Managing Law Firms in Transition

Managing Law Firms in Transition

Five Steps for Law Firms Wanting a Good 2018

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

For law firm leaders closing in on the end of 2017, there is no rest for the weary.  They are working hard to finish the year off well.  Collecting bills, distributing profits, retaining talent are just a few of the things on their to-do lists.

Even if 2017 turns out positively, it is no guaranty that a good 2018 will follow. Each law firm year stands on its own so resting on laurels is decidedly unwise.  For that reason, even before 2017 ends, the typical leader must direct his or her attention to preparing for 2018.

For firms whose 2017 looks lackluster, efforts will need to be doubled to making 2018 a good year.  Financial performance may be down, it may have lost key clients or attorneys, or it may otherwise have stumbled.  But even firms that don’t have to worry about a turnaround cannot rest.  Whatever a firm’s outcome for 2017, the following five things can be done to help make 2018 a better year:

Stimulate Thought Leadership.  Today, more law firm legal work is commoditized. Commoditized legal work typically is low margin work and also is at risk of being replaced by lower cost providers, new systems, or taken in-house. High consequence legal work is the antidote to commoditized legal work.  To help differentiate a firm as a serious resource for complex and significant legal work, leadership should strongly encourage the firm’s lawyers in 2018 to become thought leaders about today’s legal issues of significance.

Review its Strategic Plan.  Every law firm should have a strategic plan that guides it to its objectives. For 2018, firms should extensively review their strategic plan’s features and principles.  The plan should be tested against today’s current business and legal environment, the firm’s existing strengths and weaknesses, and the sentiments and aspirations of the firm’s owners.  Is the firm on track or has it jumped the rails?  Assessing the firm’s strategic plan in the existing environment, and making needed adjustments, is a great step for starting 2018.

Review its Talent Pool.  Law firm fortunes rise and fall on the ebb and flow of talent.  How good is your firm’s talent pool? Has talent been lost to attrition?  Has talent underperformed to expectations?  Should the firm go into the market to fill perceived gaps in it talent base? Evaluating your firm’s talent is a critically important step in the new year. Having quality talent is essential to achieving a firm’s objectives.  Assessing a firm’s talent and any shortcomings is an excellent step for the new year.

Invest in the Firm’s Strengths.  Gauging a firm’s strengths (and weaknesses) can come from the strategic plan and talent reviews. The reviews can help a firm identify where its resources should be invested. “Playing to your strengths” has great applicability for law firms.  Because most law firms have limited capital, it is smart to direct it to the firm’s strengths.  In the zero-sum game of law firm investment, investing in a firm’s strengths is a wise step for 2018.

Review its Culture.  Most successful law firms have a well-understood culture.  As the new year starts, a smart firm will review its culture and its recent performance.  Do market forces, or attorney conduct, indicate that the firm’s culture is strong and resolute, or is it showing signs of change? A review helps answer the question.  A firm whose culture is changing may want to quell the change.  Or it may want to embrace the new direction the change is pulling the firm.  A review of a firm’s culture helps keep everyone on the same page for 2018.  That is what smart firms will do.

Planning for positive results in the coming year is something that should be a part of every law firm’s focus in early 2018.  The steps to get that done do not need to be revolutionary-they can be fundamentally simple.  The five ideas above are ones that any disciplined law firm can implement for a better 2018.  Is there any reason to not try them?

Underperforming Law Firms Risk Failure

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

The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year.

— John Foster Dulles

Former Secretary of State

  

Weve Got Trouble…With A Capital “T”

Most law firms go through a similar cycle. Initially partners share an almost blind and intoxicating optimism. As the firm grows and matures, the dreams and ambitions of many of the partners are realized in increasing measure.

But the inevitable occurs. Momentum slows and the intoxication of the early days turns to a pessimism-tinged sobriety. Confidence slips, and the future doesn’t appear as bright.

At this point, often months before it ever shows up on the bottom-line, the partnership has officially become a Troubled law firm.

But troubled is not synonymous with doomed. In fact, a key difference between strong enduring firms and those that fail is defined by how quickly and decisively leadership responds to challenges.

