Managing Law Firms in Transition

Managing Law Firms in Transition

Its Merger Season-Five Reasons for Your Law Firm to Think About Merger

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Merger, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Succession, Law Firm Transition

Tis the season, but holidays are not involved.  Rather, market forces, activity and trends confirm that law firm merger is on the minds of law firms.  While mergers once seemed to happen mostly around the start of the year, the complexity of the merger exercise means mergers can happen at any time.  And even for the many law firm mergers that happen to close around year-end or as the year begins, there is no doubt that the courting, planning, and negotiating that goes into a consummated merger occupies many months of the year.  In reality, law firm merger season never ends but runs from January 1 to December 31 every year.

Despite the heightened number of mergers recently, the impactful act of merger is not for every law firm.  Pursuing merger “because everybody’s doing it” is a misguided take on what should matter to firms thinking about their future.  Only if merger strongly supports a strategic firm imperative should the idea of merger be considered.

For the law firm unsure about merger, there are at least five reasons it may be worth considering.

Client Driven.  When the retention or expansion of client relationships requires the addition of more substantive practice areas, greater bench strength, or an ability to serve clients in ways the present profile does not allow, merger may offer a solution.  A merger can deliver a turn-key solution to greater client needs that may not be possible through organically developing needed skill, depth, or alternative practice approaches.  A client with unsatisfied needs may not be client for long, so meeting those needs through merger is a solution to consider.

Geographic Imperative.  Much like the client driven reason for merger, distant markets can beckon a firm to geographically expand through merger.  A merger into a far-away market can further the success of an existing practice area, a firm’s attempt to focus on an industry already served by a firm’s local lawyers, or a client that has expanded away from a firm’s home base.  Moving into a market not currently served can meet a firm’s strategic need.  If so, it may be wise to consider merging with an established firm in an outlying market that helps execute a firm’s strategy.

Platform Improvement.  A firm may find itself swimming upstream when it comes to practice innovation, law school recruiting, lateral hiring, retention, and winning beauty contests.  These disappointments often have less to do with a firm’s intrinsic worth but more a matter of available resources and perception.  A merger can deliver an enhanced platform that instantly provides needed wherewithal and changes perceptions.  Instantly lawyers and their firm can seem more innovative, more attractive at law schools, pleasing to lateral candidates, more immune to attrition, and “in the game” at every pitch.  A firm tired of finishing second may have a platform problem that can be solved through merger.

Need for a Lifeline.  Some firms wait too long to tackle platform deficiencies and cross into the dreaded zone of crisis.  For these firms, a merger may smack of desperation, but it also may be a matter of survival.  A firm leering over the precipice may have an excellent reason to consider merger.  And while negotiating a merger while weakened is far from ideal, there may be no other or better alternative.  If a firm needs a rescue, it may seriously want to consider merger.

Succession.  Law firms everywhere have inadequately prepared for succession.  Whether the failure of planning pertains to leadership or client succession, it can leave a firm at risk.  Unfortunately, shortcomings in planning succession can take a number of years to correct if done organically.  The long road of organic succession can be complex, subject to fits and starts, and subject to unforeseen developments.  Firms facing succession challenges that do not have the luxury of time or the confidence to implement an organic succession plan may view merger as a good solution.

Merger is not right for every firm or suitable in all situations.  But in a number of instances, like the ones discussed above, it can be an effective solution.  Based on how things are at your firm, should it consider merger?

Is Your Law Firm Exposed to Theft?

Posted in Law Firm Growth, Law Firm Leadership, Law Firm Warning Signs

Time and time again the news includes another report of a law firm (most often small to medium in size) having been ripped off. The dollar amount involved in a majority of the reported thefts is a few hundred thousand, but  in some cases millions of dollars have been misappropriated. In what I consider the most unfortunate of cases, the missing funds weren’t the firm’s but funds belonging to firm clients.

How does this happen?

Recently I was reading of yet another case involving the misappropriation of cash by a trusted employee who, in retrospect, shouldn’t have been.  It dawned on me that a refresher course (or perhaps an introduction for some) on basic internal control “blocking and tackling” might be in timely.

As firms grow it is common to put off, or in far too many cases not even consider the appropriate checks and balances necessary as cash related responsibilities are delegated. Basic business measures are intended to decrease exposure to theft and fraud and, at the same time, minimize the possibility of errors.

