Managing Law Firms in Transition

Managing Law Firms in Transition

Sustaining Success in the Changing Law Firm World: Four Fundamentals

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

It can’t be overstated. The legal services business is experiencing dramatic change.  For law firms as institutions, it is obvious because more work than ever before is brought in-house by clients, and alternative service providers are rushing into the competitive landscape.  Besides the increase in competition, there are technical and practice advances that have changed the way law firms do business.  Legal project management, once a novelty, is altering the focus law firms are expected to bring to a task.  Technology in law is evolving so fast that even law firms committed to investing in new tech have a hard time keeping up.  And artificial intelligence is finding its place in the ultimate objective of meeting the legal needs of clients.

With all the industry change, most firms know that settling on the status quo is risky. Still, more than a few firms are slow to change.  Some are overwhelmed by the idea of innovation itself or are worried about the appropriate time and capital to invest in its execution.  Without adequate experience or guidance, a firm can be paralyzed.

As your firm sets out to evaluate the right level of change or innovation it should pursue, four fundamental steps can serve as a guide.    Following these steps have helped many firms prepare for the process of finding its future.

Look Outward at Market and Practice Trends.  Preparing for the future requires a substantive understanding of market and practice conditions and trends.  Observing (in an in-depth way) the direction of other firms and the evolving expectations of clients is highly recommended. Staying attuned to these “best practices” that are working for other firms helps guide a firm into the future, not just the present.  By keeping abreast of the latest innovations, a firm will be better positioned to design its future.  But the effort to gain market knowledge must be constant.  A superficial review of the activities of other firms and trends in the market can lead to decisions based on false positives, or fads.

Create a Plan that Looks Towards the Future.  The frenzied atmosphere of the present too often can deprive leadership of the time needed to think about its past, present and future.  With the awareness developed by remaining well-informed about the latest developments and the direction of the industry, the firm should consider a careful review and possible revision of its strategic plan.  In that review, the firm should test its plan against the perceived direction of the firm and industry; and make adjustments as needed.  While this may seem like a small step, far too many firms go years without doing so and miss the opportunity to seize control of their future.

Manage the Firm’s Behavior to Build the Firm’s Future.  A plan for the firm’s future is meaningless without action steps to achieve the future identified.  For that reason, upon completing an updated strategic plan, the firm should create an execution plan to implement important initiatives needed to achieve the firm’s goals.  It should go beyond generalities but should identify specific steps designed to move the firm towards the future it has chosen.  A core element of doing so requires creating reward processes and procedures that encourage behaviors consistent with the planned future.  If the firm does not manage its people to the future it intends, there is little likelihood that the firm can progress in a way the future demands.

Nurture and Hire Talent the Fits the Firm’s Vision of its Future. Running a law firm is in no small part about the firm harnessing its talent to towards the firm’s goals.  A firm with a view to the future will work hard at making sure its workforce skills are compatible with the direction the firm is headed.  Whether the firm is going to invest in some or all of legal project management, technology, or artificial intelligence, it must have the right kind of people to leverage these commitments.  The firm can train its existing personnel or hire new people with the correct skills. Either way, the firm’s talent must be utilized in the ways needed to achieve the intended future.

Law firms that methodically approach their changing industry are the ones that are positioned best for the future.  Is that how your law firm is dealing with its rapidly evolving world?

 

 

A Thief Among Us?

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

Most law partnerships begin with a sense of shared aspirations, enthusiasm and trust. The founding partners and those subsequently added presumably maintain a fiduciary commitment to conduct consistent with the welfare of the other partners, as well as clients.

The fact is that this is often not the case.

The recent conclusion of a case involving an Atlanta law firm and its managing partner provides a painful but poignant example of the extent to which trust can be violated.

Morris Hardwick Schneider, an Atlanta based firm that once employed 800 people in more than a dozen states, was the product of a 2005 merger of Jackson & Hardwick and Morris & Schneider. The firm, which also had an affiliate — LandCastle Title — grew to be one of the nation’s largest real estate closing firms. Based on all outside appearances the firm seemed destined for great success. Reportedly, Nathan Hardwick  had visions of offices in every state in the US, and ultimately “cashing out” through a public offering.

