Although many law firms are enjoying increased demand, revenues and profitability, not all firms are so fortunate.  For the firms seeing a sustained slackening of demand, there is no shortage of ideas on how to combat the problem.   “Work harder,” “get out and hustle,” and “reconnect with your relationships,” are but a few of the solutions often heard.  In these transitional times, an introspective look at the basic law firm model can even occur.

Indeed, in taking stock of where they find themselves, more than a few law firm leaders may question the long-term vitality of the hourly rate model due to waning client interest in perpetuating its perceived inefficiencies. In the face of such questioning, some advisors recommend that firms respond with fixed fees or hybrid rate structures where some payment is conditioned on success. These creative ideas, however, are not for all firms.

Before a law firm replaces its hourly rate model in favor of something new, it is imperative that it analytically review its culture, its clients, its people and its short-term and long-term commitments. As it contemplates a new model, it should be inquisitive and ask at least the following five questions:

How engrained is the hourly rate model in your firm?  A firm that historically has been completely an hourly rate shop will have the biggest adjustment. In contrast, a firm that has experience with alternative fee structures will adapt more easily. If your firm is more like the former than the latter, the adjustment period will be longer and potentially more difficult. Consider taking it slow.

How well do your attorneys deal with change?  Attorneys often do not do well with change. Taking away the hourly model can take away a lawyer’s security blanket. It is important to recognize the difficulty that many attorneys will experience and develop ways to assuage their discomfort.

Can your attorneys deal with a little (or a lot of) income volatility?  In a firm traditionally using the hourly rate model, gross revenue variability often was a function of billable hours booked and bills collected. Aggressive expense management and rate increases often addressed any softness in those numbers. Some of these tools may be unavailable if alternative models are adopted. Until a firm gains experience with new models, revenue volatility gets translated to income volatility. Can your attorneys and your firm weather that kind of uncertainty?

Is the proposed change something your clients will embrace?  Presumably, many of the firm’s clients will gladly accept an approach that provides greater fee certainty and aligns the law firm’s interests with theirs. But whenever fundamental change is contemplated, it is important to be certain that the proposed change is something clients will embrace. Doing your client centered research is critical.

How strong and deep is your firm’s expertise?  In the end, a firm’s reputation and expertise is what will help it weather radical change. A strong reputation and renowned expertise will attract clients regardless of the fee model, but a fee model attuned to clients’ interests will convert that attraction into greater client demand. If the lure of your firm’s reputation and expertise is slight, the conversion from one model to another may not be a panacea.

If demand is down at your law firm, it is a problem in search of a solution. One solution is to move away from the hourly rate model. But finding a solution is more than adopting the latest trend. The right remedy depends on your culture, your people, your clients and your areas of strength. If you are tackling the decline in demand, are you asking the right questions?

 

 

 

How do you define greatness?

Is it prestige?

I was recently reading an article on the “Most Prestigious Law Firms In America.” Seeing Wachtell, Lipton, Rosen & Katz (“Wachtell”) as #2 on the list, it struck me that the firm seems to frequently be at or very near the top of Vault’s list. I did some digging and found that Wachtell has been either #1 or #2 on the list for each of the last 14 years, and during that stretch has been #1 10 times.

For those not familiar with Vault’s methodology in ranking, they seek input through an on-line survey from lawyers across the country. The only limitation in the process is that survey participants cannot vote for their own firm. This year more than 20,000 lawyers participated in the survey.

Is it profitability?

As I thought about how extraordinary Wachtell’s results have been, it occurred to me that in my book Law Firm Strategy (2005), I addressed Wachtell and their phenomenal economic performance. In the book I note that Wachtell has been in the top 5 “profits per equity partner” in the AMLAW 100 for all years 1986-2003. During that stretch they were #1 or #2 in all but 3 years.

Since then, the firm’s economic performance hasn’t declined. Based on a somewhat cursory review, it appears that the firm has been#1 in profits per partner every year since 1999.

Is it retention of partners?

Being a partner in the world’s most profitable law firm naturally draws the attention of law firms and search firms seeking talent. Quality partners do not tend to stay long in an environment that is not, in every sense of the word, professional.   High performing partners are “bought” almost every day.