Absent these business safeguards, it is easy to wake and find your firm the victim of someone all-too-willing to take advantage of your trust and a system that is far too easy to hack. A relatively simple system of internal controls can provide significant protection, and decrease the risk that your firm will fall prey to someone that doesn’t deserve your trust.

A thorough discussion of appropriate internal controls is beyond the intended scope of this post; but consider the following primer.

The Basics of Protection

Segregation of duties

As a small law firm grows — both in terms of number of individuals employed and revenue generated — there is an ever-increasing demand on the time of the owner(s). The resulting tendency is to delegate activities related to receiving and accounting for funds, as well the approval, payment and accounting for payments related to obligations of the law firm.

As the volume of work delegated grows, separate individuals should have responsibility for authorizing, making and accounting for payments.

Additionally, different persons should have responsibility for opening mail, depositing payments and accounting for their receipt.

Limitations on authority

One approach to decreasing exposure is to apply limitations to authority. For example, many firms require two signatures for payments that exceed a certain threshold such as $1,000. This is not about trapping a dishonest employee; it is about installing smart checks and balances around judgements and decisions that can be pivotal in nature.

Transaction review

 A firm owner should receive, unopened, the firm’s bank statements, and review them on a monthly basis. The simple fact that the statements are being reviewed will prompt a more deliberate and considered decision-making process.

For firms with two or more owners, it is smart to separate responsibilities, having one owner authorize payments (coupled with a requirement for two signatures), and another review the bank statement.

Budget/financial planning 

An annual budget reflecting anticipated expenditures and receipts is a tool that helps to minimize exposure. A monthly review of actual to expected performance will identify unplanned and perhaps inappropriate transactions.

Mandate vacations/job rotation 

A practice of forcing a continuity break by mandating vacations away from the office (and away from access to the firm’s financial systems) has a significant impact on decreasing temptation and exposing inappropriate activity. A system of rotating responsibilities associated with cash related functions has a similar impact.

External audit

Contracting with an independent accounting firm for an audit of the firm’s books is a very healthy practice. Much like other aspects of an effective internal control system, employee knowledge of the fact that periodic audits occur will decrease the likelihood of a problem.

Implementation of any of the above will result in a more secure operation; but a professional review of your firm’s financial processes and controls is most appropriate and is recommended.

How are your internal controls

Getting Ahead of the Game-Four Thoughts About Operating Successfully in Today’s Market

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition


Every year about this time some of the major research and analytic minds focused on the legal services industry publish their annual reports or studies.  Citi Private Bank/Hildebrandt Consulting LLC’s Client Advisory was released on December 14, 2017 and contains a wealth of information and perspectives about what happened in 2017 and what might be expected for 2018.  The Georgetown Law/Thomson Reuters/Peer Monitor 2018 Report on the State of the Legal Market likewise is full of data, analytics and thoughts about the transforming legal market.

A third renowned resource, Altman Weil, Inc., publishes its always anticipated Law Firms in Transition Survey with its 2018 edition to arrive sometime this spring.  While the market waits for the Altman Weil 2018 Survey its 2017 Survey contains important information and perspectives that are valid today, especially when digesting the Client Advisory and the 2018 Report on the State of the Legal Market.

Each of the foregoing advisories/reports/surveys are commended for your review.  While each presents information worthy in its own right, a portion of the 2018 Report is particularly interesting for firms thinking about the challenge faced for 2018.  For any law firm leader searching for guidance for the future, it provides useful perspectives.  In the 2018 Report, there are some key takeaways worth noting.

Be Proactive.  The 2018 Report cites to evidence that successful firms meet client needs through changed service delivery approaches prior to being told by the client that a change in delivery is desired.  Proactively focusing on staffing, pricing, work-flow, and technology tools as a means to deliver better legal service is not only appreciated by clients, but it helps law firms seize the initiative about a discussion that is inevitable.  Making your firm more responsive to client need prior to the client feeling compelled to raise concerns not only helps a law firm frame the discussion with the client, but the time a firm takes to develop its proactive approach makes it more fully informed about the important issues at play.  Being proactive on the important elements of legal service delivery likely will improve a firm’s performance.

