When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.
The Crisis at Kaye Scholer
I was sitting back reviewing law business related articles on Zite. As the stories of doom and gloom and failing law firms big and
Mergers of law firms garner a great deal of press and comment. As noted by Debra Cassens Weiss, law firm mergers during 2013 have been numerous. Robert Denney’s Primer on Law Firm Mergers provides a useful guide about approaching law firm mergers. Just last week, yet another merger was reported, this one involving
Law firm mergers are being announced all the time. As we saw in Jennifer Smith’s Big Law Mergers Questioned, their unveiling tends to stimulate extensive discussion. The pace of mergers is ahead of last year and as Catherine Ho wrote in Law Firms Experience Big Jump in Mergers, the number of combinations in 2013 is noteworthy. Mergers of regional firms, mergers of firms with international reach, mergers borne of strategic vision and potential mergers possibly encouraged by necessity—reasons aplenty seem to be fueling the current merger activity.
A successful merger depends on a lot of things, not the least of which is the ease and thoroughness with which
Continue Reading Law Firm Merger Diligence–Are the Cultures Compatible?
To merge, or not to merge? That is the question. More and more law firms face that issue these days. We often advise law firms facing that watershed possibility and take them from considering merger in the abstract to addressing its reality. But as Larry Bodine and Robert Denney recently reported, roughly 50% of mergers fail. Consequently, properly evaluating a potential merger is extremely important. A flawed analysis, a few undeserved assumptions or allowing momentum to overtake critical examination can doom a merger to failure. Conversely, a lack of confidence in a proposed merger because a systematic and thorough analysis was not performed can be a lost opportunity for both firms.
Continue Reading Resolving Law Firm Transition By Merger–Important Compatibility Issues for Management’s Consideration
It takes 20 years to build a reputation and five minutes to ruin it. – Warren Buffet
In my professional experience, no attribute is more important for the leader seeking to turn around a law firm than trust.
In a Forbes article by David Horsager, the author eloquently articulates it. “Among all the attributes of the greatest leaders of our time, one stands above the rest: They are all highly trusted. You can have a compelling vision, rock-solid strategy, excellent communication skills, innovative insight, and a skilled team, but if people don’t trust you, you will never get the results you want. Leaders who inspire trust garner better output, morale, retention, innovation, loyalty, and revenue, while mistrust fosters skepticism, frustration, low productivity, lost sales, and turnover. Trust affects a leader’s impact and the company’s bottom line more than any other single thing.”
Horsager’s perspective is spot-on. Without trust, the hope of successfully leading a law firm turnaround is nil. The question is — how does a leader gain the trust of a firm.
In my work, I have only seen leaders earn trust when words and deeds align. This means three things:
Continue Reading Trust in Leadership and the Successful Law Firm Turnaround
Barely a day goes by without seeing a news report, an article or a blog noting the struggles of a law firm or the legal services industry in general. A recent piece by Ron Friedman examines the possibility that more law firms will be eliminated. George Beaton’s The Rise and Rise of the NewLaw Business Model looks at the NewLaw business model and how it differs from the traditional BigLaw business model. Besides providing an interesting study in contrasts, he notes the significant growth of Axiom and other adopters of the NewLaw business model. Above the Law’s Joe Patrice provides his take on data suggesting that some work is moving away from Big Law. Many law firms are being impacted by this industry turbulence and come to the realization that the status quo is not sustainable. A law firm whose management recognizes that change in the marketplace requires change within is a law firm in transition.
When a law firm begins to show signs of transition, many thoughts about the best way to address change will run through the mind of leadership. Among any group of law firms, the stage of transition presented will vary depending on the severity of the market stress experienced and the time that such stress is recognized. Whenever a firm is in transition, some fundamental steps can be taken to help the process, and ease the pain of change.
The degree to which dramatic action is required largely depends on how early signs of transition is recognized. But no matter where in the continuum transition is first observed, certain basic steps will pave the way for developing a sound action plan.