A brief look back reveals the reality that law firm failures are becoming frighteningly commonplace. It seems that big name collapses began with Finley Kumble, followed by Brobeck and Coudert in 2003 and 2006 and then someone opened the floodgates. In 2012 it was Dewey.  In 2014,  Heenan Blaikie. The trend hasn’t stopped.  Just this past week Sedwick announced the closing of their San Francisco based firm. Two years ago the 80+ year old firm had more than 300 lawyers in 15 domestic offices, plus one in London and another in Bermuda.

There is no question, the profession is in a state of transition.

So, this post will look at one of the principal causes of law firm trouble.

Underperformance: The Root of Many Problems

The truth is that, in most cases, a troubled law firm is, quite simply a firm that is underperforming. The degree of the trouble correlates strongly with two factors – how long the condition has existed, and the extent of the underperformance.

In the earliest stages, underperformance is manifest in declining market position. In this context, a number of things conspire to undermine market position, including how the firm is perceived by owners, employees, clients, law schools, and vendors.

A declining position left uninterrupted ultimately triggers a loss of confidence among clients and partners…which leads to a loss of partners…which leads to the loss of clients…which pressures the economics of the organization, leading to the further loss of partners and clients.

This cycle ultimately leads to a potentially fatal loss of confidence among vendors. Creditors begin restricting or even ending lending relationships – the harbinger of an ultimate loss of the organization. When troubles reach this level the most fortunate firms find themselves to be an acquisition target; the least fortunate file for bankruptcy.

The recent Sedgwick announcement demonstrates just how quickly developments can accelerate toward the point of no return. No doubt the firm had been faced with some revenue driven financial challenges in the preceding couple of years; but it was the relentless attrition of partners that led to the firm’s demise.

A quick summary of their  past 11 months tells the tale:

  • January 2017 – 30 plus lawyers and staff, including the firm’s former chairman, leave to form a boutique
  • February – 23 lawyers leave to open the Dallas office of Drinker Biddle
  • April – a couple of Los Angeles partners depart for Cozen
  • June – a couple more partners including the former managing partner of the DC office and partners in Los Angeles move to new firms
  • August – a dozen partners and associates in Miami and New York move on
  • September – New York office head and others leave
  • October – Head of Chicago office departs as does the Bermuda office

By November the firm had lost more than a third of its attorneys. A very sad ending to the once highly regarded firm formed in 1933.

The pressures of a profession in transition are relentless.

For firms seeking to avoid a similar outcome, a routine review and of performance-to-expectations along with corrective action is essential. It doesn’t take long for the “run on the bank” to result in closure.

For additional reading on restructuring or turning around the troubled law firm see–> here.

Five Reasons for Law Firms to Think About a Merger in 2018

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

There is much to do when a law firm closes out its year.  Getting bills out, collecting receivables, paying bonuses, and distributing profits are but a few of the things that get the attention of leadership.  As long as the firm’s year has moved along normally, finishing up strong often is the main focus of a firm and its people.  After all, there is nothing like a good year to set the tone for the upcoming campaign.

Concluding one year with hopes for the next one can seem routine.  For some firms, accepting a business as usual outlook about the coming year can be the wrong attitude.  Rather, in these times of law firm growth, consolidation and succession, thinking about alternative strategies, not just the routine, is worth considering.  One alternative more firms find themselves considering is the idea of merger.

Indeed, as the year is wrapping up there are at least five reasons law firms should think about merger.  Not all five reasons need to exist to compel thoughts about merger, and even if all five exist, a merger is not necessarily ordained. Many factors may cause leadership to conclude that merger is not for their firm.

Nonetheless, as one year ends there are five good reasons to think about pursuing a merger in the next one.  While their presence should not always dictate action, their existence should get the thought juices flowing:

Succession.  A firm may have a great year in 2017 but one year’s nice performance says nothing about whether the firm is ready for the future.  A firm constantly should ask whether it is adequately prepared for succession.  Are leadership successors identified?  Do key client relationships have younger attorneys to whom those relationships can be transitioned?  If the answer to both questions is equivocal, and time has slipped away for a multi-year succession initiative, the firm may want to consider merger in 2018 as a succession alternative.