Don’t Fret About a Firm’s Size or Market.  The data cited in the 2018 Report indicates that the success of the proactive firms does not depend on their size, their market location, or even whether their accepted rate increases exceeded the rate increases of the less successful firms.  According to the information cited in the 2018 Report, focusing on improved legal service delivery transcends issues of law firm size, market location, or any implication that more successful firms are simply blessed with better clients more willing to accept higher rate increases.  Rather, the fundamentals implemented by proactive firms dutifully focused on the correct issues delivered results regardless of common conceptions that dramatic results are only enjoyed by AmLaw top 25 law firms dominant in money center or prime commercial locales.

Resulting Improved Communications Improves Results.  An apparent by-product for proactive firms is that they believe in what they have to offer and communicate about it with their clients upfront.  Having thought through a dynamic proposal leads to a willingness to discuss and defend it with clients at inception rather than waiting until later.  After all, a new proposal intended to replace the status quo must be vetted with the client before it can be implemented.  Clear communication at the outset greatly reduces misunderstandings, establishes clear expectations, and is more likely to put law firm and client on the same page.  The outcome is predictable.  Communication as the work begins improves realization and speed of collection.  Simply put, good communication is worth its weight in gold.

You Have to Spend Money to Make Money.  Proactive firms not only focus on improved service delivery, but they realize success depends on a commitment to investing in the present and in the future.  Well placed dollars invested in business development training may increase a firm’s overhead, but among the more successful firms that kind of investment frequently pays dividends.  Similarly, firms showing better results often are more willing to invest in technology to improve their service delivery, staffing strategies, pricing models and work-process improvements.  Proactive firms enjoy success not because they pinch pennies better than peer firms, but because they spend money on needed investments wisely.

In the legal services industry, the drumbeat of change pounds incessantly.  As the 2018 Report suggests, relying on the status quo is not the way to address any percussive annoyance. Can your firm take the initiative and modify its operations to enjoy greater success in 2018?

Failing Strategies and Law Firm Success

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

I recently finished a review of the 2018 version of the Georgetown University Law Center’s Report on the State of the Legal Market. Although the report contains numerous quantitative facts reflecting continued struggles for the law firm services market (falling productivity, realization and profit margins), I was intrigued by the commentary regarding strategy.

The report addresses the tendency to follow or even double down on strategies that are failing.

When thinking about goals and the development of strategies to achieve them, it is a bit like selecting one of the numerous routes available to a specific travel destination. It is typical (and advisable) to evaluate progress, and change plans if the chosen route is found to be blocked or includes unreasonable delays.

Unfortunately, the norm for many businesses, including law firms, is to re-double efforts when chosen strategies are not providing the projected progress towards the realization of goals.  The report details several reasons for this tendency including these three (paraphrased) reasons:

  1. Commitment Bias – As an organization invests time and money in strategies, it is predisposed to value those strategies more highly — “in for a penny, in for a pound.” We see this time and time again as firms continue to pursue approaches that are not yielding desired results. The investment one has made in an initiative should not be the deciding factor when it comes to making future investments. An objective evaluation of progress is the mark of leadership.
  2. Finish-What-You-Start-Syndrome – Most of us have been programmed since we were children to stick with what we have started until we have completed the task. Somewhat like commitment bias, this approach to strategy often makes little sense. Once we determine that what has been started no longer serves our purposes, the effort should be terminated.
  3. Ego/Face Saving – Finally, all too often firm leaders become far too personally vested in a strategy. To change course, abandon the failing strategy and start anew feels like failure. However, the effective leader operates in the best interest of the firm, and is not afraid to change course when necessary — no matter the degree to which they are personally identified with the strategy.

Routine monitoring of progress is the key to identifying and challenging strategies that are not serving the firm. Any strategy should include a series of actions and specified interim progress milestones. As time passes, with benchmarks failing to support targeted milestones,  the strategy itself should be increasingly questioned.

The Georgetown report provides some great insights into the state of the profession and some very good additional perspectives on failed strategies.

For those interested in other readings on law firms and ways in which leadership can address the challenges of transition, see here.

