in Transition

Law Firm Merger-Four Key Stages to Success

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Merger

Law firm growth gets a lot of attention. Among the various approaches to law firm growth is the tactic of merger. Almost weekly we are treated to another announcement about two law firms fulfilling their desire to grow by combining. And although law firm mergers have been part of the landscape for years, since the Great Recession the incidence of law firm growth through merger has become more commonplace.

Generally, until the merger itself is announced little is publicized about a law firm’s merger activity. Even in the instances in which a law firm’s interest in a merger is leaked before the merger is a done deal, details about the merger mechanics are scant. The leaked news usually only stokes a rumor and a closed deal may or may not result.

For firms that have not done a merger the question often asked is “how does a merger come together?” While the genesis for each transaction is unique (as are the negotiations), virtually all mergers involve four distinct stages that are interrelated and build on each other. Performed well and a merger is positioned for success. Performed poorly and a merger’s prospects are suspect. The four key stages are:

Stage One-Deciding to Pursue Merger. The reasons behind a firm’s decision to pursue a merger can be many. Some firms need a rescue; others see a need for additional capabilities or have a desire to enter a new and critical market. A frequent reason to merge is one premised on the combination adding market share not easily gained through organic growth. As the Boomer generation reaches retirement, merger also can be a useful tactic to address leadership or succession issues. Whatever the impetus, the decision to consider merger should be one premised on meeting a strategic initiative identified through thoughtful and critical analysis.

Stage Two-Establishing Your Requirements. In Phase Two, it is essential that the criteria for a merger be clearly identified before seeking out a potential merger partner. Only once the criteria are established should a firm purse candidates-all the while remaining faithful to its criteria. Whether acting opportunistically or methodically, staying true to the criteria protects a firm from letting the thrill of the conquest dictate its tactics. It also provides the foundation for the discipline needed to walk away from a bad deal that momentum would have you close otherwise. Understood criteria and discipline prevent emotional or irrational decisions. They should not be compromised.

Stage Three-Finding a Match that is Compatible. For firms approaching merger correctly, a thorough diligence process provides guidance on firm compatibility. In this phase, a firm should consider whether it and its prospect are compatible on matters of culture, finances, compensation systems, clients and operations. Also key is the fit of leadership styles and the potential for evolving to a leadership team that will be accepted by people in the unified firm. Ideas on succession and vision should be compared to further confirm the fit.

Stage Four-Making the Combination Work. While it is essential that the integration and assimilation of the two firms be planned before the merger is finalized, also essential are an attention to detail and a dedication to bringing together disparate groups post-merger. Everything from forging a singular culture to creating systems, processes and procedures to gauge, motivate and reward the new firm’s valued behaviors.   Hard work post closing is not only important to avoiding crisis during the honeymoon period, but it also is important to the care and feeding of the next generation of performers and leaders.

Doing the right merger and finding the right partner takes work. It does not come about by happenstance but requires an unyielding focus at critical points along the way. Has your merger experience shown you other important steps?

Opportunity and the Law Firm Turnaround

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

When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.

John F. Kennedy

crisis

The Crisis at Kaye Scholer

I was sitting reviewing law business related articles recently. As the stories of doom and gloom and struggling law firms big and small continue to occupy print-space, I reflected back on a law firm crisis story which had a happy ending. The story, although a little dated, is interesting and instructive for law firm leaders facing crisis today.

Kaye Scholer is a New York based law firm that has an interesting history dating back to its formation in 1917. From the earliest days up to 1992 the firm developed a great reputation as a premier law firm in the area of bankruptcy and reorganization.

In the spring of 1992, Kaye Scholer found itself in as precarious a position as any law firm had ever been. In the mid 80s, the firm had begun representing a California based S&L — Lincoln Savings. They had been retained to assist the S&L with a government investigation into its lending practices. The S & L ultimately failed, costing the government and taxpayers more than $3 billion.

In addition to pursuing the owners and managers of the failed S & L, the government went after Kaye Scholer like no law firm had been pursued before or since. The government accused the law firm of providing unsound advice and misleading statements contributing to the S&L’s demise..

Frustrated by a perceived lack of cooperation from the law firm the Federal Office of Thrift Supervision and the Securities and Exchange Commission decided to turn up the heat. They demanded an immediate payment of $275 million in damages for misleading the government, and took the unprecedented step of freezing the firm’s assets as well as some of the assets of individual partners. The firm couldn’t pay rent, payroll or even the light bill – signs of serious trouble.