Meanwhile, a 2018 interview with Daniel Neff, one of Wachtell’s co-chairs, speaks volumes about the Wachtell culture,“It’s not only that no partner has left the firm for a bigger paycheck. Neff, the Wachtell co-chair, maintains he hasn’t even dealt with a partner who has been made an offer and is considering leaving.”

What is the secret sauce that keeps this firm on top of an extraordinarily competitive marketplace?

The firm’s dominance certainly isn’t based on many of the benchmarks we typically use to signal dominance.

  • Geographic reach —the firm operates out of one office in New York.
  • Leverage —the firm operates with marginally more partners than associates and has one class of partner.
  • Compensation system —it is an old-fashioned lock-step system.
  • Size —Wachtell has fewer than 300 attorneys, a relatively small firm in today’s world

So, if not based on the measures we typically use, how do we explain this firm’s success?

There are no doubt a number of factors that have yielded such extraordinary and prolonged success; but what I believe is chief among them is focus.

The founding partners decided in the firm’s earliest days that they would do work that passed two tests:

  • the work had to be of significant consequence to their clients; and,
  • it had to be interesting to the partners

In the 50+ years of the firm’s existence it hasn’t wavered from that focus.  Wachtell has not been seduced by opportunities, or distracted by what the marketplace defined as “growth” or “greatness.”

As it relates to Wachtell’s recognition as a “prestigious firm,” I believe their focus on thetype of work has been the key. So frequently when reading about large scale matters of huge consequence, the firmis involved. Wachtell’s focus has, over time, established it in the minds of the marketplace as a go-to firm for the largest, most complex matters.

But, there are other factors that have contributed to their success.

From day one the partners committed to an ethic of hard work. They hired, trained and developed others who shared that commitment. When you combine consistent levels of high productivity with the type of rates that “bet the company” matters support, he result is market leading revenue.

Although earlier I inferred that the firm’s compensation system was likely not central to its success, it may in fact be a leading factor. The firm has never been subjected to the internal competition and division that results from a system based on quantitative performance in any area. Sure, there is an expectation that everyone will work hard; but what trumps everything is the uncompromising standard of excellence.

Your firm

The real point here isn’t about becoming the most prestigious or the most profitable. The point is that with focus and dedication to that focus all law firms can realize enduring success as they define it.  Without a Wachtell-like focus, time and money are diluted.

More on Wachtell Lipton

 In our recently published book, Decisions that Matter – Tales of Law Firm Leadership in Moments of Consequence, we dedicate a chapter to the Wachtell Lipton firm, you might find it interesting. The Wachtell story provides so many great lessons for all of us to consider.

Let’s face it, the hugely important issue of law firm succession has a lot to do with senior attorney retirement.  Recognizing that, more law firms have prepared for coming retirements by infusing new leadership, transferring existing client relationship responsibility, and coaching the next generations to be business developers. When succession is done right, a firm enjoys continued strength while orchestrating a seamless and gracious retirement of its senior attorneys.

The retirement of a senior attorney typically results in a significant change to the financial status quo.  It can mean a cessation of monetary rewards for the long-time contributor.  Or it can mean a limited and reduced financial payment, either lump sum or declining over a period of time, along with reduced or eliminated work expectations.

From a financial standpoint, the difference between being a fully recognized partner or a retired partner can be dramatic—less money to no money received.  For that reason, even when the appetite to work hard has long passed, some senior attorneys defer announcing their retirement and seek to prolong their partner status-hoping to extend indefinitely the receipt of full partner compensation.  This “retirement in place” can be a vexing problem for law firms.

How does a firm deal with the partner insisting on full partner benefits when by all measures he or she has already retired? Understanding and addressing this issue is examined best through assessing the depth of the problem (Part One) and considering the curative steps available (Part Two).

Part One-Assessing the Problem

 Retirement in place as a problem depends greatly on the firm, its culture, and leadership.  It can range from being barely a concern to representing a looming earthquake.  Five factors determine where your firm sits on the retirement in place crisis continuum.

The Partner with Power. Coaxing a partner to retire can be exponentially harder if he or she is willing to wield institutional power to stay. That power can come in the form of political status in the firm’s management hierarchy.  In some cases, power may not be political but based on charisma or personality.  Urging a powerful partner to retire can be a difficult proposition.