Recruiting.  The lifeblood of any firm is its talent.  Good talent yields good legal work which typically improves financial results.  A firm with prospects for the future is constantly replenishing its talent, and in turn, improving its current and future financial health.  Any weakness in recruiting talent should be a concern.  When good law students eschew your firm and choice laterals will not give you a look, the firm should ask whether merging with a better platform will improve its talent prospects.  Without talent or the ability to recruit it, it will be tough to compete over the long run.

Market Presence.  With law firm growth into new markets a constant, a firm should assess whether its market stature has risen, kept pace, or fallen in recent years.  A firm seeing its relative rank slide backwards might need a better platform to arrest any decline.  A firm’s competitors, either carpetbaggers or long-term fixtures, will not stand still.  A firm that does not have the capital or the time to reverse a downward trending competitive imbalance might think about merger.

Opportunity Based Attrition.  Unwanted attrition is a concern for any firm.  Attrition caused by attorneys sensing greater professional opportunities elsewhere can be concerning, especially if repetitive.  Attorney belief that their existing firm does not provide an exciting career path is hard to overcome.  If professional-opportunity based attrition has been steady, a strategic merger may inject a new sense of excitement and stop the losses.

Upward Tick in Firm Performance.  Even if none of the prior four circumstances are a concern now, they may emerge over time.  A firm that has finished its year on a strong note but foresees a time when changing circumstances (like the four identified above) will force it into transition may want to consider merger sooner than later. If so, negotiating a merger now after having enjoyed a strong year could be preferable to waiting until firm weakness makes negotiations difficult.

The hurly burly of year-end can deprive leadership of a needed long-term vision.  Leadership with the right perspective will think about the big picture.  That thinking can encourage assessing the wisdom of merger.  Will your firm’s leaders think beyond 2017 as the year ends?

What Makes A Great Law Firm

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

Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice, and discipline.― Jim Collins


During a re-read of the Jim Collins classic “Good To Great”, I was struck by the profound difference discipline in decision making could have on law firms.

One of the glaring areas where a disciplined approach has a notable and measurable impact is in the utilization of discretionary resources.

All solvent law firms have discretionary resources. These are defined as funds available beyond mandatory spending. Mandatory spending includes all expenses that are fixed in the relatively short term; payroll, rent, benefits and contractual obligations.

Discretionary resources are the monies that are used to fund:

  • Developing new clients
  • Opening new offices
  • Technology upgrades
  • Adding new practices
  • Renovating or acquiring new space
  • Hiring new lawyers
  • Expanding existing client relationships

Most law firms, big and small, finance virtually all of the practice related activities of its individual lawyers. The budget for each year reflects anticipated spending that, if categorized honestly, would fall into three categories: fixed spending, strategic spending and the non-strategic spending that satisfies the whims of a few. Such an approach is a long way from disciplined decision making.

Great law firms apply discretionary spending in a laser-like fashion, concentrating investment where it can have the greatest value in pursuit of creating a great organization.

Karen Martin in her excellent book The Outstanding Organization discusses how typical companies suffer from Attention Deficit Disorder. These firms randomly pursue the latest and greatest ideas proposed, having no ability to focus and prioritize.

A great tool to help firms focus and make rational choices is the Effort Impact Matrix

 

 

 

Using this tool during the annual planning and budgeting process (all great firms have such a process) will help the firms invest in a prudent manner. We recommend directing resources as follows:

  • 25-30% upper right
  • 55-65% upper left
  • 10% or less elsewhere

 

 

Does your firm use any type of planning tools to help direct the investment of resources? Tell us about your experience.

Five Steps to Making Your Law Firm More Dynamic

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

The legal services market is as competitive as ever-ask any law firm leader.  More clients are bringing work in-house or turning to alternative providers.  Law firms know that and fight fiercely over what is left.  Lawyers thinking about starting their own firm see the robust competition as well.  Whether established or just getting started, law firms face a challenging market.  Almost all are looking for an edge to succeed.