A Crisis Indeed!

At this point, nothing short of prompt decisive action could save Kaye Scholer. Fortunately, bankruptcy partner Michael Crames, a relatively new addition to the firm, stepped forward. Crames offered an aggressive plan to immediately reach an agreement with the government and the firm’s bankers. Crames’s plan was successful in not only reaching the necessary agreements, but in convincing partners to stay the course during the turnaround. For handling the difficulties in such an impressive manner, Crames was elected the firm’s new Managing Partner and served in that capacity for five years.

A crisis that would have killed most firms became a successful turnaround. Kaye Scholer not only survived, but has grown, becoming very profitable and establishing itself as one of the leading firms in the world.

Anatomy of Kaye Scholer’s Success

Successful transition doesn’t just happen. In fact, in our increasingly volatile environment they seem infrequent and more difficult. We’ve shared thoughts based on our experience working with law firm leaders here, and here; and the Kaye Scholer case confirms at least three elements that are critical to a successful turnaround:

Early Recognition. When crisis looms there is a tendency (perhaps natural) to suspend recognition and acknowledgement that real trouble looms. Time is not on your side. Know the signs and the odds of a successful transition shift dramatically in your favor.
Leadership. In the moment of crisis a successful turnaround rests almost solely on the shoulders of visionary and decisive leaders who are able to put an actionable plan in play.
Communication. Successful turnarounds don’t occur behind the closed doors of private conference rooms. As the Kaye Scholer example demonstrates, timely transparency with partners and critical allies like lenders and landlords can result in important continuity.
These days, we all benefit from examples of timely transition and successful law firm turnarounds. Do you know of one?

Law Firms and Retiring Partners-The Issues Extend Beyond the Financial Ones

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

At a growing number of law firms, the Boomer generation is reaching the age when retirement among the ranks has partners leaving in increasing numbers. Recent writings, including Debra Cassens WeissAs Baby Boomer partners retire, law firms face increasing costs and client issues, have noted the numerous and significant financial issues for law firms that are associated with partner retirement.

The increased incidence of partner retirement can be a financial hit on many levels. The monetary payout associated with the retirement benefits is one. While some firm’s retirement plans are fully funded, many plans require a “topping off” of a guaranteed benefit and others, not being funded at all, must be satisfied out of yearly profits. Second, when senior lawyers retire the impact can be negative due to the loss of their productivity not so readily replaced. Third, retirements generally require the return of capital to retiring partners. In a world in which partner capital contribution levels have grown, the capital to repay can be significant-certainly often greater than the capital being contributed by incoming partners.

Individually each one of these financial “hits” can be significant. When considered together (as they often occur), they not only can strap a firm but also can upset the financial bargain the younger non-retiring partners have come to expect. To respond to that predicament, firms are taking action to lessen the financial impact by reducing the overall financial benefit paid on retirement, extending the years for repayment of capital, extending the years of service necessary to vest in a retirement plan, and lowering the cap on annual retirement benefits paid by the firm in any given year. Because such modifications generally must be phased in over a number of years, however, the initial ameliorative effect can be modest.

Even a proactive financial solution to the increased retirements does not necessarily solve all problems. Other issues tied to cascading retirements can loom over a firm, including:

Modifications to the Plans Can Take Too Long to Assuage Younger Partners. Because most modifications to the bulging retirement obligations firms face are phased, the financial strain on the firm and potentially felt by the next generation is not avoided immediately. That can mean an inordinate portion of the firm’s positive financial performance (at least in the eyes of younger partners years away from retirement) is allocated to retirees. With a sense of security and loyalty among partners lower than ever before, opportunities for younger partners to go elsewhere may resonate.

Eagerness to Invest Capital at Firms is not a Given. As senior partners retire and start recovering their capital, younger partners are afforded the opportunity to invest capital in the firm. Sure, it often is the sin qua non of a nice compensation package, but what if highly productive attorneys eschew partnership in favor of a contractual arrangement that requires no capital contribution. It happens now and may happen more often in the future.

Longer Vesting Periods Will Create Other Issues. Engineering the retirement benefits with longer vesting periods and the like may work in a firm’s financial model, but it could create a caste system among generations of lawyers. Moreover, in a market that competes for high value laterals or transformative mergers, the handling of “years credit” towards retirement plan vesting can be thorny. Many law firms will find that the vesting issue for new additions can have destabilizing ramifications.