Documentation. What do the firm’s constituent documents say about forcing retirement?  If the firm’s applicable documents and policies are silent about a mandatory retirement age or requiring retirement after individual performance falls below some objective threshold, the firm may be left to the potentially unpleasant option of forcing retirement through ownership vote (but consider the voting power of the subject partner).  Forced retirement by vote is neither pleasant nor risk free.  And in some cases, a firm’s documentation may be unclear whether the unpleasant option even exists.

Have Book Will Travel. By definition, retirement in place is not much of a concern where the partner is productive from a working and business origination standpoint.  Yet some partners will leverage their book of business to cover for reduced activity as a working attorney.  Even the slowed down partner forced to retire could blow a hole in the firm’s succession plan by bolting for another firm with client relationships in tow.

Firm Culture. For the firm that has never had to address the partner who has retired in place, the first time the issue is tackled can send shock waves through the firm’s culture.  Although aged, the partner in question may be fixture at the firm, revered and loved by all.  A successful action plan that forces the retirement of the clinging icon may disquiet a harmonious place.  Even so, taking no action runs the risk of normalizing unwanted behavior that others may emulate later.

Time.  Like in the case of many situations, time is an important factor when addressing retirement in place.  If the problem has already manifest itself because one or more partners have already taken this approach, the firm’s challenge will be great.  But if retirement is a future risk, greater flexibility exists to prevent the problem from occurring.   Prevention can be far more effective than a fix.

These five factors impact a firm’s ability to solve retirement in place.    In Part Two to follow, the available solutions to retirement in place will be considered.

 

Let’s get real for a moment.

Most law firms are woefully unprepared for any significant economic downturn — let alone a prolonged, decrease in demand.

This is a startling reality; but here are a few undeniable facts:

  • Starting in 2008, during the “great recession,” the demand for legal services fell dramatically approaching 10% by 2011, and consequently so did productivity and profits for most law firms.
  • Since 2009, the U.S. economy has experienced the longest stretch of economic expansion in history. Earnings have improved and employment has fallen from 9.8% in January of 2010 to 3.7% last month.
  • But…demand for legal services has been relatively flat during the same period. A real increase in profitability has been hard to come by and law firms continue to fail.
  • Alternative service providers continue to eat up a growing percentage of the pie. Analysts say that ASPs currently consume more than $10 billion of the legal services market and that figure is growing at an annual rate of more than 10%.
  • In-house counsel are aggressively shifting work away from law firms while expressing concern that their outside counsel don’t listen and do not appear to be improving service levels or adapting to the new reality.

How has the profession responded?

With few exceptions, firms have ignored the messages the marketplace has been sending, and continue to operate in much the same way as before 2008. Profitability pressures are addressed by raising rates (an average of more than 50% since 2007), which has resulted in more work shifting in-house and a major decline in collected realization rates.

What is to come?

As Isaac Newton said “What goes up must come down.” Now in the 10thyear of economic expansion, the tide is going to turn. Many economistand other prognosticators see the next recession on the horizon, perhaps starting within the next year. Some experts expect the downturn to begin as early as the first quarter of 2020; and many expect it to last longer than the last recession.

What to do?

There are two things I recommend to all law firms:

  • aggressively work to get your total cost structure in line with demand for your services; and,
  • proactively engage with your clients to identify specific ways in which to improve your service.

Cost structure –– Most firms continue to be challenged with underperforming professionals. Virtually all law firm cost is directly related to the quantity of professionals employed. Law firms should seek to finally resolve chronic underperformance and eliminate related cost.

Client engagement –– In survey after survey clients say their law firms aren’t listening to them, don’t ask about their service levels and don’t innovate. While firms have chosen to ignore this feedback (we’ve heard lawyers suggest the clients have no way of knowing what is best for them), clients have chosen to move more and more work in-house. Institutional clients once thought to be loyal are seeking other solutions.

If we’re going to get serious about client service, it is long past time for law firm leaders  to ensure that they have a real process for listening to and collaborating directly with their clients. Where sincere, these conversations inevitably lead to identified means of improving service. These means will lead to ongoing dialogue and experimentation that results in improved satisfaction levels. (Perhaps, even a new breed of loyalty.)

