The concentration of law firm financial strength narrows as fewer AmLaw 200 law firms can be counted among the fortunate. As Mark A. Cohen argues in his The AmLaw 200 Is Down to 50 – Maybe 20. What does It Mean? a fiscal separation among bigger firms has occurred and continues. Cohen concludes that the
“When a law firm embarks on a plan to grow, ultimate success … [directly relates to] leadership’s ability to make the right decisions while navigating the high seas of growth.”
from Decisions That Matter: Tales of Law Firm Leadership in Moments of Consequence
It is not unusual to hear “Growth” as the response when law…
Law firm succession is a huge issue for many of today’s law firms. Not surprisingly, more firms than ever before are focusing on succession by adopting written succession plans that address leadership succession and client relationship transfer. Despite the importance of succession, many firms have no written plan and remain unprepared for transitioning leadership or…
“Law firm disasters are almost always of the man-made variety…. Once a storm is brewing, add the fact that as business organizations go, a law firm is among the most fragile, and you have the climate for a series of catastrophic events.”
As more law firm mergers are announced, the idea of pursuing a merger crosses many a law firm leader’s mind. The idea of grabbing greater market share, entering distant markets, bolstering capabilities, or addressing succession can spur thoughts of combination. Those potential results or outcomes can seem compelling and cause a firm to jump into…
Charles Darwin said so profoundly “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Our practice is seeing an increasing number of firms tested by their ability to adapt. The news reflects a growing number of firms in obvious transition. From high-profile names to lesser-known partnerships, the leaders of each firm faces pivotal decisions. Some of these firms will restructure or otherwise embark on a turnaround strategy. Others opt for merging with another group or offering themselves as an acquisition target in an effort to avoid dissolution. History has shown far too many end in a messy liquidation.
Identifying The Path That Leads To Decline
The decline of a once vibrant partnership rarely has much to do with the quality of lawyers engaged in the practice. And though the marketplace is certainly tumultuous, what is at the heart of survival and success for some, and the dire straits of a struggle to survive for others?
In his book Corporate Turnaround, Dan Bibeault identifies four key mistakes that lead to organizational decline. These mistakes, paraphrased to the legal profession are:
- Failure to respond effectively to a changing competitive environment
- Poor control over operations
- Operating with excessive financial leverage
Let’s look at each one a bit more closely.…
The typical press release announcing a law firm merger extolls the excitement, the opportunity to have one plus one equal three, and the great fit of culture, practices and people. It’s perfect until it is not. In fact, by some measures more than half of all law firm mergers fail. When the realization sets in that your law firm merger is a bad one and not the combination of your dreams, what can you do?
Besides whistling past the graveyard, you’ve got to do something. And while a solution stimulated by panic is not recommended, prompt action is advisable. As action plan options go, the following three options generally are presented and often are considered:
Law firm succession planning represents an important component to law firm longevity. The two forms of succession most often discussed-leadership and client relationship transfer-should be top of mind to any firm thinking about being an enduring institution. While leadership succession can be a significant challenge, creating an effective client relationship transfer strategy is among the most complicated things to achieve.
In client relationship transfer, it takes four different parties to make it work. First and foremost is the client without whom there can be no client relationship transfer. Surprisingly, too often the client’s thoughts and perspectives on relationship succession are not prioritized, at least to the degree desired by the client. If the client’s interests are neglected, there is little hope for a successful plan.
Fingerprints are unique. No two snowflakes are alike. And the more one looks at law firms, the more it is apparent that each law firm has its own personality. Whether small or large, local, national, or international in scope, general service or specialized boutique, driven by profit or public service, each law firm has its own DNA.
Though distinctive, many law firms share common characteristics. One shared by all law firms is the need to be financially healthy. Law firm financial health is the universal need of every law firm—without financial health a law firm’s future is seriously suspect.