Demographics are Trending the Wrong Way.  To the extent demographic trends make Social Security a bad bet, the demographic trends at law firms could be worse. The pyramid is dead and buried and signals a shrinking law firm workforce that will be expected to shoulder tomorrow’s retirement obligations. Today’s numbers, as reported by Julie Triedman in her The American Lawyer article Pensions Pose an Increased Threat for Some Firms, are not great. There is no reason to believe that they will improve in the years ahead.

Many of today’s law firms are taking sound steps to address the progression of partner retirements. They simply have to. But as helpful these steps are to the long-term bottom line, they also may contribute to or fail to address some long-term implications that won’t be felt for years.   As you engage in retirement plan tweaking, are you addressing these long-term issues?

Law Firm Culture and Stability

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

Culture 2Culture is a tough concept to get your hands around.  When you see the word “Culture” used in a discussion about today’s law firm environment, what comes to mind? A metric defying intangible that, though referenced in reverent tones in firm literature, bears little relevance to the bottom-line? Or, as a palpable reality that impacts human resources?

Is culture something entirely different?

Here’a a working hypothesis for today’s conversation: you can’t help it – every firm has a culture. However, for law firm leadership the concern should be less about good versus bad, and more about ensuring a culture that is aligned with the aspirations of those wth whom you wish to share the advernture of partnership.

This seems worth discussing, given the excessive rate of partner churn in so many law firms today.

Partner Turnover, Growth and Stability

What causes a firm like K&L Gates, according to American Lawyer, to be the “number one gainer” of partners in 2009, but in 2011 they were the “number one loser” of partners, and the “number two loser” of partners (percentage wise) for the five year period 2009-2013?

I suggest the answer lies in firm culture.

But as I mentioned above, this is not a good versus bad issue. Culture – as fuzzy as it sounds — is how a firm is day to day. What its behaviors are, what it feels like and what it cares about. There is a strong correlation between a firm’s culture and what it most values. Not what it says about these things on the website or in recruiting materials; but where investments are made and stakes put in the ground. Eloquent copy describing a shared commitment to client service, community, collegiality, and collaboration are common. There is often a world of difference between what the website says and what the law firm is.

In fact, a keen focus on certain of these firm characteristics may make a culture a better fit for one individual than the next; but there is nothing inherently wrong with any of them. Cultures vary greatly. For example:

One firm may be family orientated, committed to a serious balance between work and personal life in an environment that provides quality services to clients while earning a reasonable level of income;
Another firm might be committed to driving the greatest level of profitability possible; in this culture there exists the expectation of a continual sacrifice of personal time in order to yield those profits.
There are obviously countless variations between these two extremes; but the point is that they are both cultures. Neither is good nor bad. A person attracted to one is not likely to be attracted to the other. It is reasonable to think that one landing in or recruited into a culture that does not align with personal values and objectives will not last long in such a firm.

Without regard to the type, firm cultures range from strong to weak. Those with strong cultures have a high degree of consistency between their behaviors, policies, procedures and practices. They hire, train, recognize, promote and compensate in ways that further strengthen that culture.

Weak cultured firms are the opposite. There is little consistency in what they do and how they do it.

Strong Culture Is No Accident

A strong culture does not just happen. Leaders of those firms have an understanding of what is important to partners, and direct the development of the firm in a manner that progressively builds on and strengthens culture.

A strong culture helps shape and define successful hiring (hires that further strengthen the firm for an extended period of time) at all levels of the organization. To maximize success in hiring, a firm must understand its own culture and have the skills to draw out the aspirations and values of prospective hires.

So back to K&L Gates and firms like them — the more rapidly a firm grows the more difficult it is to maintain culture and hire in a manner that consistently reinforces that culture. Think about the challenges a firm faces when it is on the acquisition fast track. Each incoming group of laterals brings varied practice and cultural make-ups. At the same time injecting lateral hires with varying aspirations . The successful integration of those firms and individuals is very difficult, if not impossible.

So my theory for the day is two fold; firms that have a strong culture and knowingly recruit individuals and groups with values and aspirations that align with that culture will enjoy the benefits of a higher retention rate. Those that have a weak culture (probably synonymous with but not exclusive to rapid growth) will continue to have a high rate of turnover . And, if you are going to grow extremely fast, you’d better be extremely profitable…because compensation is likely to be the only glue that will hold those hires in your firm.