Five Steps for Preparing Your Law Firm for a Great Future

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Succession, Law Firm Transition

Predicting the future of the legal services industry is no easy task.  The complexity of its landscape makes divining next year, let alone the coming years, difficult.  Prophesying about the future, however, is not simply an academic exercise.  It has practical importance because firms must develop sound strategies that can help assure future success.  For that reason, law firms need to think about the future and their approach to sustaining themselves as the years unfold.  But without a crystal ball, how can a firm adequately prepare for what lies ahead?

Looking at recent law firm performance and emerging tendencies is a good start.   The 2018 Citi Hildebrandt Client Advisory just released is one resource that can be used to observe industry activity and best practices.  The Advisory includes information and performance data that identifies recent shifts among legal service providers.  Not only does the Advisory study those currents, but it goes on to make some high-level suggestions about preparing for the future.

Even with these insights or those of other thought leaders, most law firms are looking for actionable steps that can address the shifting paradigm.  While nothing about the future can be certain, there are at least five measures that law firms can take to prepare for the years ahead.  Indeed, if these steps are followed faithfully and with discipline, the foundation for a great and lasting law firm can be built.

Focus on Acquiring and Retaining the Right Talent.  Successful law firms in any age have talent throughout.  In the future, acquiring and retaining talent will take on more importance than ever.  A law firm preparing for the future will focus on having uninterrupted premium talent at all levels of its professional ranks (e.g., partners, senior attorneys and associates) and the non-attorney ranks, whether the non-attorney management team, marketing personnel, technology team, or pricing officers.

Focus on Managing Your Talent.  Just acquiring talented people will not sustain a firm if those people are not managed to achieve their best.  Processes, procedures and coaching should be used to foster opportunity, personal and professional development, and accountability.  Any law firm focused on managing its talent will create an environment that directly benefits the firm as an institution and stimulates the satisfaction of its people.  The future will be littered with law firms that take its people for granted.

Take Succession Seriously.  In the coming years many firms will be challenged by leadership and client relationship succession.  Firms that focus on succession will treat it as a multi-generational challenge that must be mastered. Today’s associates and mid-level attorneys are just as important to preserving a law firm as addressing baby-boomer transition. A top to bottom focus on succession will create a culture more likely to help a firm endure.

Make Service Delivery More Efficient.  The growing competition among legal service providers (including law firms) is driven by client desire for quality, value and speed. Law firms preparing for the future will do more than strive for excellence, reduce rates, and turn work around quickly.  They will instill a mindset that thinks originally and creatively about service delivery. Because client expectations will be ever evolving, creating a culture of innovation will be a cornerstone to client satisfaction about service delivery.

Embrace Technology, Systems and Ideas.  It is partly through technology, systems and ideas that law firms will transform themselves for the future.  Ironically, leveraging these things will bring the firm full circle back to the issue of talent.  A law firm that nurtures its lawyers and other personnel to think like their clients and react to the economy in which the clients compete will use technology, implement systems and encourage ideas in order to improve performance. Law firms that understand the role of technology, systems and ideas in their clients’ success will enjoy success themselves.

Gone are the days when law firms could operate with a “business as usual” attitude.  To endure in the future, more is required.  Is your law firm doing more?


Considering A Merger? 10 Questions to Answer First

Posted in Law Firm Growth, Law Firm Merger

Merger has continued to be a strategic choice for many law firms. Since 2009 the volume of transactions has continued to grow, with approximately 100 announced mergers last year.

Our expectation is that the number of law firms that choose merger as their go forward strategy will increase, dwarfed only by the number of firms that will simply entertain the idea. Given the probability that firms will at least consider merger, it seems prudent to think about what a good merger partner should look like.

To that end, here are 10 questions you should answer before having a conversation with another firm:

