Spectacular law firm failures like Dewey, Brobeck and Howrey (to name a few) provide many lessons. They also evidence leadership’s failure to timely recognize or act on problems so as to avoid disaster. Due to the fragile nature of law firms, it is imperative that prompt action be taken lest a troubled firm’s problems become unresolvable and fatal.
How prompt is prompt? Because every law firm’s problem is sui generis, no black letter rule fixes the amount of time available to implement a cure. Unlike judicially based procedural rules establishing an answer date to a lawsuit, the time to respond to law firm distress will be dictated by numerous variables, including the make-up of the law firm, the nature of the problem, the market in which the law firm operates and the leadership/rank and file relationship. So while the amount of time available to turnaround a firm depends on the particular facts, at least five factors can have an impact:
Recognition. “Timing is everything” is a statement of significant truth and applicability when law firm complications surface. Early recognition of the difficulty allows greater flexibility to attack the troubling issues. Identification tools useful in recognizing potential strife can be found in Five Indicators of Law Firm Trouble , The Troubled Law Firm-We Didn’t See it Coming, Warning Signs Your Law Firm is in Transition and Signs Your Law Firm is in Need of a Repositioning. Imitating an ostrich with a head in the sand compounds the risk that time to remedy the trouble will be short.
Culture. The law firm’s culture can be an important variable in determining whether the time to turn around the firm is short or long. For example, if the crisis is financially based, a firm built primarily on financial rewards likely will fray more quickly than a firm primarily constructed on other values. Consequently, understanding the nature of the crisis and its challenge to the core of the firm’s values helps management assess whether its woes will morph into something more extreme or whether a calm and deliberate response is possible.
Deferred Maintenance. A firm that previously addressed performance problems, client issues or market pressures is likely to have more time than less time to address its challenges. On the other hand, a firm with accumulated organizational challenges that have remained unresolved is more likely to see brush fires erupt from unattended problems-frequently at the most inopportune times. Any firm finding itself in trouble should honestly assess its past vigilance respecting past maintenance items. If it has been lax in dealing with deferred maintenance, it likely will have less rather than more time to deal with its trouble.
Leadership. Leadership quality is always a factor in dealing with any business reversal, setback or crisis. It is not that good or great leadership inherently means there will be more time to address any strife (although it cannot hurt); it is that good or great leadership likely has the capacity to buy the additional time needed when trouble arises.
Panic Level. Hopefully, any difficulty presented is in its early stages and has not escalated to a level where panic among the rank and file percolates. The always feared “run on the bank” requires focused attention to avert or reverse, but clearly is one form of panic that can shorten the time to respond. Whatever the reason for the panic, its presence means that the time to turn around the firm may be short.
Time is precious in any restructure. Because a law firm leader never knows how much time exists to address any challenge, the solution needs to be designed and executed with speed and diligence. In your experience, have you found additional factors that impact the time available for the turnaround?