But what appeared so successful and held such promise ended in an ugly fashion for everyone involved.And it happened quickly.

  • August 2014 — Morris Hardwick Schneider and its partners file a $30 million-dollar suit for theft of firm and client funds against managing partner Nathan Hardwick
  • October 2014 — former client, professional golfer, Dustin Johnson sues the firm and his business advisor Nathan Hardwick for theft
  • July 2015 — Morris Hardwick files for bankruptcy protection
  • February 2016 — Nathan Hardwick is arrested on multiple counts, including wire fraud and conspiracy
  • February 2016 — former firm CFO, Asha Maurya , is charged with conspiracy to commit fraud, and later pleads guilty and becomes a prosecution witness
  • October 2018 — a jury found Hardwick guilty of embezzling $26 million from his law firm
  • This week — Judge Eleanor Ross sentences Hardwick to a 15-year sentence plus restitution
  • During the four-plus-year- period hundreds of people lost their jobs, a large firm failed, individual partners lost millions of dollars, some lost their homes and all suffered career disruption of an extraordinary nature

A closing note, there were signs of trouble dating as far back as 2008 when the firm began receiving calls from bankers and other creditors regarding the firm’s managing partner, Nathan Hardwick. Interestingly, one of Hardwick’s partners was concerned enough about his partner’s financial position that he decided to personally loaned him $750,000. In retrospect, one imagines that the need for this kind of loan might precipitate concern and prompt an inquiry into the firm’s management.

So, what to-do?

A quality set of internal controls will significantly decrease the odds of your firm facing its own Nathan Hardwick-like moment. Certainly, the “Thief Among Us” doesn’t ‘have to be the managing partner. It can easily be any individual that has the authority to approve or effectuate payments. Every well-run firm should have its own review of internal controls; but the following should be considered fundamental to any law firm.

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 time of the owner(s). 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 firm.

As the volume of work delegated grows, separate individuals should have responsibility for authorizing payment, making payments 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 the firm’s bank statements, and review them on a monthly basis. The owner opening and reviewing the bank statement should be someone that doesn’t sign checks. The simple fact that the statements are being reviewed will prompt a more deliberate and considered 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 significant impact by 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 an effective 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 important and we highly recommend it.

Though shared aspirations and trust characterize the early days of virtually every partnership one should be aware that the case of Nathan Hardwick is far from an isolated incident. Fraud within a law firm is a surprisingly frequent occurrence. If you’re interested in additional recent cases, see hereherehereherehereherehereherehere and here.

Implementing internal controls is inconvenient. Adhering to good internal controls can be annoying and disruptive, especially when there are more interesting aspects of a practice and a career to focus on. But prudent law firms and their partners accept the interruption or inconvenience as a small price for the protection they may bring—much like a seat-belt!

How are your internal controls?

Four Ways a Strategically Designed Merger Can Strengthen Your Law Firm and Make it More Competitive

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

Despite the seemingly “good” year that 2018 was for many law firms, experience tells us that ”good” can be  a relative thing.  While 2018 performance data compares favorably to the data from the prior years following the Great Recession, all is not completely rosy.  Today’s law firms face more competition than ever as market share is shrinking, and the industry is being disrupted in multiple ways.

The recently released Thomson Reuters State of the Legal Market 2019report provides some industry information about how the 2018 results should be viewed.  The report concludes that despite good results last year, a robust round of “high-fives” should be tempered.  As Thomson Reutersnotes, shared competitive industry information, technological advances, client control of legal service use and terms, greater competition among law firms and other resources, have all greatly altered the legal services market. This change in landscape has, among other things, stimulated a war for talent, causing valuable lawyers with valuable clients to move from one firm to the next in free-agency run wild.

In this challenging world, law firms are looking for solutions.  As one answer, some law firm leaders are considering merger.   While merger is not a panacea every time, there are four good reasons the idea of merger should be discussed by law firm leaders.