  1. What principal characteristics of your existing culture are most important to you. A lack of cultural compatibility is difficult, if not impossible to overcome, and one of the reasons so many combinations fail.
  2. In what rate tier do your clients exist. A lack of similarity in realized rates drives conflicts in staffing client files, compensation and a host of other critical law firm areas.
  3. What additional expertise (whether new to your firm or additional depth in existing areas) will allow your firm to make desired progress in targeted areas of growth.
  4. What are your key financial metrics. A good merger partner will have economic metrics that are similar to yours (of course unless your firm is failing). Metrics significantly different from yours — whether better or worse — will lead to painful pressure for one party or the other on rates, hours and retention.
  5. What aspects of your current compensation system do you most value. Merging with a firm with a significantly different approach to compensation will almost certainly result in a different relative treatment among your existing partners, possibly with unexpected negative consequences.
  6. What size of merger target best serves your firm’s goals? Questions like are you comfortable being a small outpost of a mega firm, or even small relative to your merger partner are good questions to think about. The greater the size disparity in a combination the less “say” the smaller firm will have in future decisions.
  7. Is your firm facing succession issues? If so in what specific way would you like to see a merger partner solve those issues?
  8. In addition to your existing footprint, what additional geographic presence would bring value to your firm, and why?
  9. What type of governance are you and your partners most comfortable with. Firms are governed in a range of ways, from very democratic to tremendous authority being vested in a few. It is important to know in advance what you are comfortable with and what is off-the-table in terms of governing options.
  10. What level risk do you think is reasonable? Risk in a law firm includes bank debt, partner turnover, unfunded pension plans, pending or threatened litigation and loss of key clients. Understanding your risk-tolerance is key to a successful merger.

The answers to these questions, and the impact the answers will have on your approach to a merger possibility will vary depending on whether you are acquiring or being acquired; but the greater the variance between how you feel with respect to these 10 issues, and the reality of the world you’re considering will be a predictor of the success of the combination.

If a strategic merger is in your future, smart leaders will engage in identifying   the things that are most important to their partners; far too many mergers occur without defining in advance what a firm is seeking, and why.

If you are interested in additional materials we have published related to law firm mergers click here.

Four Steps for Driving Non-Equity Partner Performance Towards Equity Partner Expectations

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

Firms often find themselves with too many non-equity partners whose performance could and should be better.  But because of a long string of promotion decisions and/or lax management, the non-equity partner pool is bigger than desired and its overall contribution to the firm is, in a word, disappointing.  Indeed, many equity partners see this middle tier as a case of unrealized potential.

The unfulfilled non-equity partner performance (as a group) can result from a number of things.  In the first instance, some of the underperformers probably should not have been promoted in the first place. In other cases, good promotion decisions are subsequently undermined by a culture of assumed annual raises, political infighting hurting accountability, “siloed” work assignments resulting in pockets of overcapacity, and a stifling of motivation because promotion seems unlikely. If this is the status quo, non-equity partner performance usually is misaligned with equity partner expectations.

Based on experience, there are four steps that law firms can use to better align non-equity partner performance with equity partner expectations.  These steps do not correct any imbalance overnight, but once employed the potential within each non-equity partner is more likely to be realized.

Perform an Objective Evaluation of Your Non-Equity Partners.  If a firm has too many underperforming non-equity partners, it likely has been lax in its evaluation of them in the past. Improving non-equity partner performance starts with a thorough assessment of the non-equity partner pool. Quantitative and non-quantitative data and information about each non-equity partner, covering at least the preceding three years, should be assembled and evaluated to rank each non-equity partner’s contribution to the firm.  Once the evaluation is completed, the firm has a baseline report that serves as the foundation for the next steps.

Create a Comprehensive Professional Development Program. A lack of accountability is the root cause for unrealized non-equity partner performance.  Unfortunately, once non-equity partner promotions are decided, many firms move on to other issues and inadequately manage their newly promoted partners.  This institutional indifference can be corrected with the imposition of a non-equity partner professional development program in which each partner is guided towards a higher performance suited to his or her abilities.  To do so, the firm should give each non-equity partner direction on how he or she can contribute in the future, provide training to make him or her a success, and provide support so the plan’s objectives can be achieved.  With frequent feedback, incremental improvements in performance are possible and a higher level of accountability will result.

Compensate for Professional Development Program Performance.  Adjusting the non-equity partner compensation system to comport with anticipated improvements from the professional development program is the next step.  Through compensation tied to improved performance, the firm can use compensation to encourage behaviors that align with equity partner expectations.  Compensation decisions also can discourage conduct that veers away the goals the owners desire.  As a reward mechanism, compensation furthers the professional development that improves the firm’s financial health.

