Managing Law Firms in Transition

Managing Law Firms in Transition

Law Firm Succession Planning-Thinking About a Realistic Client Relationship Succession Plan

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

Law firm succession planning represents an important component to law firm longevity.  The two forms of succession most often discussed-leadership and client relationship transfer-should be top of mind to any firm thinking about being an enduring institution.  While leadership succession can be a significant challenge, creating an effective client relationship transfer strategy is among the most complicated things to achieve.

In client relationship transfer, it takes four different parties to make it work.  First and foremost is the client without whom there can be no client relationship transfer.  Surprisingly, too often the client’s thoughts and perspectives on relationship succession are not prioritized, at least to the degree desired by the client.  If the client’s interests are neglected, there is little hope for a successful plan.

The other three parties critical to client relationship transfer are — the senior attorney controlling the client relationship, the prospective junior lawyer most capable of succeeding to the senior lawyer’s relationship, and the firm leader seeking to foster a client transfer succession arrangement.  All three of these firm related parties are integral to developing a client transfer plan that works.  And in developing the plan, all three must be prepared to “meet in the middle,” or stated differently, make concessions.

Senior Attorney Currently Controlling the Client Relationships.  Even if the senior attorney controlling client relationships does not think that she or her career will live forever, she may not have a sense of urgency about a client relationship transfer plan.  Indeed, the current state of affairs may be comfortable, non-threatening, and financially lucrative.  Getting the senior attorney to change the status quo requires persuasion from leadership and concessions.  In any plan the senior attorney will be asked, over time, to cede client control, upset a settled routine, and forego some level of financial rewards.  Those concessions typically do not come easily.  Any client relationship transfer plan requires salutary elements that wreak concessions from the senior attorney.

Junior Attorney That May Succeed to the Senior Attorney’s Client Relationships.  Despite the thought that client relationship transfer is all upside for the junior attorney, it can present the junior attorney with considerable risks.  A junior attorney may already be on a path towards professional success when presented with the client relationship transfer opportunity.  Diverting towards client relationship transfer requires the junior attorney to have great faith in the senior attorney’s (and firm’s) commitment to the initiative.  It also requires client acceptance.  None of those things are assured.  To move forward on client relationship transfer, a junior attorney must be willing to avert in favor of succession an otherwise untethered path towards building a fresh book of business. A concession to do so might not come easily and may need to be induced.

Firm Leader Seeking to Implement a Successful Client Relationship Transfer.  Firm leaders like to encourage the players in the client transfer drama to work together and be “firm minded.”  In cajoling the senior and junior attorneys to vary their behaviors in furtherance of client relationship transfer, leaders are asking each for concessions.  Whether economically based or not, something of value from the firm will be needed.  For example, while many firm leaders are hesitant to do so, sometimes client relationship transfer requires the firm to pay the senior and junior attorneys collectively more compensation for client results than if only one of them was responsible for the client work.  The firm’s concession, or overpayment to make the client relationship transfer work, is an investment in the initiative and its way of being “firm minded.”  Without the firm being as willing to extend concessions as is being asked of the senior and junior attorneys, the client relationship transfer plan will have a hard time being successful.

Client relationship transfer can happen only if key players are willing participants.  Obviously, getting the client on board is essential.  But beyond the client, firm related parties must work together in a give and take way toward a common goal.  Does your client relationship transfer plan extract from each key participant, including the firm, a reasonable amount of “give?”

 

 

Law Firm Merger and Shared Aspirations

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

I am interested in the interaction of a group of people who have a common goal, or a common obsession, each contributing something unique to make something greater than the sum of its parts. I don’t know why, but from day one, that has interested me. – Steven Van Zandt, Bruce Springsteen’s E Street Band

The recent news of departures from Carlton Fields Jorden Burt is most interesting. The firm, was the product of the 2014 merger of Tampa based Carlton Fields with DC based Jorden Burt. At the time of the merger the synergies between the two firms was promoted as one of the real selling points. Now, 5 years late, at least 30 of the 48 original Jorden Burt partners have left, including name  partners Jorden and Burt.

The degree of fallout between two firms that had touted “fit” begs the question of how good the fit really was. When looking back one must wonder about the degree shared aspirations.

When looking at law firms and particularly two firms getting ready to become one, the single greatest predictor of a law firm’s stability — through good as well as tough times — is the degree to which the partners share aspirations.

In fact, it is really pretty simple. The more disparate the aspirations in a partnership, the more difficult it is to maintain harmony.

When looking at mergers or even general growth, the hiring priorities of most law firms exacerbate the issue of fit. When it comes to hiring entry-level associates, little matters but law school attended and grades. And when hiring partners laterally, the expected portable business trumps everything else (even though reality rarely measures up to those projections).

You might try conducting a blind survey in your firm and with potential additions to see the extent to which there is variance on a few simple issues to see the extent of variance.

Pose these (or others that you find appropriate) aspiration-based questions:

  • All partners should work at a minimum billable level of ________
  • All lawyers should commit a minimum of______ hours to pro-bono work.
  • Should the firm accommodate lawyer part-time schedules
  • What is a reasonable target for senior partner compensation.
  • How do you rank the following on a scale of 1-5, with 5 being most important:
    • Quality of client work;
    • Partner income;
    • Firm size;
    • Employee welfare;
    • Community reputation.