Preparing Your Law Firm for the Future-Don’t Confuse Tactics with Strategy

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

Challenges ahead warning road signSuperficial solutions to the long-term challenges law firms face are seldom lasting. The right answers only come through disciplined strategic thinking that projects beyond a looming horizon. Unfortunately, some thinking in the guise of being strategic is anything but. And for the law firms trying to position themselves past that horizon, misinterpreting motion for progress can be a bad thing.

A recent piece by Ivan Rasic entitled Law Firms vs NewLaw: How to face the future of legal services? is loaded with interesting and provocative thoughts about today’s law firms readying themselves for life in a NewLaw world. It is commended reading.

An interesting discussion in Mr. Rasic’s article, among many, credits Casey Flaherty for some insightful thoughts about technology and innovation. One of Mr. Flaherty’s points is that in this high technology age some law firms wrongly view technology as a giant step towards innovation. He cautions that the use of technology can be an aid to innovation, but it is not innovation itself.

Mr. Flaherty’s view about technology and innovation highlights the danger of confusing tactics for strategy. Leaders in the legal services market trying to unlock the future and how their firm will fit in it have a formidable task. In seeking the answer to that puzzle, however, it is imperative that leadership not be fooled into thinking that action is synonymous with progress.

But because every law firm’s place in the future is unique and leadership prescience is not a certainty, sometimes it is helpful to start by thinking about what not to do. Avoiding common mistakes won’t necessarily deliver a visionary strategy for the future, but it can be helpful in eliminating distractions, false starts, or missteps.

Some of the more common ways firms mistake tactics for strategy follow:

Overinvest in Technology. Just as Mr. Flaherty argues that technology is not innovation, it is true that investing heavily in it does not assure long-term progress. Investing in technology without understanding the goal it will help achieve misdirects the potential advantage technology can provide. It can waste capital and misdirect a firm’s focus.

Pursue Growth. Similarly, while in a cursory fashion law firm growth connotes action, it is not always aimed towards an articulated purpose. Before growth is to be embraced, it is critical that the time consuming and financially expensive tactic be tied to a strategic objective-hopefully one that is premised on a desired long-term result. As action packed as growth may be, it often is nothing more than a tactic whose promise is overblown.

Add Substantive Capabilities. Focused firms do not try to be all things to all people. Even many “full-service” firms eschew serving the full range of potential clients but instead play to their strengths by doubling down on their expertise. With one exception, new substantive capabilities should be added to a firm only if they augment or enhance current offerings. The lone exception is when the new and unconnected substantive capability furthers a mature and well thought out long-term strategy. Otherwise, the new substantive capability should be carefully scrutinized if not declined.

Copy the Competition.  Just because “everybody’s doing it” does not mean your law firm should follow a competitor’s lead. Law firm leaders should be wary of trying to copy the same steps taken by other firms, especially since the quality of a competitor’s reasoning and analysis largely will be unknown. What a competitor does may be useful in stimulating thought, but it should not be a substitute for an independent consideration of your firm’s status, condition and place in the marketplace.

Preparing a law firm so that it can compete and endure is no small task. Understanding the difference between a tactic and strategy helps in tackling such a daunting challenge. As you have positioned your firm for the future, have you been able to keep them straight?

Is Your Law Firm Being Ripped Off ??

Posted in Law Firm Growth, Law Firm Leadership

burglar-157142_960_720Far too often we see stories of law firms (mainly small to medium in size) that have been ripped off. here, here and here are three examples.

Reported thefts have  ranged from a few thousand to millions of thousands of dollars. Worse yet, sometimes we are talking about funds belonging to firm clients.

 

How does this happen?

 

After recently reading of another case involving the misappropriation of cash by an individual abusing trust, I thought a refresher course (or perhaps an introduction for some) on basic “blocking and tackling” might be appropriate.

 

As firms grow it is easy (in fact, not unusual) to fail to implement a handful of checks and balances that serve to decrease exposure to theft and fraud. Absent these business safeguards, it is easy to wake and find yourself the victim of someone all-too-willing to take advantage of your trust and a system that is far too easy to hack.

A relatively simple system of internal controls can provide significant protection, and decrease the risk of your firm falling prey to someone that doesn’t deserve your trust.

A thorough discussion of appropriate internal controls is beyond the intended scope of this post; but consider the following primer.