When signs of transition surface, a wise leader does the following:
Continue Reading First Steps For Law Firm Management When Facing Transition
It’s common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”– Franklin D. Roosevelt
Last Tuesday Part 1 of Law Firm Decline and Leadership Mistakes was published. In today’s post we look at the other two leadership errors that lead to decline.
Over-expansion
Imprudent growth may be the number one mistake law firm leaders make. There is a tremendous bias for numerical growth in our industry. Unfortunately, the growth in which we engage is often far from strategic, and about little more than becoming bigger. As a result, most lateral expansion is not – in the long run — beneficial to the partners of the expanding firm. Most growth changes the numbers, but adds little value. Growth is expensive, tests culture, strains the limits of the management and leadership infrastructure and is just plain risky.
Counsel/Advice
Excessive Leverage
The general inclination in most law firms is to maximize immediate cash flow to owners while minimizing the amount of owner cash tied up in contributed capital. The combination of these two often leads to operational stress, and — if extended too far, organizational failure. Edwin Reese has an excellent article here on law firm capital.
Counsel/Advice – Better to be safe than sorry. We recommend that firms maintain a balance of contributed capital that is equal to 25-45% of annual owner compensation and that monthly distributions to owners be based on a distribution of 60-70% of projected annual income with the balance distributed at year-end.
Follow Basic Guidelines And Avoid Crisis
Continue Reading Part 2 – Law Firm Decline and Leadership Mistakes
“Bigger is better.” In recent years, many law firms have subscribed to that maxim to grow through office launches, mergers, or lateral acquisitions. Grabbing market share, adding substantive expertise, and establishing geographic relevance provided the justification for many an expansion plan. For some firms, growth appears to have been partly in response to the rapidly changing legal service landscape. Edwin Reeser recently has written two thoughtful pieces presenting a contrary view to some popular notions that stoke the enthusiasm for growth.
Mr. Reeser’s articles note that law firm growth is not necessarily a winning strategy. Indeed, for every benefit gained from an out of the ordinary course growth strategy, the bigger law firm assumes some corresponding risk. Only time will tell whether the financial benefits from expansion will outweigh the intangible risks. For that reason, it is a good idea to consider some of the by-products of an expansion plan before diving deep into the growth plan pool.
The Results of Growth Can Disappoint or Backfire. Bringing into your firm new people, new offices, and new expertise causes change. Change can be good, but it also can be unsettling. Moreover, all the promise justifying the growth can play out poorly. Indeed, as Mr. Reeser wrote in 2012 in an excellent five part series for the San Francisco Daily Journal about the economics of lateral acquisitions, there is an equal chance that the lateral acquisition won’t take (to review the terrific five part series, go to Mr. Reeser’s website). If this is the case, the cost of failure will be borne by the existing owners. Trying to maintain credibility among your partners once an acquisition struggles or fails is not an easy task. Beyond credibility, financial burdens caused by failed acquisitions can de-stabilize the firm.
The Excitement of Growth Can Become Addictive. Let’s face it; growing a law firm can be exciting. It really gets exciting if there is a series of
Continue Reading Growing Your Law Firm–Some Cautionary Thoughts
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. – Charles Darwin
These days, scarcely a week passes without news of another law firm in decline. From high-profile names to less-known partnerships, the leaders of each face 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. In recent years we have seen 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:
Let’s look at each one a bit more closely.
Continue Reading Part 1 – Law Firm Decline and Leadership Mistakes
The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life. — Steve Jobs
Welcome to our blog – Managing Law Firm Transition – Thoughts on Leading High Consequence Change.
There is no denying that the legal profession is in a tremendous state of flux. The press and blogosphere are rife with news.
Like most everyone else, we appreciate the news but news isn’t what this blog is going to be about. Our objective is to provide insights and generate dialogue that will be of value to law firms in transition.
To that end, we start with how we define a law firm in transition. There are firms that are:
Continue Reading What is a Law Firm in Transition