Finding that elusive “edge” to get beyond the pack often depends on sound leadership and a strategic approach to practicing law. Developing a long-term plan that accentuates a firm’s strengths and fixes harmful weaknesses is a good recipe for success.  A plan can take many forms: building on substantive strengths, exploring new markets, being more attentive to financial health-these non-exclusive tactics can be helpful to a law firm’s long-term future. Finding the right strategy, however, requires a vision of where to go and a deft use of the dials and knobs that move a firm forward.

Whatever the long-term strategy, taking steps to be a more dynamic law firm can also help.  Being more dynamic is not a substitute for a firm’s long-term plan.  Instead, it creates a vibrant law firm environment that enhances its ability to execute its long-term plan.  To foster the dynamism that forcefully guides a firm towards its long-term objectives, law firms should consider five basic steps:

Enhance Client Access.  Giving clients better access should be every law firm’s ideal.  Nothing serves a law firm better than connecting to clients.  Enhanced client access often comes from improved service delivery, proactively anticipating client needs, and taking on a “partner’s” attitude instead of a “vendor’s” mindset.  A key reason for clients bringing legal work in-house is the feeling that in-house lawyers better understand client strategies, needs, and expectations.  A law firm that improves delivery, anticipates needs, and acts like a partner brings its client closer.  Client satisfaction follows.

Embrace Generational Change.  The older a law firm’s demographic profiles the more likely some things will be done because “we’ve always done it that way.”  The new (or newer) blood at a firm can be a fountain of new ideas, different perspectives, and potential efficiencies.  The younger generations ultimately will be running the firm-don’t wait for that watershed event to hear their views on making your firm’s practice better.  Not all their ideas will be keepers, but by embracing their perspectives now your firm likely will be fresher and nimbler.

Learn from the Disruptors.  As much as your firm seeks to compete with other firms, it can’t be forgotten that today’s cut throat landscape is owed in part to dynamic disruptors like client in-house departments and alternative providers.  Among the disruptor’s hallmarks are commitments to speed, efficiency, and economy.  Consider taking a page or two from these disruptors to modify your practice.  Successfully incorporating some of their better ideas will move your firm into a more dynamic place.

Become Leaner.  A firm that streamlines its support functions not only reduces overhead but is leaner.  A by-product of becoming lean is the elimination of bureaucratic tendencies that thwart the speedy and efficient delivery of legal services to clients.  Obviously, becoming too lean may create unwanted consequences, but finding the right blend of leanness and delivery will make a firm vibrant and exciting.  Technological advances are perfectly suited to helping a law firm find that perfect middle ground.

Work on Pricing.  Dynamism is not a function of being cheap. That said, running a practice that proactively thinks about providing better value to clients will not only get the attention of clients, but will stimulate constant internal creative thought about maximizing value delivery.  Always thinking about providing better value through pricing strategies also will alter a firm’s culture in a positive way.  Once the idea of improved pricing becomes second nature, client satisfaction will go up as will the firm’s financial health.

A dynamic firm is vibrant, forceful, energetic and motivated to succeed.  Stimulating those qualities in a law firm heightens the prospects for success.  In today’s competitive legal services environment, is your firm dynamic enough?  If not, is it time to take action?

It’s November – Create A Stronger Law Firm in 2018

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, 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 2017 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 2018 and beyond?”

A few months ago 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 when you take stock of 2018, and plan for the next year.

If you have further interest in improving your firm, see here, here and or here.

What do you think?

Five Exercises for Toning Up a Law Firm’s Large Middle Section

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

 

Law firms look around and see that the attorney pyramid structure is crumbling or gone.  In its place is an indistinct shape that often includes an oversized group of experienced lawyers not worthy, at least yet, of ownership.  Depending on the firm, the contribution of these lawyers can vary.  Some firms enjoy great financial contributions, while many firms feel underwhelmed by what they receive.

If yearly financial performance from these experienced lawyers is not ascending but has settled into a modest level of performance, firms should be concerned.  Like the proverbial middle age “spare tire,” this collection of seasoned lawyers seldom shrinks but continues to grow.   They and a continued ordinary routine can represent ‘weight’ a firm would rather not have.  Cosmetic surgery like layoffs may help but may not be the sole answer.  Indeed, ridding a firm of a bloated middle section and the culture that allowed it to grow requires more.

