Nations, like stars, are entitled to eclipse. All is well, provided the light returns and the eclipse does not become endless night. Dawn and resurrection are synonymous. The reappearance of the light is the same as the survival of the soul.

Victor Hugo

This is the fourth part in this series on Turning Around the Troubled Law Firm, See Part 1, 2 and 3.

Planning the Turnaround

The first and most important step in turning around any organization is recognizing that a turnaround is necessary. That said, lip service to the trouble will, of course, accomplish nothing. No matter how long your firm has been underperforming, and without respect to where the firm sits on the Spectrum of Underperformance (illustrated below), an actionable plan is essential. Your plan must address two specific objectives:

1. Drive institutional renewal — restoring confidence and stability. The Kaye Scholer story exemplifies such a turnaround (see “A Successful Turnaround”). Where restoration of confidence isn’t possible and the organization faces dissolution, objective number two becomes job one.

2. Avoid a bankruptcy filing at any cost, short of violating your duty to partners or creditors. No one wins in a bankruptcy; lawyers and non-lawyers are displaced, clients are inconvenienced, the community and profession suffer and, to my knowledge law firms — unlike corporate entities — never survive long after a bankruptcy filing. The stories of  Howrey and Dewey and a recent Chapter 11 filing by the much smaller Sadler law firm in Houston, demonstrate what can happen in the wake of bankruptcy.

Keys To Executing the TurnaroundSpectrum of Underperformance

Once you’ve decided to right the ship, four steps are critical to a successful turnaround.

1. Determine whether you need outside professional help. Generally speaking, the further left you are on the Spectrum of Underperformance, the greater the need for assistance. If you find your firm on the far left, consider a combination of turnaround consulting support and bankruptcy counsel. If you’re somewhere on the right side of the Spectrum, turnaround expertise may be all you need.

2. Identify the cause(s)of underperformance. It is essential to understand what precipitated the troubled condition in order to effectively address change. Although every firm is unique, some likely causes of underperformance include:

a. A poor strategy (or none at all)

Most law firms do not have a well thought out strategy. Many have no strategy at all. According to this issue of Managing Partner Forum almost 60% of law firms have no formal strategic plan. In the best case, the consequence of no strategy is a lack of institutional alignment, causing waste and a declining competitive position.

b. Growth

Ironically, the way a firm grows frequently ends up threatening its future. Bigger does not automatically equate to better. Non-strategic growth taxes an organization in at least two ways. First, it calls for an increased need for leadership and management– and the typical law firm is not in a position to deliver either As a result, you have a growing firm that is under-lead and under-managed.  Second, growth often causes resource deprivation; specifically resources dedicated to anything not tied to client service will threaten competitive advantage.

c. Poor accountability

The independent autonomous nature of most lawyers often results in an absence of systems and processes within law firms–including those intended to hold individuals accountable for performance. At times the lack of accountability is driven by the absence of articulated standards. At other times it is the result of a failure to maintain a system that monitors expected-to-actual performance.

d. Management complacency

Mark it down– the longer a firm has been underperforming the greater the degree of complacency. If leadership is attentive to performance and routinely takes steps to address it, the firm is not likely to become a troubled organization.

e. Poor client feedback systems

To some degree, the root cause for many troubled/underperforming firms is a loss of client focus. When the focus of a law firm shifts from client service to any other target, whether growth, technology, image, or profitability–the effect is underperformance. On the other hand, making a proactive investment to acquire quality feedback from clients can pay off in terms of client satisfaction and loyalty.

f. Poor market feedback systems

To succeed, a firm must be constantly aware of evolving market demands, and adjust accordingly. With the rapidly increasing number and types of new competitors in the legal arena, the ability to monitor consequential change has never been greater.


OK — Long enough–we will continue with the end of this series next week on 12/17. Between now and then –Do you know of a law firm that has successfully made the transition from seriously troubled to health? If so let me know.