Attracts and Preserves Talent.  The law firm of today is engaged in a war for talent.  The competition comes from other law firms, clients that have built up their own legal departments, and innovators that provide legal services through non-law firm platforms.  The increased competition has caused the lateral movement of lawyers with business to reach an all-time high.  Not only are most firms finding themselves looking for talent in this fluid market, but their own key players are in danger of being poached away by other firms. A merger can create a bigger platform and financial opportunity that law firms can use to lure and retain talent.

Expands Expertise. As clients grow and prosper, they often need more expertise if their growing legal needs are to be met.  A firm’s substantive capabilities may begin to fall behind the needs of clients, or the direction the law firm’s market is headed.  A merger with the right firm can jump-start an expansion of substantive capabilities that can keep pace with clients and industries served.  Relying on organic growth of expertise may prove too slow. And while hiring the needed expertise through the lateral market may work, a merger may advance the ball more quickly and effectively.

Become Better Positioned to Compete.  The competition law firms face is greater than ever.  In addition to the traditional battles with other law firms, competition now means trying to wrest market share from client in-house legal departments, accounting firms, and alternative legal service providers.   A broader platform that a merged firm enjoys may make it possible for the law firm to slow the client’s interest in moving away from a smaller firm that has more limited offerings.  A firm with expanded expertise and talent is less likely to be disregarded than a smaller firm that has allowed itself to be languishing in the status quo.

Makes More Likely Greater Non-Lawyer Investment.  In its report, Thomson Reuters shares data that reflects an increasing investment by law firms in things like technology, marketing and business development, library resources, outside services, and recruiting.  These investments are now occurring after years of expense cutting and signal a concerted interest in investing in the future.  While size alone does not guaranty the ability to likewise make these kinds of investments, a larger platform with increased revenues may make investing in the firm’s future more likely a part of a firm’s strategic conversation.

Is your law firm losing talent, losing market share, and unable to invest in its future?  If so, the idea of merger should be discussed.

 

 

Will Your Firm Be A Victim of the Law Firm Succession Crisis?

Posted in Law Firm Succession, Law Firm Transition

I have been thinking about  the results from a recent survey conducted by the Zeughauser Group. Although the survey covered a variety of issues, the responses related to succession particularly struck me.

  • When describing the top objectives for their firm, the most frequently stated objective was to “achieve long term stability.”
  • When describing the biggest challenge facing their firm in the next 3-5 years, the biggest challenge stated was “transitioning leadership to the next generation”, closely followed by “transitioning client relationships to the next generation.”
  • Finally, when asked about the biggest priority in the next 3-5 years the greatest priority was “building a more stable future.”

These responses aren’t particularly surprising when considered along with repeated survey reports indicating a minority of firms have developed any type of formal plan to transition leadership and/or client relationships to the next generation. (See here and here for some good discussion related to the lack of preparation industry wide.)

What now? 

If you are a law firm leader, this reality does not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their heads in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.

A 3-Step Path to Survival

Step 1– Start now. As simple as this may sound, it may be the single toughest part of developing a plan. The day-to-day demands of managing a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in the current predicament — years of not having time to address relationship continuity and succession.

To think too long about doing a thing often becomes its undoing” –Eva Young

Step 2– Engage your colleagues in a series of discussions intended to yield a plan for succession. Inclusion is essential to obtaining the buy-in necessary for a plan to succeed. Conversations with those impacted (clients as well as lawyers) that focus on long-term benefits, continuity of representation for clients, and the value of legacy are critical pieces of the puzzle. Some of these conversations may not be easy, but without them you are reverting to a strategy of hope.

Step 3– Execute and monitor the plan. Very few plans roll-out exactly as intended but the routine monitoring of performance to the plan provides a means of adjusting as necessary to achieve the objective. Succession is about the future–and any conversation about the future must be on-going. Inside a successful firm, a good plan must be able to evolve.

A successful succession plan doesn’t necessarily mean future leadership comes from within your firm. The plan may include the recruitment of new talent in the areas of leadership, and/or client generation and servicing. It may mean that the core of your firm survives as a part of a bigger organization. The real key is that the result your firm ends up with is the result you desire. Without effective planning the desired result is highly unlikely.