There are at least five exercises a firm can do to turn fat into muscle.  Like getting a person into shape, they don’t deliver results over-night, but require a plan and discipline to achieve the fitness goal.  Their implementation involves a holistic approach to improved performance that aligns all actions towards the goal of better financial health.

For firms motivated to do something, the five elements of an effective New Year’s resolution are:

Create a Comprehensive Way for Attorney Evaluation.  A law firm’s attorneys contribute in many ways.  Tracking those contributions is the essential first step to recognizing the value of an attorney’s effort. Any firm needing to accurately assess its middle tier attorneys must have a comprehensive system that measures the quantitative and non-quantitative ways an attorney contributes to the firm’s financial health.  A comprehensive system also spotlights each attorney’s strengths, weaknesses, and capacity to improve.

Create an Attorney Development Program.  As a group, attorneys are geared towards achievement.  Nothing pleases an attorney more than facing a task and meeting it with success.  Attorney professional development programs can be non-threatening and stimulate an attorney’s inner drive for success.  Correctly implemented, it can give attorneys the right kind of direction to succeed for themselves and the firm.  Any good program involves individual attorney development plans, coaching, frequent reviews, and support.  A firm without a program should not be surprised by lawyers that languish.

Create an Attorney Compensation Program that Rewards Performance and Modifies Behavior.  Too many law firms allow excessive non-performance criteria to seep into their attorney compensation decision making.  Annual compensation increases based on seniority/longevity, matching colleague awards, class advancements, over-strident mentor advocacy, or custom will not drive higher performance.  Tying compensation increases to contributions (quantitative and non-quantitative) to the financial health of the firm and fulfillment of attorney development plan goals rewards performance, positively modifies behavior, and rewards the firm.

Create a Promotion Program that Rewards Performance and Modifies Behavior.  A bloated middle grouping of lawyers loses some incentive to modify behavior if the prospects for promotion are minimal.  Most attorneys exhibit a lifetime of being goal oriented-creating promotion criteria that gives them a prospect towards ownership feeds their goal-oriented nature.  Even if promotions are limited, a promotion program builds a culture in which performance is rewarded and desired behavior is aligned around firm financial health.

Respond to Outcomes Proportionately. Ideally, valued members of the attorney class will react to increased support and rewards to achieve things they and the firm never thought possible.  Tapping their untapped potential benefits all. Despite encouragement and support, some attorneys may struggle.  For those, the right thing may be to help them to a place where they would be more comfortable.  Conversely, the same performance oriented environment may be positive for other attorneys.  The loud sound heard may be their forceful knocking on the door of promotion.  All outcomes deserve a response or opportunity is lost.

Getting a law firm fit is not a matter of edict or unfounded expectations.  It takes a sound plan, a collaborative effort, and lots of patience.  It also takes time. Leadership and the attorneys in question will all play a major part in achieving success.  If your firm has an outsized mid-section of attorneys, what is its remedy?

 

 

Two Keys to Effective Law Firm Leadership

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

If people like you, they’ll listen to you, but if they trust you, they’ll do business with you. – Zig Ziegler

 

A number of things can cause one to land in a law firm leadership position; such as success in building a legal practice, ability to build consensus and advance initiatives or even political acumen. But two factors are essential if one is to seize the role and provide enduring leadership: trust and respect.

Neither is an automatic byproduct of the position.

Trust is earned when you do what you say you are going to do – when deeds match rhetoric, and align with the values of your organization. At a practical level, this means a few things must be accomplished.

  1. A leader must be prepared to put a stake in the ground, defining goals, timetables and specific actions
  2. These goals and action steps must be communicated (and re-communicated) to the firm
  3. The leader must maintain focus, and follow through on promised action, and then be certain the organization is aware of critical benchmarks and accomplishments
  4. Trust is earned by embracing responsibility when things go wrong and graciously distributing credit when they go well

To conduct ones self in a manner consistent with firm values presumes a crystal clear understanding of said values, and the commitment to conduct business in a manner consistent with these cultural cornerstones.