The results of these efforts will be immediate. Clients who have been frustrated by the lack of law firm interest in their views will be delighted with the opportunity to be heard.

The clock is ticking, I hope your firm is preparing for the inevitable!

“[L]eaders must have a sharp eye on the future, always considering how the law firm will evolve and succeed in the years ahead.”

from Decisions That Matter:  Tales of Law Firm Leadership in Moments of Consequence

Sustaining a law firm’s success is a nice challenge to have. For one, it means that the founders already have agreed on common aspirations, have tested them, and to some degree or another, are in sync.  That early success also may involve growth. But success in law firm formation and initial growth don’t necessarily assure long-term success or the creating of a legacy.

You see, sustaining a law firm’s success involves connecting the past to the present and from that creating a vision for the future.  When trying to ensure a promising and likely future, leadership cannot relax.  It must deliberately think about what it must do to remain relevant in the years ahead.

 Dedicated Leadership Focused on the Present and Future is Critical

 Unlike the exciting formation or growth phases in which objectives and identifiable goals may become top of mind as time goes by, a firm seeking to sustain its success must purposely articulate the direction it seeks to head.

To avoid becoming a compass with no true north, firm leadership must develop a thoughtful plan that addresses not only the present, but also the future.  “Winging it” won’t work.  The plan should identify objectives that can be managed to.  A firm’s plan for sustainability must bear a connection to the world in which the firm competes and be sensitive to where its market likely will go.  But as the world around the firm changes, the firm must be willing and able to adjust. Finally, the plan must be a realistic one in light of the firm’s talent.  Not only must the firm leverage its human resources strategically, but the plan must be built around concepts that suit the firm’s people and earns their enthusiastic support.

An International Success Story

 Probably no firm has built a bigger name in international legal matters than Baker McKenzie. Its story about sustaining its success can be traced to building a plan around its market niche and talent.

After enjoying steady success in its early years, the firm’s plan for its future was obvious—it had to continue focusing on serving clients who had legal needs that crossed borders.  Client matters in foreign lands had historically introduced Baker McKenzie to highly accomplished indigenous attorneys who were impressed with the “Baker McKenzie way.” In many cases, their experience and self-starting make-up convinced them to join the firm so they could continue working on the sophisticated international transactions that Baker McKenzie could attract. As the firm’s talent pool mushroomed, the firm’s market share of significant cross-border transactions continued if not increased. In a cyclical way, internationally accomplished attorneys at Baker McKenzie begat internationally driven transactions which in turn attracted more talent.  This focus on meeting client needs grew the firm, and lead to an expanding international footprint spawned by a growing economy in a world that was shrinking daily. The plan that saw Baker McKenzie grow across the globe perfectly leveraged the firm’s reputation and its people dedicated to client satisfaction.

The Lesson

 Taking a law firm’s early success and creating a legacy is not a matter of happenstance.  It requires a thoughtful plan with objectives that it and its people can pursue and meet. Without leadership’s focus, a successful future may not be possible.  Guiding a law firm so that it creates a legacy is one of the lessons found in our new book Decisions That Matter:  Tales of Law Firm Leadership in Moments of Consequence.

Let’s start by defining terms. There are a number of characteristics that might be used to bring definition to   “potential”  – size, profitability, locations, and so on. But, for purposes of this discussion, I define it as achieving the professional goals of the firm’s professionals. If, over the span of a career, the dreams, goals and aspirations of every one of a firm’s professionals were met, it would be hard to argue that the firm achieved anything short of its potential.

With this definition in mind, there are three keys to any law firm realizing its full potential:

  • affiliating with those that share a common set of aspirations;
  • creating a plan for achieving those aspirations; and
  • relentlessly investing time and money in a manner aligned with that plan,to the exclusion of spending time and money elsewhere.

Let’s look deeper at each of these three.

Common/shared aspirations

It’s difficult enough to chart and execute a path to success when everyone is on the same page. It is next to impossible when they are not.

Superior firms define aspirations in terms of the type of practice, including nature of services and clients, profitability objectives, role in the community, culture of firm, standards of performance and all other characteristics reflective of the firm that is being built.

The greater the alignment between firm members on these issues the greater harmony and ability to advance in the desired direction. The lesser the alignment, the greater the stress, conflict and ability to move in any consistent direction.