One additional note that many firms miss when it comes to the issue of succession planning—-Succession is likely on the mind of your clients. The issues of experience and continuity are likely being dealt with inside your client’s organization. A thoughtful collaboration between relationship partner, the client and firm leadership is an opportunity to demonstrate that level of client-centeredness all law firms proudly tout.

Our experience is that most firms wait too long and suffer the consequence of fewer or no options. Don’t let that happen to your firm!

See here for additional reading on this topic.

Focusing on a Great 2019-Five Areas for Law Firms to Consider

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

No sooner than closing out 2018 than do law firm leaders confront the next challenge-2019.  Even firms not facing upheaval caused by attorney departures or declining client relationships will encounter other transitional events.  The contest never ends.

Whether 2019 preparations are just getting started or already developed, some areas deserve a firm’s attention.  Focusing on these select areas can deliver short-term and long-term benefits and aid in making a law firm stronger.  As the New Year dawns, the five areas that should receive a firm’s focus are:

Client-Relationships. Without an adequate client base, it is hard to continue a firm’s status quo.  For that reason, it is important to annually (if not more often) take stock of the firm’s client portfolio.  Are important clients starting to drift away?  If so, what can be done to arrest the unwanted trend? Conversely, are some clients, even legacy ones, too much of a drain on firm resources in light of the financial reward?  If so, does it make sense to transition away?   A review of client relationships may indicate that a different client profile for the future should be pursued to better align with the firm’s strategy. The inquiry can take many directions, but without performing a top to bottom client review, the future can be at risk.

Financial Performance. Understanding your firm’s financial success and prospects for the future is more than asking whether everyone made enough money last year.  A good year in 2018 may mask red flags destined to wave furiously soon. The 2018 legal services market was the best in years–your firm’s success may not be as “earned” as it was “gifted.”  Even with recent success, focused firms perform an objective assessment of the firm’s financial strengths, weaknesses, trends, and strategies for improvement.  The scope of the review should include a look at productivity trends, market reliance, margins, expenses, investment levels and financial risk.

Talent.  Just as a law firm is nothing without clients, it is nothing without talent.  Successful law firms usually are blessed with talent, but positive talent levels in the future are not guaranteed.  Whether 2018 was a banner year or not, leadership should perform a serious talent review of each person, each practice segment, and the back of the house.  Upon performing those assessments, leadership should consider possible improvements and whether a boost in talent can be realized in-house (through training, focus, or otherwise) or by acquisition of outside talent. If the review identifies gaps in the firm’s talent profile, the firm should act to fill the holes.

Culture.  The quality of and commitment to a law firm’s culture is often cited as critical to success.  Yet the pursuit of high financial performance or growth can undermine a firm’s culture.  An annual review of the firm’s culture can identify whether short-term initiatives or successes have come at the expense of the firm’s valued culture.  Being faithful to the firm’s culture generally is a good idea, but not always.   Indeed, a review may spur the realization that culture has changed for the better (or at least not for the worse).  A yearly review of the firm’s culture allows the firm to correct unwitting detours, embrace good changes, and plan for a future in which the firm’s culture is aligned with its strategy.

Succession. Every year that passes brings a firm closer to the need for an effective client relationship and leadership succession plan.  Whether succession is more client-relationship driven or leadership based, annual attention to the topic is vital.  Even firms that have planned previously must pause each year to see if they remain on the right track.  A firm cannot be comforted simply because it has addressed succession in the past.  Existing plans should be reviewed to determine whether a refresh is required and whether implementation elements need updating.

Successful years at law firms seldom occur due to happenstance.  Rather, great years require leadership focus.  Has your law firm brought the needed focus as it prepares for 2019?

Is Your Firm Prepared For Major Disruption in 2019?

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

Strength and growth come only through continuous effort and struggle. – Napoleon Hill

The market volatility during the last year and the increasing concerns about a coming recession foreshadow risk for many law firms.   Additional market disruption may lead to challenges for firms of all sizes and in most practice disciplines.

In a Forbes article, Basha Rubin suggested that we might be seeing the end of the mid-tier firm. Rubin’s reasoning is that the growth of in-house counsel staff and their use of temporary legal resources to manage a fluctuating workload is likely to hit the mid-tier firm particularly hard. That may be true but we see emerging challenges for firms from small to large.

