Hope is the denial of reality – Margaret Weis




As a law firm in decline continues to struggle, there are two primary scenarios in which denial furthers the rate, or degree, of decline:

  • undervaluing the risk associated with a significant undertaking; or
  • disregarding mounting evidence of decline.

Denying the Risk Associated With Major Initiatives

Struggling law firms often entertain major changes (to the firm or in its culture) in order to “right the ship.” I define a major change as one that, if it were to go very wrong, could trigger the demise of the organization. Some examples include:

  • downsizing through the termination of individuals, groups or office closings;
  • the acquisition of another firm or practice;
  • being acquired;
  • restructuring management/governance; or,
  • modifying the compensation system.

Major changes are often necessary for a struggling firm, to be sure. However, a move from the frying pan into the fire is to be avoided. The overwhelming tendency is to undervalue the risk associated with major moves. To counter that tendency the prudent leader will seek to have the “worst case” scenario fully developed and discussed prior to decision-making. It is best to lead with caution and seek counsel.

Denial of the Evidence of Decline

By definition, struggling law firms are operating in variance to desired levels. In the most extreme case – a failed firm — it is typical to find that there was mounting evidence indicating a decline – evidence that was discounted or ignored. Examples of mounting decline include:

  • an increase in the level of undesired attrition/turnover;
  • an increase in debt;
  • a decline in margins;
  • falling revenue levels; or,
  • the loss of meaningful client relationships.

Law firm leaders must be vigilant in monitoring the performance of the organization. Steps should be taken to ensure that the firm doesn’t veer too far for too long from operating performance norms or targets. The longer the firm operates in variance, or the greater the degree of that variance, the stronger the corrective action needs to be. And the more frequently the performance needs to be monitored.

Often the leader of a law firm in decline becomes more insular, protecting the firm from “bad news” and trying to prevent alarm. The prudent leader will honestly communicate with confidence and conviction, while broadening the number of people from whom input and advice is solicited.

Is denial adversely impacting your firm?