Eric Fletcher, a great market strategist, recently published this post that does a nice job of describing this concept.

Plan for realizing potential

Any business In pursuit of realizing full potential is best served by investing the time necessary to plan for their future. The plan may be the ambitious 5-year version or the more practical 1-year plan and budget.

A good plan brings clear and measurable definition to specific actions the firm intends to take during the plan period in order to move toward its potential.

Mark Haddad, of Thompson Reuters, provides a good overview in this recent post. The post’s stated target is small firms, but the principles are universal.

Execute with discipline

The rate and effectiveness of a firm’s movement toward its potential is directly tied to its discipline in the allocation of resources (time and money) to those actions that are deemed most important to the desired progress.

Every firm faces scores of options when it comes to the investment of its resources. There are new ideas every day as to “what we should do.” I remember well a common refrain from my executive team in an AMLAW 100 firm trying to execute with limited resources “the last thing we need is another good idea.”

The key to realizing potential is to choose  carefully — investing where resources will provide the greatest leverage in moving the firm forward. Deny all other expenditures.

So, in closing…know what your aspirations are, figure out how to realize those aspirations and don’t spend resources in areas not clearly aligned with executing the “how.”

 

The concentration of law firm financial strength narrows as fewer AmLaw 200 law firms can be counted among the fortunate. As Mark A. Cohen argues in his The AmLaw 200 Is Down to 50 – Maybe 20.  What does It Mean?  a fiscal separation among bigger firms has occurred and continues.  Cohen concludes that the separation presents challenges for all but the elite firms of the world and that smart firms not among the elite must confront this industry upset through differentiation.  If history is any guide, for many firms it won’t be easy.

Greater competition, higher client expectations (and lower client loyalty), and the stratification of legal matters highlight some of the reasons law firm success today, especially for the non-elites, is far more uncertain than ever before.

If business as usual is not sustainable and differentiation essential, firms must consider not being all things to all clients, must bring greater focus to their clients’ needs, become more efficient, cost-effective and value conscious.  Firms also must consider advanced technology solutions, master project management, and “think outside the box.”  As Mr. Cohen suggests, these measures “will require serious soul searching, reorganization, and a fresh perspective on what it means to be a law firm in today’s marketplace.”

Firms seeking to differentiate face their old nemesis: change.  To conquer the change necessary in this quest, firms must have and/or use the following five things:

Courage.         Differentiation means moving away from comfort zones.  It means changing the way business is done with the possibility that there is no turning back.  And it likely means narrowing service offerings and investing in specialization not invested in before.  Differentiation can mean saying good-bye to practice areas and personnel that for years have been a part of the firm.  Pivotal change like that takes courage.  Without it, recasting a firm through differentiation is difficult.

Knowledge.    The idea behind differentiation is not change for change sake.  It is focusing on a new direction that offers more promise.  No new direction can be pursued without knowledge about the firm’s existing strengths, the opportunities in its markets, and the cost/benefits from pursuing a new direction.  Mere hunches are not enough.  Without a factually based and analytically tested plan, knowing whether the current state should be replaced by a future state amounts to guesswork.

Judgment.       When moving from the status quoto something else, forks in the road will be confronted.  At those forks, critical decisions will need to be made.  The exercise of sound judgment is essential if the path towards differentiation is to succeed.  A firm embarking on a new and more focused way forward must be blessed with decision makers that have exhibited wisdom in the past.  If leadership’s judgment is suspect or untested, outside advice should be sought to supplement in-house mind power.

Resolve. It goes without saying that a firm seeking to differentiate must believe in its strategy.  When possessed with that belief, it is essential that the firm have the resolve to follow through on its plan.  Because it will be moving away from the comfort of the status quo, and bumps in the road could be felt, the firm must remain confident it is new direction.  As challenges are confronted, the firm’s commitment to the plan must be demonstrated by forging ahead.  If resolve is lacking, for a whole host of reasons failure is more likely.

Leadership.     A strong leader or leadership group must be in place before differentiation is possible.  People being asked to invest in the new way, many less courageous or simply uncertain, will gain strength from leadership that believes in the path forward and acts in ways consistent with that belief.  Strong persuasive attributes will be needed constantly as doubters, opponents, and uninformed overreact to challenges along the way.