Step Away From The Ledge, And Remember What It Takes To Maintain Stability

There is no denying that an increasing number of forces are creating pressure on many firms; and new uncertainties in the economy may become an additional one. However, the fundamentals of what it takes to maintain a successful practice remain the same – for firms of any size. Here’s a quick primer.

  • Manage obligations to a low and sustainable level. This means:
    • Not committing to expensive (and extravagant) office space. Resist the siren song of that newest office tower – and the long term lease and increased fixed-cost-per-lawyer that comes with it.
  • Limit hiring of permanent lawyer and support staff until an extended and reliable need has been established. In the interim, learn to rely on part time, and temporary resources.
  • Focus your practice on an area of law for which you have a passion, and for which there is a significant demand.
  • Strengthen and expand your relationships. This means the network of those that you have a direct relationship with, and those that can be developed in person or increasingly through social media.
  • Do work of a quality that will bring clients back, and turn them into referral sources.
  • Maintain (or initiate) a rigorous process for client feedback and conversations that transcend specific matters or projects. This is increasingly central to long-term, stable relationships.

Success is not about size. In fact, solid growth and profitability are not dependent on or guaranteed by the addition of people, offices or the obligations that accompany them.

Success and stability are about purpose, passion, wise management and a relentless focus on nurturing and growing your network.

Law Firms Enjoy Positive 2018-What If Your Firm Didn’t?

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

Although the final numbers are not in yet, 2018 has been touted as a good year for law firms.  Based on various reports including the 2019 Citi-Hildebrandt Client Advisory, revenues were up, billing rate increases held, and client demand increased.  These improvements are not shocking as law firm performance has been ascending in recent years.

Just because industry performance this past year was on the whole very good, not all law firms can look back on 2018 with such positive thoughts.  Indeed, the overall industry uptick is pulled along by strong performances among the AmLaw 100, especially the top 25 firms.  Performance among the second AmLaw 100 (or 101 to 200) generally was not as positive. Similarly, firms outside the second 100 did not, as a class, enjoy the kind of robust financial performance logged by the bigger firms.  Specialty firms (obviously focused in the right specialty) were the exception among smaller firms.

If your firm was one that had, relatively speaking, a down year, then all this good news about the industry in general is small consolation.  For leadership in those firms, what is to be done?  In some cases, an average or even modestly down year should not be overly concerning.  After all, law firm performance can run in cycles and a softer showing for 2018 may not be indicative of looming trouble.  But if firm leadership can’t slough off 2018’s performance with “no worries,” it should consider addressing its real concerns in the following five ways:

Perform a Careful Analysis.  A performance off the mark deserves a careful and unpanicked review.  Determining the causes of a down year is step one to designing an effective response.  As a start, compare 2018 performance data with prior years’ and then get behind the numbers for an explanation of what happened.  Understanding top line and expense variations can be extremely helpful. The more information that can be gathered, tested, and understood, the more likely leadership can avoid acting on false positives.

Look for External Signs.  Once a careful analysis respecting the 2018 performance is completed, consider external signs that help explain the 2018 outcome.  A change in client fortunes, movement in the market heavily relied on, loss of key partners, or legislative, judicial, or executive branch course changes must be considered.  Big picture items can be particularly important and may force a change to the firm’s direction or strategy.

Address Correctible Failings.Sometimes a down year comes about because talented people simply had a down year.  Letting talent ride out a down cycle may be appropriate or directing that talent to change the approach to working may be the better alternative. Thankfully, poor performance among firm attorneys or firm segments can be corrected.  A focus on fixing the misplayed 2018 can be a big step towards assuring an improved 2019 and beyond.

Excise Systemic Failings.  Not all problems can be corrected.  After a careful review, a firm may realize that certain components of the firm’s operations are irretrievably broken.  A practice that has been legislated to irrelevance often should be eliminated. So too for a practice whose sole client has disappeared and either can’t be replaced, or its lawyers taught to retool. Painful as it may be, an elimination strategy may be the most appropriate step.