The Basics of Protection

Segregation of duties

As a small law firm grows — both in terms of number of individuals employed and revenue generated — there is an ever-increasing demand on the owner(s) time. The resulting tendency is to delegate activities related to receiving and accounting for funds, as well the approval, payment and accounting for payments related to obligations of the law firm.

As the volume of work delegated grows, separate individuals should have responsibility for authorizing, making and accounting for payments.

Additionally, different persons should have responsibility for opening mail, depositing payments and accounting for their receipt.

Limitations on authority

One approach to decreasing exposure is to apply limitations to authority. For example, many firms require two signatures for payments that exceed a certain threshold such as $1,000. This is not about trapping a dishonest employee; it is about installing smart checks and balances around judgements and decisions that can be pivotal in nature.

Transaction review

 A firm owner should receive, unopened, the firm’s bank statements, and review them on a monthly basis. The simple fact that the statements are being reviewed will prompt a better decision making process.

For firms with two or more owners, it is smart to separate responsibilities, having one owner authorize payments (coupled with a requirement for two signatures), and another review the bank statement.

Budget/financial planning 

An annual budget reflecting anticipated expenditures and receipts is a tool that helps to minimize exposure. A monthly review of actual to expected performance will identify unplanned and perhaps inappropriate transactions.

Mandate vacations/job rotation 

A practice of forcing a continuity break by mandating vacations away from the office (and away from access to the firm’s financial systems) has a strong impact on decreasing temptation and exposing inappropriate activity. A system of rotating responsibilities associated with cash related functions has a similar impact.

External audit

Contracting with an independent accounting firm for an audit of the firm’s books is a very healthy practice. Much like other aspects of a good internal control system, employee knowledge of the fact that periodic audits occur will decrease the likelihood of a problem.

Implementation of any of the above will result in a more secure operation but a professional review of your firm’s financial processes and controls is most appropriate and is recommended.

 

How are your internal controls?

 

 

 

Law Firm Lateral Hiring: Preparing for the Upcoming Free Agent Season

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

As law firms prepare for the last half of 2016, the ingredients for the lateral hiring stew are being added. Firm and individual lawyer performance on the year, bonus expectations and realization, internal law firm management and politics-all will be factors in determining individual lawyer contentment. The same factors, viewed from management’s perspective, will drive an examination about the firm’s “keepers” for 2017 and its future. These respective points of view will flavor the free-agent recipe. Content lawyers seldom leave-dissatisfied lawyers are always potential departures. And money talks.

Based on recent experience, lateral movement between law firms has become a way of life. With a widening gulf between the top law firms in the AM Law 200 and the rest, the better performing firms have a significant advantage in the lateral hiring space. Firms that are struggling or treading water may be particularly vulnerable. Even firms that are enjoying modest success may be susceptible to losses as ambitious lawyers think about finding a “better platform.”  Conversely, firms that are healthy may be positioned to act opportunistically.

Aggressive activity by the firms most able to pursue laterals will stimulate lateral hiring activity in the latter part of 2016 and in early 2017. Faced with the advent of the upcoming “free-agent season,” law firm management should prepare in at least five key ways:

Update or Develop a Growth Plan That Ties to Your Strategic Plan. Growth for growth’s sake is a losing proposition. Not many law firm leaders will admit to such a strategy, but if proposed lateral hiring is not in furtherance of an imperative in a firm’s strategic plan, it should not be pursued. A reactionary pursuit of lateral hires because a competitor might otherwise hire the target is mindless growth to be avoided. If your firm intends to pursue acquisitions, only target lawyers that further your strategic plan objectives.

Assess Your Vulnerabilities. Lateral movement is a two-way street. Just as you are identifying targets to hire, some of your most valuable attorneys may be checking out opportunities at other firms. Don’t be blind to what goes on around you. Analyze which of your lawyers may leave and then work on a retention strategy. Keep your key assets as you seek valuable lateral additions.

Work on Deferred Maintenance. If your firm is in danger of departures, it is probably because unresolved issues at the firm make some of your producers unhappy. Likewise, a sloppy firm will not impress lateral candidates. Get ahead of the game by curing deferred maintenance. It may help save someone nearly headed out the door and improve your ability to impress lateral candidates.

Build Firm Momentum Independent of Lateral Additions. It is critical to end every year on a positive note. Yet we all know that not all years end up with record profits and bonuses. While positive spin sometimes can be tough to generate, leadership must attempt to excite the firm’s lawyers about the future. They will help excite the outsiders looking in.

