Some of us think holding on makes us strong, but sometimes it is letting go. – Herman Hesse
This is the final post in a series examining law firm decline, inspired by the Jim Collins book, How the Mighty Fall. See the previous four post:
- Overconfidence and Law Firm Decline,
- Aggressive Growth and Law Firm Decline,
- Denial and Law Firm Decline, and
- Stage 4 of Law Firm Decline.
The unfortunate truth for some firms that continually wrestle with the realities of decline is that continuing is no longer an option. (See Andy Jillson’s post “When it is time to say when.”)
The challenge is recognizing that your firm has reached this point before the final few options to make the best of a bad situation are no longer available to you.
The law firm facing closure has options. However, because the options become fewer and progressively harsh with time, it is important to recognize impending closure as early as possible.
The Progression of Shut-Down Options
- Action taken early – The firm’s options include seeking a combination with a healthy firm that is compatible in practice and culture. This typically constitutes a best-case scenario, and in addition to early recognition, requires strategic, proactive and visionary leadership.
- Mid stage – As the firm’s position is further weakened, the full firm combination may no longer be a viable choice, but options remain. Leadership may be able to facilitate the movement of significant pieces of the firm in a manner in which the greatest number of people have new homes, clients needs are professionally managed, leases are assumed by acquiring firms, creditors are satisfied and the firm is dissolved without a bankruptcy filing.
- Finally, in the worst-case scenario leadership waits until dissatisfied claimants force the firm into a bankruptcy proceeding. This result is typically the least favorable for all concerned. A bankruptcy proceeding is expensive, typically results in less economic satisfaction for the claimants, and is a burden and often long-term costly distraction for the owners of the liquidating firm.
Even when persistent decline has brought you to the brink of closure, there are options. As is so often the case, the key to the best outcome is to be realistic. Face the situation and seek appropriate advice while it is early enough to seize the best options. Time is rarely the friend of a firm facing closure.
Is your firm facing the potential of closure?