Even though disruption observed in the AmLaw 200 suggests that the “good old days are gone,” a nimble firm prepared to operate within new market realities can still thrive.  That means taking steps to differentiate to avoid languishing in the past.  All it takes is courage, knowledge, judgment, resolve and leadership.  Does your firm have those attributes?

 

“When a law firm embarks on a plan to grow, ultimate success … [directly relates to] leadership’s ability to make the right decisions while navigating the high seas of growth.”

            from Decisions That Matter:  Tales of Law Firm Leadership in Moments of Consequence

 It is not unusual to hear “Growth” as the response when law firm leadership is asked about a firm’s strategy.  Indeed, almost daily mergers of law firms are announced—many times with a fanfare suggesting that one plus one equals three. Whatever the math, firms join together because they see a better future combined than apart.  Firms not merging often pursue growth through lateral acquisition.  They try to lure attorney groups or individual lawyers controlling significant client relationships by promising better platforms, enhanced support, and better synergies.

But is growth, in and of itself, a strategic way to address the business issues faced by today’s firm? Does it constitute a strategic way to approach the marketplace? For that matter, does one-plus-one ever end up equating to three?

In this transaction rich world, it is not surprising that many law firm leaders not only frequently think about growth, but also sometimes worry that a failure to grow will leave their firms vulnerable.  Whether growth is offensively or defensively oriented, it must be carefully approached.  Deployed unwisely, growth can take on a life of its own and control over its effectiveness can be lost.  In light of this challenge, the chances of growing a law firm effectively are greatly improved by following a key fundamental discussed below.

Use Growth to Further a Long-term Strategy that is not Growth Itself

The excitement that comes with growth is inescapable.  But a pause from jumping into the looming exhilaration is helpful.  For growth to endure beyond the initial pizazz, it must be about a purpose that transcends the mere idea of getting bigger.  Absent a fundamental purpose behind the proposed growth, it can grow tarnished like the formerly new car that ages into a beater as the miles pile up.  For that reason, taking the time to understand the underlying strategy of the firm and growth’s role in its achievement is essential.

Successful growth is premised on an idea or strategy that makes a firm better and stronger without regard to head count, new offices, or added markets served.  Growth grounded in a strategy that establishes the reason to growhelps a firm in many ways.  It not only establishes the principle the growth serves but it also guides a firm in how it will use growth to execute its strategy.  If growth is tethered to an underlying strategy, a firm’s growth initiative becomes a tactic towards an understood non-growth goal.  The firm can measure its progress by comparing how its growth is serving its key non-growth strategy.

A Well-known Success Story

The legal powerhouse of Wilson Sonsini Goodrich and Rosati grew to its present stature by, among other things, pursuing various non-growth strategies designed to serve clients and build a reputation. The firm’s idea to become Silicon Valley’s premier law firm for emerging companies led it to create tools for client use that contributed to making the firm irreplaceable.  It adopted client friendly ways for fees to be paid, feeling that many of those relationships would pay off in the long run.  For many of the start-ups seeking their footing in an ultra-competitive entrepreneurial market, the firm was seen as an essential partner to success.  These client centered strategies drove client demand that ultimately caused the firm to grow. The firm’s decision to grow was not growth for growth’s sake but was an outcome that made it possible for more clients in need to benefit from the firm’s client centered strategies.   As client relationships expanded, demand and the size of the firm grew within and without Silicon Valley.

The Lesson

Growth is a topic and tactic of our times. But it should not become a tonic. If it serves an understood strategy that is sound, growth can be an effective tactic to further the strategy. Recognizing that growth is not a strategy, but a tactic is one of the lessons found in our new book Decisions That Matter:  Tales of Law Firm Leadership in Moments of Consequence.

 

“Preparation is very important.”

“Albert Pujols, one of the best hitters in baseball’s modern era, used this four-word phrase to describe one of his keys for success. It is not overly complicated and it is easily understood. The fundamental quality of being prepared—of keeping his eye on the ball figuratively in addition to, in the moment, literally—held him in good stead throughout his career.”

from  Decisions That Matter: Tales of Law Firm Leadership in Moments of Consequence 

What the experts are saying

Many of you have noticed the steady increase in the number of financial professionals projecting an economic downturn, This recent Duke University study reports a significant majority of corporate CFOs expect the next recession to start no later than the third quarter of next year. Those projections, as well as other indicators, lead me to believe that law firms are on the lip of the same (or worse) economic challenges as was experienced in 2008-2010.