Be Disciplined. You can have a growth plan, a strategic plan, a retention plan and a profitability plan. But if discipline is lacking in implementation of any of the plans because leadership has the bug to hire a new lateral to create some buzz, the firm suffers. It is imperative that discipline guide leadership in the upcoming free-agent season.

Baseball has its seasonal “hot-stove league” when players get traded and teams seek improvement through building a new roster. The functional equivalent for law firms is getting ready to start. Is your law firm ready?

 

This article won the BiglawWorld Pick of the Week award for the week of August 21, 2016.  The editors of BiglawWorld, a free weekly newsletter for those who work in midsize and large law firms, give this award to one article every week that they feel is a must read for this audience.

The Bullseye and Law Firm Success

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

“Focusing is about saying No!” Steve Jobs

Blue-bullseye

I was reviewing an article regarding the an Annual America’s Best Corporate Law Firms study and was struck with how consistent the same names appear on this list — year in and year out. Even if you haven’t seen it, chances are you can name many of the firms that have a stranglehold on a position on this enviable list.

 

 

It begs the question for firms seeking to achieve a similar position — How did these firms secure their position? And what will it take for your firm to capture a similar position?

 

 

The answer is simple………..

Focus

 

 

 

 

 

 

Firms that hold dominant market positions have found a way to align who they are and what they do on a daily basis with the market position to which they aspire.

Dominant law firms hire, spend, acquire, merge, and compensate based on one question: Does this investment align with our strategic focus? If it does not, it eats away at the desired position…and weakens the law firm.

The path to dominance is easy to define in theory. Identifying and navigating the right path for your firm is much more challenging in practice. A thousand good ideas, disparate aspirations and diverse views combine in an assault against focused and disciplined decision-making.

Without unwavering focus on the desired market position, every good idea seems worthy of investment. Any opportunity to expand can appear to support growth. Every opportunity can seem to be a good one; however, at the end of the year you find yourself having made significant investments, but no closer to your firm’s desired market position.

And the discussion is not limited to aspirations of a position of market dominance. The principle applies to whatever your aspirations are. Without disciplined focus your odds of achieving what you would like to achieve are greatly diminished.

Here are the guideposts that lead to the aligned law firm…and will help you chart your firm’s course to stability, the profitability you desire, and yes — market dominance.

  • Identify the market position to which you and your partners aspire. (You can guess…but this is most effectively accomplished through a series of interviews/discussions designed to identify your shared vision.)
  • Audit your expenses and define which move you closer to the position you desire. (Whatever they are – office space, infrastructure, people — begin now to create an expense ledger that is devoid of the things that do not move you toward your desired market position.)
  • What is lacking…in terms of talent, location, support and infrastructure? Build a plan that moves you from where you are today to where you need to be…and invest appropriately.
  • Consider each decision in this context – will this move us closer to the market position we’ve targeted?

Is your firm on its way to the top?

 

Law Firm Succession Planning and the Millennial Generation-Covering Achilles’ Heel

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

Last week saw Vault.com release its 2017 survey of the best law firms to work for and O’Melveny and Myers is the new reigning champion. Among quality of life factors that matter to many of today’s associates, the firm scored first in satisfaction and honors, and placed second in firm culture, leadership transparency and substantive work categories.

The importance of quality of life to Millennial attorneys also was touched on in Law360’s 3 Factors That Make Law Firms So Toxic.   The article, written by Kathryn Rubino, noted that “toxic” firms tend to perform poorly in providing consistent feedback, displaying an atmosphere of personal and professional growth and operating transparently.

Today’s law firm leaders don’t need to read about Vault.com’s quality of life rankings or study Ms. Rubino’s writings about toxicity to know that in the age of the Millennial a law firm’s appeal to young attorneys is different from years past. Recruiting and retention of good quality associates today requires attending to their “new age” interests and preferences for career development.

Meeting the Millennial challenge also goes to the heart of law firm succession. While there is no denying that a law firm’s succession plan must satisfy the Generation X talent that is next in line, looking beyond Generation X to a firm’s Millennial associates and young partners is critical. If Millennia’s are not fully a part of a firm’s succession plan, it likely will be nothing more than a delaying action to an ultimate firm surrender. This can be avoided if Millennia’s believe:

In the Process. Telling Millennia to do something without explaining how the task fits into the bigger picture is a mistake. They crave understanding the process and being part of the process. A firm that engages young attorneys in the succession secures for itself a solid foundation for the future. Keeping young excited about their future at the firm is vital.