Redo Your Long-term Plan.  Taking measures to remedy problems in the short-term is not enough.  Each problem corrected may reappear unless long-term term consequences are considered, and an action plan is implemented.  Anytime a firm falls off its intended performance, a review of long-term impact is essential.  Studying how the most recent past will impact the firm’s future can lead to a change in long-term strategy.

As a new year starts, leadership’s action will play a large role in determining the 2019 outcome.  If your firm did not perform up to expectations in 2018, now is the time to make sure it is not repeated.  What is your firm doing to make 2019 a better year?

 

Preparing Your Firm For 2019 and Beyond

Posted in Law Firm Leadership, Law Firm Transition

Most firms are in the final stretch for this year, wrestling with collections, budgets, promotions and compensation decisions. All of these are important activities. But, while focused on wrapping up 2018 let me suggest one more subject that deserves attention — something that stands a chance of making a real long-term difference.

I suggest that you spend some time really wrestling with this question: “What one thing, if accomplished in the coming year, will leave us a healthier, happier firm — better positioned to compete in 2019 and beyond?”

I came across the book The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results, by Keller and Papasan. The premise of the book is that we all face a tremendous number of distractions and demands on our time, most of which make no significant difference in our lives or the endeavors most important to us.

But if we take the time necessary to determine the most important thing to accomplish today, this week or this year, we can make a difference that really matters.

This isn’t a particularly complex concept, but it is one that far too few law firms (or individuals for that matter) seriously consider…much less, actually execute.

If you are in a law firm that doesn’t have a strong culture of planning, start by gathering the senior members of your firm for a discussion about the “one thing.” The dynamics will surprise you. Agree that you won’t be distracted…that you won’t attempt to solve every issue…but you’ll focus on identifying your “one thing.”

Agreeing on the “one thing” is more than half of the battle; but you will still have to execute. Things are more likely to really happen with some accountability built into action items. I recommend a regularly scheduled meeting with your partners during which progress towards the “one thing” is discussed. To accomplish the “one thing” requires a relentless, unwavering commitment to make it happen.

With these simple tools, you and your partners can take a giant step toward being in a better position as you take stock of 2018, and plan for next year.

Law Firm Profitability and Client Satisfaction: Using a Pricing Pro to Achieve Both

Posted in Law Firm Growth, Law Firm Leadership

Law firm leaders understandably see lucrative client work as an important key to overall firm profitability.  Left to their own devices, those leaders would eagerly raise rates or otherwise take steps to ratchet up the yield on work.  In contrast, their clients often consider the containment of legal costs as a key component to valuable legal services.  If clients were in control, they frequently would reduce rates, or seek other ways to manage down their legal bills.

While these respective objectives may seem incompatible, they don’t need to be.  Hitting the sweet spot of simultaneous law firm profitability and client satisfaction is possible—it simply requires greater effort in managing the law firm/client relationship.

In recent years, some firms are learning that achieving firm profitability and client satisfaction can be aided through the use of a law firm pricing professional.  The recent Thomson Reuterspaper Law Firm Pricing Insights – Value, Profitability, and What Comes Next provides an informative overview about this breed of professional and some of the successes enjoyed to date. Law Firm Pricing Insights makes the case for using pricing professionals to meet law firm financial objectives while growing client relationships and satisfaction.

It’s review of the growth, use, and roles of pricing officers at law firms is commended for your review and will not be repeated here.  But it may be worth looking at five of the more practical benefits for a law firm that utilizes a substantively empowered pricing professional:

Enhances the Understanding Between Firm and Client.  By already knowing the firm’s financial strategies, the firm’s pricing professional can concentrate on listening to the client to understand its objectives. Instead of acting as an advocate to convince the client that it mustaccept the firm’s financial terms, the pricing professional takes what is learned from the client to arrive at a solution that works for both sides.  Communication improves understanding, the client relationship, and in many cases, financial results.

Brings a Bigger Toolbox to Fixing the Profitability and Value Conundrum.  Most pricing professionals are aware of numerous ways to price legal services.  With a firm pricing professional involved, creative financial arrangements can be discussed to keep the firm/client discussions from getting bogged down.  The bigger pricing solution toolbox reduces the likelihood that an impasse with the client will arise.

