History tells us that Heenan Blaikie’s failure was not an isolated event. It was preceded by more publicized failures, like Dewey, Howrey and Coudert Brothers, which failed due to a combination of their own unique reasons and maladies found in all law firms. For good reason, many in Canada and the US note the challenges law firms face today. Heenan Blaikie will not be the last law firm to collapse-others will follow.
As I wrote in There But for the Grace of God, go I, the Heenan Blaikie playbook was not all that different from other law firm playbooks. Heenan Blaikie did not fail from a watershed event that took it down–its bank did not call its loan and cut off its liquidity. Nor was its business strategy out of the mainstream. Rather, it experienced a dip in its financial performance that many of its partners refused to stay around to remedy. The financial challenges that sank Heenan Blaikie have been attributed to a changing legal market in which greater competition, fewer high-dollar deals and increased client expectations made it tougher to drive the kind of profits its partners expected.
If Heenan Blaikie was not much different from firms with similar profiles, how can a firm avoid a Heenan Blaikie? There is no magic potion that will guarantee a law firm a steady and prosperous future. But there are a number of things that can be done to improve the odds, including:
Build from Within. As much as possible, make a law firm’s growth organic. Invest in a law firm’s good clients, exemplary people and strong areas of expertise. These areas of opportunity can be as lucrative as other growth strategies and the attention dedicated to organic growth is deeply appreciated by the people that define a firm’s culture.
Temper the Enthusiasm for Lateral Hiring, Mergers and Multiple Offices. Lateral hiring, merging with other firms or opening offices are popular growth tactics but they can be destabilizing. As Robert Denney recently noted, mergers fail half the time. And the American Lawyer suggests that lateral hiring doesn’t guarantee higher profits. More importantly, none of these tactics provide a firm with the glue needed in time of crisis but instead add components that pull at any adhesive that exists. A firm concerned about a Heenan Blaikie outcome will compliment each lateral hire, merger or office opening with strategies directed to cement each addition to the firm.
Constantly Monitor Performance. Heenan Blaikie may have closely monitored the performance of its practice groups, its offices and its lawyers, but even if it did it was not able to avert its disaster. Nonetheless, there is little hope for a law firm if it does not constantly monitor the performance of its business segments. Close performance monitoring puts a firm in position to recognize its problems. And recognition is the key to any saving action.
Assume Business Will Decline-Develop a Contingency Plan. There is no reason to assume that business will always increase. Every firm should have a contingency plan that identifies likely areas of risk and how the firm plans to deal with those risks when they arise.
Respond to Signs of Decline. The good old days are over. Law firm management does not have the luxury of allowing a performance decline to right itself or to cycle back around. Unfortunately, with the heavy reliance on lateral hiring and mergers, law firms are populated with many lawyers that give their self-interest primacy. As Heenan Blaikie found out, lawyers with that attitude will not stick around to see a turnaround through.
Develop a Succession Plan and Future Leaders. Numerous reports on the Heenan Blaikie story recount Roy Heenan’s history as the primary firm leader and his ability to keep his firm together. Many of those same accounts lament a leadership vacuum that arose after he stepped down. When a restructure was needed, new management could not pull together the disparate segments necessary to make one work. It is clear that Heenan Blaikie failed to have strong leadership that could take Roy Heenan’s place when needed most. Law firms hoping to last many generations will systematically find, train and prepare future leaders to lead in the next generations.
What else could Heenan Blaikie have done better?