What to expect

As the absolute volume of demand for legal services is likely reaching a peak, the strongest firms will continue to adapt and move “downstream” — infringing on market share once the purview of small and midsized firms.

Inflation adjusted costs for law firms (as is the case in almost any business) will continue to increase at a slow but steady pace.

At the same time, alternative service providers will continue to take a growing slice of what was the legal service pie.

The combined result of the above is that  economic pressure on law firms is poised to jump  for all but the most valued, established and strategically positioned.

Without respect to successes of the past, the market is sending clear signals to any law firm not following a strategic path: it is time to stop and reassess how your firm fits into the competitive landscape — and tune-up appropriately. If you haven’t recently evaluated your debt, space and people position, now is the time!

Law firm succession is a huge issue for many of today’s law firms.  Not surprisingly, more firms than ever before are focusing on succession by adopting written succession plans that address leadership succession and client relationship transfer.  Despite the importance of succession, many firms have no written plan and remain unprepared for transitioning leadership or client relationships.

But even when law firms draft succession plans that address leadership and client relationships, too many of those plans don’t do enough.  Too many plans are deficient because thought and resource dedication for plan implementation is inadequate or an afterthought.  Like the football coach that comes up with a great game plan but fails to prepare the players to execute, the job is only half done.

Giving plan implementation inadequate attention can mean your carefully constructed succession plan won’t work.  What about your firm’s plan, you may ask?  Simply put, your firm’s succession plan is in danger of not working when any of these five signs exist:

You are Too Satisfied That a Succession Plan Was Completed.  Dedicating the time to prepare a comprehensive succession plan is no small task. Seeking input from important voices within the firm and forging a consensus on the plan typically doesn’t come easily or naturally.  So once a comprehensive succession plan is developed it is natural to feel a sense of accomplishment.  In reality, a firm’s adoption of a succession plan with all its aspirations represents only the first steps in succession.  Too much patting oneself on the back for finally drafting the succession plan can be a bad sign.

Elements of Plan Implementation are Non-existent or Vague.   Most succession plans aspire to continue a firm’s legacy through the next generation, and many do a credible job of identifying the ways past successes need to be continued into the future.  Just getting to that step oftentimes puts the firm light years ahead of where it was. But too often the plan is light on how it is to be implemented or there is no companion plan that specifically details how the aspirations will be implemented.  A weak implementation scheme suggests looming disappointment.

Measurements of Implementation Success are not Identified.  A close corollary to needing a clear idea about implementation is identifying the ways in which implementation can be graded.  Any implementation initiative must create clear measurements of success along the way to full implementation.  Ephemeral commitments about getting the next generation involved or making client introductions is not enough.  Substantive markers of progress must be created. If clear signs directing the firm to where it is going don’t exist, it is going nowhere.

Accountability Requirements for the Plan’s Success are not Established. Closely aligned with the need to measure success is the need to place persons in charge of achieving success.  A lack of clarity on who is “on point” for getting stuff done means nobody is “on point.”  But it is not enough to make someone responsible for implementing aspects of the plan if that person is unclear on how he or she is going to be graded. Specific milestones and timelines for achievement need to be assigned and understood by all parties given responsibility for the plan’s implementation.  A firm without assigned responsibilities and markers of success is living in a “not my job” world.

The Persons Responsible for the Plan’s Success are not Held Accountable.  A person assigned any responsibility for plan implementation must be held accountable for performance.  It is imperative that performance be periodically reviewed so that the firm can assess progress towards achieving cited objectives. When the firm falls short of objectives, corrective action can be taken, including changing personnel assignments.  Conversely, on target progress can be noted and rewarded.  Frequent review and accountability keep a plan from stalling.

Producing a consensus driven succession plan is a critical step towards creating an enduring firm legacy.  As important as it can be, however, a firm is not positioned well for achieving its succession goals if any one of the above five circumstances exist.  In thinking about your firm’s succession plan, what are the chances it will work?