Can Foster the Institutionalization of Clients.  While working on an acceptable financial arrangement with a client, a pricing professional may see opportunity beyond the immediate engagement. Instead of the analysis being limited to a short-term pricing arrangement, the pricing professional may recognize ways the client’s fundamental requirements can be leveraged long-term. An astute pricing professional may see how it may be worth strategically investing in a new relationship in order to build a long-term one.

Let’s Lawyers Concentrate of What Lawyers Do Best.  A pricing professional can free a lawyer to focus on client service.  Once an acceptable arrangement between the firm and the client is endorsed by the firm, the firm’s backing may make it be easier for the lawyer to concentrate on achieving substantive results.  While a priced arrangement does not excuse a lawyer from managing a file correctly, it can establish a clear understanding between firm and client that engenders the efficient delivery of client service.

Improves Lawyer Morale. Too often lawyers are told to raise their rates beyond their comfort zone.  It’s not as if lawyers don’t value their own worth, but they see firsthand the impact of being priced out of the market.  The firm’s desire for higher rates versus the lawyer’s desire to not rock the client boat can amp up the pressure at the firm.  By moving outside the attorney rate merry-go-round, a capable pricing professional can find a solution that satisfies firm leadership, the lawyer, and the client.  A busy lawyer is a happy lawyer.

More and more law firms are turning to pricing professionals to improve the client experience and financial results.  Is it time your firm does likewise?

 

 

Is Succession Planning On Your Firm’s 2019 To-Do List?

Posted in Law Firm Leadership, Law Firm Succession, Uncategorized

Succession and succession planning are hot topics in the legal profession. One statistic explains the focus on the topic – only about 30% of law firms make it beyond the first generation.

Why Do So Many Law Firms Fail?

Why do so few law firms make it to the second generation? Consider this progression of logic:

Few goals are realized by happenstance;
The greater the objective, the less likely it will be realized without serious intent;
A written succession plan is a reflection of serious intent;
95% of law firms have no written succession plan;
For a majority of law firms, 25% or more of revenue is generated by or closely associated with lawyers that are 60 or older;
Few firms will survive the loss of 25% of revenue in a short period of time.
So What?

If you are a law firm leader, this reality does not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.

A 3-Step Path to Survival

Step 1

Start now. As simplistic as this may sound, it may be the singles toughest part of developing a plan. The day-to-day demands of managing a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in the current predicament — years of not having time to address relationship continuity and succession.   The first step is to be done with hand wringing and more talk.

“To think too long about doing a thing often becomes its undoing” –Eva Young

Step 2

Engage your colleagues in a series of discussions intended to yield a plan for succession. Inclusion is essential to obtaining the buy-in necessary for a plan to succeed. Conversations with those impacted (clients as well as lawyers) that focus on long-term benefits, continuity of representation for clients, and the value of legacy are critical pieces of the puzzle. Some of these conversations may not be easy; but without them you are reverting to a strategy of hope.

Step 3

Execute and monitor the plan. Very few plans roll-out exactly as intended but the routine monitoring of performance to the plan provides a means of adjusting as necessary to achieve the objective. Succession is about the future — and any conversation about the future must be on-going. Inside a successful firm, a good plan must be able to evolve.

A successful succession plan doesn’t necessarily mean future leadership comes from within your firm. The plan may include the recruitment of new talent in the areas of leadership, and/or client generation and servicing. It may mean that the core of your firm survives a part of a bigger organization. The real key is that the result your firm ends up with is the result you desire. Without planning the desired result is highly unlikely.

One additional note that many firms miss when it comes to the issue of succession planning—-Succession is likely on the mind of your clients. The issues of experience and continuity are likely being dealt with inside your client’s organization. A thoughtful collaboration between relationship partner, the client and firm leadership is an opportunity to demonstrate that level of client-centeredness all law firms proudly tout.

Our experience is that most firms wait too long and suffer the consequence of fewer or no options. Don’t let that happen to your firm!

 

.