Law firms can be in different stages of transition, ranging from facing a business altering decision all the way to requiring an orderly liquidation. One of the stages of transition frequently observed is when a law firm requires a repositioning. Such a law firm is not in trouble, is not staring down the threat of crisis and certainly does not need to develop and execute a liquidation/wind-down plan. Yet a firm in need of a repositioning cannot ignore the change occurring within its midst. If it does, the more serious and dire forms of transition may begin to surface with potentially devastating effects.
On the continuum of concern, clearly a law firm that may be in need of repositioning has more time to react than a firm in trouble; but procrastination is dangerous.
Recognizing the need for repositioning is the first step to staying away from the more serious forms of transition. With that said, here are a number of signs that your law firm is in need of a repositioning.
The law or the marketplace is migrating away from your substantive and financial strength. Neither our law nor our economy is static—it is ever changing. Most lawyers are able to keep up with the changes and adapt as they occur. But sometimes the changes are so dramatic (e.g. tort reform or increase in estate tax exemption) that what once was a lucrative practice is no longer so solid.
The work you do and do well is subject to greater competition. If the sweet spot of your practice has held you in good stead over the years, no doubt it has been noticed. While competition generally is good and you would not have been a success had you not been willing to compete, excessive competition or alternative sources for your kind of services drives down rates, reduces market share and can place stress on the economics of your practice. And worse yet, sometimes competition over time causes your specialty to become commoditized.
A more efficient legal practice requires fewer people. How can that be bad you ask? At first blush, having to employ fewer people to deliver excellent legal work to your clients is a good thing. Yet if your firm’s infrastructure is built on a business model that assumes a certain number of people billing 1,800 hours a year, the disappearance of those timekeepers is not going to make valid the assumptions that underlie your business model. The solution is not to retain people that are not productive, but merely cutting the payroll will not necessarily address the fact that your overall business model may be anachronistic.
Energy has been lost and the firm is stagnating. An energized firm revels in its success and new business. The energy emanating breeds more success and more new business. Unfortunately, many firms can’t keep up that pace and begin to experience a slowdown in energy. A firm in malaise does not correct itself—it needs a kick-start.
Your firm is aging. Age catches up with all of us, and law firms are no exception. The well-managed law firm continually replenishes its ranks with young and vibrant attorneys in order to avoid the advent of age. Easier said than done; but the need to reposition due to the march of time is common.
Non management firm leaders are satisfied with the status quo. The status quo serves the partners currently well settled in the way things are. They probably hold the greatest influence in what the firm does, and receive a large portion of the allocated compensation. Most of them believe that change will do little good. Other firm contributors, less invested in the status quo, may look for a better alternative unless a more firm-minded repositioning is adopted.
These signs require that law firm leaders take a close look at the fundamentals on which their firm is based, and reject the notion that these issues are simply explained as the inevitable cycle of a law practice. While no doubt you would hope that things would get better by themselves, whistling past the graveyard is not a strategic plan. Examining the possibilities of a repositioning is a much better plan. In your experience, what other signs indicating a need for repositioning have you seen?