Managing Law Firms in Transition

Managing Law Firms in Transition

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?

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


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………..








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 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’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


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:

Planning, and
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?

Managing Excess Law Firm Growth-Spinning Off the Struggling Office

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

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

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

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

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

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

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

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

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

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

Denial and Turning Around The Troubled Law Firm

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

Hope is the denial of reality – Margaret Weis




As a law firm in decline continues to struggle, there are two primary scenarios in which denial furthers the rate, or degree, of decline:

  • undervaluing the risk associated with a significant undertaking; or
  • disregarding mounting evidence of decline.

Denying the Risk Associated With Major Initiatives

Struggling law firms often entertain major changes (to the firm or in its culture) in order to “right the ship.” I define a major change as one that, if it were to go very wrong, could trigger the demise of the organization. Some examples include:

  • downsizing through the termination of individuals, groups or office closings;
  • the acquisition of another firm or practice;
  • being acquired;
  • restructuring management/governance; or,
  • modifying the compensation system.

Major changes are often necessary for a struggling firm, to be sure. However, a move from the frying pan into the fire is to be avoided. The overwhelming tendency is to undervalue the risk associated with major moves. To counter that tendency the prudent leader will seek to have the “worst case” scenario fully developed and discussed prior to decision-making. It is best to lead with caution and seek counsel.

Denial of the Evidence of Decline

By definition, struggling law firms are operating in variance to desired levels. In the most extreme case – a failed firm — it is typical to find that there was mounting evidence indicating a decline – evidence that was discounted or ignored. Examples of mounting decline include:

  • an increase in the level of undesired attrition/turnover;
  • an increase in debt;
  • a decline in margins;
  • falling revenue levels; or,
  • the loss of meaningful client relationships.

Law firm leaders must be vigilant in monitoring the performance of the organization. Steps should be taken to ensure that the firm doesn’t veer too far for too long from operating performance norms or targets. The longer the firm operates in variance, or the greater the degree of that variance, the stronger the corrective action needs to be. And the more frequently the performance needs to be monitored.

Often the leader of a law firm in decline becomes more insular, protecting the firm from “bad news” and trying to prevent alarm. The prudent leader will honestly communicate with confidence and conviction, while broadening the number of people from whom input and advice is solicited.

Is denial adversely impacting your firm?

Lexit: How to Respond to Lawyer Exodus from Your Law Firm

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

Modest attrition at law firms is to be expected-it happens continually and few firms are exempt. But when the lawyer departures spike, or the particular resignations are from your most important lawyers, management must respond quickly.

Lawyer departures don’t just happen for any reason. Unexpected and damaging departures often can be traced to problems a law firm is having but has failed to correct. Disappointing financial results, political infighting or declining confidence in the firm’s future can contribute to attorney losses that are particularly painful. When faced with crisis stimulated by loss of key contributors, law firm leadership should take action decisively. In addition to trying to stabilize the inevitable flagging firm morale, leadership should:

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

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

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

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

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

For many firms, an unexpected but significant departure hits at the worst possible moment. Reacting quickly and effectively can be huge in the success or survival of any law firm. If Lexit happens at your firm, will it be able to respond?

Is Your Law Firm Slipping Into Trouble

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

One ought never to 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


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. In an earlier post, What Caused the Pain, we discussed the fact that 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 able to turn the tide.

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 to the firm 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 recognize 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?