To the extent you find wide variation, you might consider reevaluating the targeted growth and maybe your general hiring practices.

Optimizing Your Law Firm’s Financial Health in 2019-Four Areas to Focus Your Spring Cleaning

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

Fingerprints are unique.  No two snowflakes are alike.  And the more one looks at law firms, the more it is apparent that each law firm has its own personality.  Whether small or large, local, national, or international in scope, general service or specialized boutique, driven by profit or public service, each law firm has its own DNA.

Though distinctive, many law firms share common characteristics.  One shared by all law firms is the need to be financially healthy.  Law firm financial health is the universal need of every law firm—without financial health a law firm’s future is seriously suspect.

Absent a solid financial footing a law firm cannot sustain itself.  So as 2019 is getting started and thoughts of spring-cleaning take hold, there is no better time to make your firm’s financial health a priority.  To get there, four key financial and management elements should become integral to every firm’s go-forward planning.  This is true no matter a firm’s practice, its size, location, or focus.

Manage Debt and Capital to Appropriate Levels. A law firm’s financial health is greatly impacted by the debt it carries and the invested capital maintained.  The incurrence of debt in moderate amounts can be helpful, but too much debt can create a burden that undermines stability.  To the extent physical assets (furniture, fixtures and equipment) are financed the amount of debt should not exceed the unamortized asset value. While working capital debt may smooth out cyclical revenue realization for a firm, relying too greatly on credit lines can prove troublesome and signal the need for more capital.  Moreover, maintaining adequate capital in the firm should not be an afterthought.  Being the opposite of debt, capital at appropriate levels can provide a firm with a healthy financial profile.

Strictly Manage the Creation and Collection of the Firm’s Inventory.  A law firm will struggle if it does not generate sufficient revenue. No doubt having a great client base helps.  But developing a steady stream of revenue also can depend on having systems and processes that manage client intake, time entry, sending out invoices, and collecting bills.  Having such systems and processes is not enough.  The firm must have the ability and discipline to assure firm-wide adherence. This means that the firm’s professionals must understand that there are adverse consequences if they fall short in complying.  Hands-on inventory management greatly contributes to financial health.

Create Expectations About Productivity and Manage to Expectations.  Underperforming professionals can hurt greatly.  An important step to achieving financial health is the prompt and effective management of overcapacity.  Responding to underperformance is best handled by clearly articulating to all personnel firm standards and expectations, monitoring each person’s performance against expectations, and taking proportionate measures when expectations are not met.  Adjusting compensation, coaching, supplementing training, or departure management are some of the proactive measures available.  Consistent management of the firm’s human resources is essential to financial health.

Understand and Manage the Value in the Firm’s Productivity and Inventory.  All client work is not created equal.  Some is more profitable than others.  A smart firm pursues only the client work that contributes to its financial health.  All client work should be reviewed to determine if it is accretive.   Similarly, personnel and the work they do should be reviewed for their contributions to firm financial health.  Personnel whose contribution to firm revenues is exceeded by their cost (compensation, benefits, overhead), generally are not helpful.  On the non-human side, all costs the firm incurs should be analyzed and questioned. While some intangible contributions are inevitable if not irreplaceable in most firms, a close examination of the margins associated with the work a firm does and the personnel that do it can help eliminate unnecessary soft spots.

Every firm seeking success should stay focused on these four areas that directly impact financial health.  Is your firm giving these areas the right amount of attention?

 

 

 

 

 

 

Overconfidence and Law Firm Decline

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

 

 

Every institution is vulnerable, no matter how great. No matter how much you have achieved, no matter how far you have gone, no matter how much power you’ve garnered, you are vulnerable to decline. There is no law of nature that the most powerful will inevitably remain at the top. Anyone can fall and most eventually do. –Jim Collins

 

Confidence

Jim Collins, the author best known for his positive and uplifting books Good to Great and Built to Last, wrote another provocative volume in 1999. How The Mighty Fall which looks at the causes and stages of organizational decline.

In a recent reread of the book I was struck by how much of what is proposed by Collins applies to the success or failure of law firms.

The First Sign of Decline

Collins calls the first stage of decline “Hubris Born of Success.” I translate this to leadership driven by false confidence. Whatever you call it, it marks the beginning of a law firm’s decline.

As a firm moves from figuring out how to survive, to enjoying measured success, some begin to lose sight of what it was that brought about their initial progress. This blind spot causes a drift away from continued improvement in favor of the pursuit of additional or different ways to grow.

This cycle — from early success to the beginning to decline — looks like this.

  1.  An initial struggle for footing.
  2.  Some success doing what it does well.
  3.  The prospect of climbing new mountains becomes increasingly attractive (this comes in the form of new client types, new practice disciplines, new industries served or a new geographic presence).
  4.  Significant resources of time and money are redirected to the “something new”
  5.  The “something new” doesn’t work near as well as envisioned.
  6.  The source of original success slips; momentum is lost; future success and stability are threatened.

In order to avoid decline, effective law firm executives direct the majority of firm resources to improving the value proposition that brought about the original success of the firm.

By contrast, executives presiding over a declining firm confuse their initial success with keen business insight, and begin diverting significant resources in pursuit of “something new.”

How is your law firm growing?

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.

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