Use Professional Development Program Performance in Promotion and Tenure Decisions.   As non-equity partner performance comes into line with the expectations of the firm’s owners, an opportunity exists to further drive desired performance.  This is possible by integrating promotion standards that conform to the accountability fostered by the professional development program and new non-equity partner compensation system.  As the non-equity partners are rewarded for their successes they can become more motivated if the likelihood of promotion to equity partner is enhanced.  While not all of them will be promoted, having a reasonable chance for promotion supplements the accountability and reward systems already in place.  Conversely, accountability and rewards may indicate that some non-equity partners have not thrived as well as some others.  The firm can work with these colleagues in finding opportunities designed to accentuate their strengths and achieve their career goals.

The lifeblood of any law firm is its talent.  Law firms with a group of non-equity partners can find themselves blessed with the kind of talent critical to achieving the goals and aspirations of its owners.  Although realizing on that talent is not a given, it can be achieved by following these four steps.  If not taking these four steps or other decisive action, is your law firm doing enough to align its talent with owner expectations?

6 Keys To A Healthy Law Firm – Food For Thought

Posted in Law Firm Growth, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

For years, we’ve known two things about personal health: ‘We are what we eat’ and ‘We need to move more.’

Specific admonitions and instructions change, but the theme is consistent. The human body needs a balance of nutrient rich foods with a compliment of vitamins and minerals. And there are the things to avoid — especially in excess — sugar, bad fats and processed foods. Add some exercise that gets the heart rate up and tones muscles, and we’re on the road to a healthier life.

But what are the keys to a healthier law firm?

 It is not complicated. We suspect (or intuitively know) most of this; but not unlike working out and eating right, sometimes the daily grind gets in the way of basic principles. When it comes to the managing a law firm there are a few things that you should really focus on. So here are 6 keys to maintaining a healthier law firm.

The healthy law firm avoids excess in the areas of:

  1. Debt. Relying on debt to fund operations is like fast food – convenient, but often detrimental to the firm’s health. Few law firms that manage debt appropriately run into severe financial trouble…no matter how volatile the market might become. On the other hand, a little taste of that credit line in order to even out cash flow can be a slippery slope. Borrowing for new furniture and equipment acquisitions, or to finance lateral hiring are warning signs. An increasing reliance on debt can become a crushing burden.
  2. People Costs. The cost of excessive staffing — whether attorney or administrative — is like two scoops of double chocolate chip every night. Not only does excess staffing come with a fixed cost; when the human resources exceed the amount of work to be done, morale drops. Financial pressures increase. Layoffs typically ensue. And culture is weakened — not to mention the damage done to those adversely affected. Careful modeling that clearly outlines the cost of adding people is one of the signs of a disciplined and healthy law firm.
  3. Space.  Commitments to expensive or excessive space have been the ruin of many a firm. Increasingly, healthy firms are minimizing the number of square feet they commit to, and resisting the temptation to lease premium space in the shiniest new building in town.

Avoid excess in these three areas, and you’ll be well positioned to focus on the remaining three keys to health.

  1. Stay Connected With Each Other. The things that brought you together as a firm are the things that, if nurtured, will create a cultural fabric strong enough to meet challenges, embrace opportunities, and withstand almost anything. It sounds so simple, but quality communication is often like the physical exercise we know we need; it is the last thing we get to…or not.
  2. Remember The Sweet Spot. A firm grows stronger by focusing on excellence in work product and service. Stick with what you know. Resist the temptation to be all things to all clients. Unless yours is a most unusual firm, that’s likely not your sweet spot.
  3. Stay Connected With Clients. A law firm that consistently maintains an understanding of what clients really think, care about, and need has landed on the formula for maintaining organizational health.


How healthy is your law firm?




Five Steps for Law Firms Wanting a Good 2018

Posted in Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition

For law firm leaders closing in on the end of 2017, there is no rest for the weary.  They are working hard to finish the year off well.  Collecting bills, distributing profits, retaining talent are just a few of the things on their to-do lists.

Even if 2017 turns out positively, it is no guaranty that a good 2018 will follow. Each law firm year stands on its own so resting on laurels is decidedly unwise.  For that reason, even before 2017 ends, the typical leader must direct his or her attention to preparing for 2018.