That Success and Work-life Balance are Compatible. A firm that currently displays sensitivity to achieving a work-life balance will be popular, certainly for the short-term. If that same firm demonstrates that its long-term plans beyond the Generation X attorneys will allow the next generation of owners to enjoy financial and professional success without sacrificing a life outside of work, succession prospects long-term will be enhanced.

Their Team Has Good Coaches. More than ever today’s young lawyers want to learn their craft, but don’t want to learn in isolation. They value being mentored, receiving clearly articulated feedback and being coached in a way that focuses on professional development. A team approach in collaborative projects is also valued because it is consistent with prior learning experiences. So the firm that is committed to a collaborative and interactive culture both short-term and long-term furthers its succession goals.

A Square Hole Can Fit a Round Peg. Despite their desire to enjoy a work-life balance, Millennia’s entrepreneurial tendencies look for better ways of doing things. A law firm that stifles creativity “because that’s the way we’ve always done it” is not going to appeal to the newest generation of lawyers. If a law firm’s future encourages its attorneys to think of new and better ways of doing things, it not only will project opportunity but it also differentiates itself from much of the pack. For a workforce with a “startup” mentality, a firm open to a sound transformation can create excitement that yields long-term dividends.

The Older Generations Can Adapt. It takes two to Tango, so for succession to appeal to the Millennial generation senior leaders and lawyers must show their buy-in as the succession plan takes its course. If senior members of the firm only pay lip service to a Millennia attentive plan the best of the Millennia’s may be gone long before the day of succession arrives. Not only must the senior attorneys be willing to adapt, but also they must demonstrate a willingness to do so on a real-time basis.

Law firm succession planning that fails to think deeply about the Millennia’s role in the firm’s future misses a vitally important component that cannot be taken for granted. Indeed, a Millennia lite succession plan could prove to be a law firm’s Achilles heel. Does your succession plan protect against such a point of weakness?

Adapting and Law Firm Survival

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

The measure of intelligence is the ability to change – Einstein

Change

Adapting to change – At first blush the need to adapt is so obvious there would seem to be no need to discuss it. Then we see firm after firm, small to large, fail because of their failure to adapt. So, lets discuss it.

 

 

 

In our experience there are 4 steps to adapting:

Acceptance,
Evaluation,
Planning, and
Execution.
Step 1 -Acceptance

It has been long understood that all species, human, animals and businesses of all types, operate in an environment of constant change. There are two choices, adapt or die.

In slowly changing environments, like the legal market during most of its history; responding to change doesn’t need to be hurried. In an environment like the legal market of the last several years, where change is rapid and accelerating, an appropriate response must be developed with a sense of urgency.

This short and insightful post by Eric Fletcher provides a great example.

So, if the constant nature of change is an absolute, why do so many firms fail to adapt. I suggest that it can only be one of two things, 1) a lack of understanding of the effect on their firm, or 2) a lack of the knowledge/capability necessary to do anything about it.

Step 2 – Evaluating Impact

There are numerous ways in which change may impact a law firm;

  • New competitors – this might include new law firms as well as a growing list of non-traditional service providers,
  • Changing methods of service delivery fueled in large part by innovations in technology and/or process,
  • Shrinking demand for certain types of services, and
  • Increasing experience and expertise among clients, in particular General Counsel, who are utilizing their power of choice — resulting in pricing pressure, and in some cases the loss of an important client.

Law firms must regularly engage in an evaluation process that attempts to understand the specific nature and ultimate impact of the changes their firms are facing.

Step 3 – Planning for adaptation

This step includes discussing options for how a firm will respond to the primary changes it is facing. Often this is a difficult step because the plan will almost always include the reallocation of resources in a way that improves the odds of success. A third party participant in the process can be very helpful in maintaining a level of objectivity.

Step 4 – Execution of the Plan

As is so often the case, execution can be the point of failure. A firm can expend all the resources — time and money – and end up with a killer-strategy that addresses change and scopes new opportunities. But we’ve all seen great plans fall victim to the pressures of daily realities. The plan winds up collecting dust in a desk drawer.

Meanwhile, change continues its march.

Firms that beat the “desk-drawer” fate typically do three things well:

  • Set up “short fuse” milestones for the implementation of the change plan,
  • Include a process designed to build consensus, and
  • Put the right people in charge of driving the plan.

It all begins with a full acceptance that our choices are to adapt or die.

Is your firm adapting?

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