Gaining respect is an incremental process. It requires consistency as well as a measure of success in moving the organization forward. Practically speaking, this means:

  1. Establishing realistic as well as measurable objectives that are consistent with the aspirations of the firm
  2. Ensuring firm values are adhered to no matter the influence of the person in question
  3. Treating everyone with an equal level of dignity and respect no matter their role or performance
  4. Walking the talk, being the example for others

How do you see leaders earning trust and respect?

 

Four Key Components to Law Firm Financial Health-Meeting the Universal Objective

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

Law firms come in all shapes and sizes.  Some consciously specialize in distinct areas of the law while others are more reactionary-willing to do anything they feel generally competent to do.  Firms can be local in scope, only serving a home town populace from its home town address.  Geographically expansive law firms can have a footprint beyond a single zip code and compete nationally, or even internationally for name brand clients.  There can be firms singularly dedicated to making their owners a lot of money while a firm next door might prefer to deliver community based legal services as a non-profit.  Profit driven or not, all firms have a universal need to be financially healthy.

Law firm financial health should be a goal for all law firms regardless of culture or objectives about wealth.  Even a so-called “life-style law firm” that values a relaxed atmosphere must be mindful about its financial health.  It can be relaxed about a lot of things, but disregarding the key elements that make it possible to exist can be risky and unwise.

There are many ways to assure a firm’s financial footing.  Certainly, being attentive and focused on dollars and cents issues endemic to any business helps.  But being admonished to “keep your eye on the ball” alone does not provide the clarity a law firm leader typically needs.  More is required.

Law firm leaders committed to their firm’s financial health would be wise to focus on four fundamental elements of operating a law firm as a business.  Understanding and integrating the following four financial and operational components can go a long way to achieving financial health, no matter the firm’s personality, make-up, or culture.

Debt/Capital.  The levels of debt and capital at a law firm directly affects its financial health.  While some debt may be justified and sustainable, too much can impose a burden that becomes hard to overcome.  Purchased furniture, fixtures and equipment should not be financed at amounts over their unamortized asset value.  A modest line of credit may be used to counteract cyclical collections (for example, at the beginning of the year), but leadership alternatively could consider increasing the firm’s capital or adjusting draws downward. In virtually no circumstance should a firm borrow to pay owner “profits.”  As for capital, having capital levels at a rational ledge can greatly contribute to a firm’s financial health.

Systems and Processes. The mundane world of systems and processes can be an exciting contributor to a firm’s financial health.  A firm with a consistent approach to client intake, time entry, sending out bills and collecting bills improves its lie greatly.  Having the ability and discipline to monitor compliance with these systems and processes, as well as articulating clearly the consequences for non-compliance, points a firm in the right direction.  Finally, having a compensation system that encourages financial contributions of all attorneys is an important feature of responsive firm systems and processes.

Productivity and People.  A common malady is underperformance by attorneys and other personnel.  Despite lagging performance, too many firms are slow to address the overcapacity that dilutes financial health.  Challenges must be addressed by establishing clear standards and expectations for all personnel, monitoring performance against these markers, and taking appropriate measures when expectations are not met. Reducing an underperformer’s compensation, providing him or her improved training, and ultimately, removing the incorrigible from the firm, are effective actions a firm can take to address underperformance.

Margin/Overhead.  Client work is beneficial if it contributes to the firm’s financial health.  If it does not, it may not be worth keeping.  Clients and the work the firm does for them should be analyzed for any contribution to the firm’s financial health.  Similarly, personnel who produce the legal services must be assessed for their contribution to the work that generates revenues.  A lawyer or paralegal whose contribution to firm revenues is exceeded by the expenditures he or she requires (compensation, benefits, overhead) is not a positive for the firm.  All costs the firm incurs in operations should be examined.  If expenditures do not directly contribute to the delivery of superior client service they should be questioned.

These financial and operational components are relevant to a firm’s financial health.  None can be considered in isolation; rather all relate to each other.  They must be brought into alignment around consistent principles that focus on a firm’s financial health.  Does your firm exercise that kind of discipline?

 

 

Is Your Managing Partner Becoming More Effective?

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

 

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

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

All serious leaders need feedback.

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

What A Leadership Evaluation System Looks Like

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

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

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

 

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

 

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

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