For firms whose 2017 looks lackluster, efforts will need to be doubled to making 2018 a good year.  Financial performance may be down, it may have lost key clients or attorneys, or it may otherwise have stumbled.  But even firms that don’t have to worry about a turnaround cannot rest.  Whatever a firm’s outcome for 2017, the following five things can be done to help make 2018 a better year:

Stimulate Thought Leadership.  Today, more law firm legal work is commoditized. Commoditized legal work typically is low margin work and also is at risk of being replaced by lower cost providers, new systems, or taken in-house. High consequence legal work is the antidote to commoditized legal work.  To help differentiate a firm as a serious resource for complex and significant legal work, leadership should strongly encourage the firm’s lawyers in 2018 to become thought leaders about today’s legal issues of significance.

Review its Strategic Plan.  Every law firm should have a strategic plan that guides it to its objectives. For 2018, firms should extensively review their strategic plan’s features and principles.  The plan should be tested against today’s current business and legal environment, the firm’s existing strengths and weaknesses, and the sentiments and aspirations of the firm’s owners.  Is the firm on track or has it jumped the rails?  Assessing the firm’s strategic plan in the existing environment, and making needed adjustments, is a great step for starting 2018.

Review its Talent Pool.  Law firm fortunes rise and fall on the ebb and flow of talent.  How good is your firm’s talent pool? Has talent been lost to attrition?  Has talent underperformed to expectations?  Should the firm go into the market to fill perceived gaps in it talent base? Evaluating your firm’s talent is a critically important step in the new year. Having quality talent is essential to achieving a firm’s objectives.  Assessing a firm’s talent and any shortcomings is an excellent step for the new year.

Invest in the Firm’s Strengths.  Gauging a firm’s strengths (and weaknesses) can come from the strategic plan and talent reviews. The reviews can help a firm identify where its resources should be invested. “Playing to your strengths” has great applicability for law firms.  Because most law firms have limited capital, it is smart to direct it to the firm’s strengths.  In the zero-sum game of law firm investment, investing in a firm’s strengths is a wise step for 2018.

Review its Culture.  Most successful law firms have a well-understood culture.  As the new year starts, a smart firm will review its culture and its recent performance.  Do market forces, or attorney conduct, indicate that the firm’s culture is strong and resolute, or is it showing signs of change? A review helps answer the question.  A firm whose culture is changing may want to quell the change.  Or it may want to embrace the new direction the change is pulling the firm.  A review of a firm’s culture helps keep everyone on the same page for 2018.  That is what smart firms will do.

Planning for positive results in the coming year is something that should be a part of every law firm’s focus in early 2018.  The steps to get that done do not need to be revolutionary-they can be fundamentally simple.  The five ideas above are ones that any disciplined law firm can implement for a better 2018.  Is there any reason to not try them?

Underperforming Law Firms Risk Failure

Posted in Law Firm Crisis, Law Firm Repositioning/Turnaround/Restructuring, Law Firm Transition, Law Firm Warning Signs

The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year.

— John Foster Dulles

Former Secretary of State


Weve Got Trouble…With A Capital “T”

Most law firms go through a similar cycle. Initially partners share an almost blind and intoxicating optimism. As the firm grows and matures, the dreams and ambitions of many of the partners are realized in increasing measure.

But the inevitable occurs. Momentum slows and the intoxication of the early days turns to a pessimism-tinged sobriety. Confidence slips, and the future doesn’t appear as bright.

At this point, often months before it ever shows up on the bottom-line, the partnership has officially become a Troubled law firm.

But troubled is not synonymous with doomed. In fact, a key difference between strong enduring firms and those that fail is defined by how quickly and decisively leadership responds to challenges.

A brief look back reveals the reality that law firm failures are becoming frighteningly commonplace. It seems that big name collapses began with Finley Kumble, followed by Brobeck and Coudert in 2003 and 2006 and then someone opened the floodgates. In 2012 it was Dewey.  In 2014,  Heenan Blaikie. The trend hasn’t stopped.  Just this past week Sedwick announced the closing of their San Francisco based firm. Two years ago the 80+ year old firm had more than 300 lawyers in 15 domestic offices, plus one in London and another in Bermuda.

There is no question, the profession is in a state of transition.

So, this post will look at one of the principal causes of law firm trouble.

Underperformance: The Root of Many Problems

The truth is that, in most cases, a troubled law firm is, quite simply a firm that is underperforming. The degree of the trouble correlates strongly with two factors – how long the condition has existed, and the extent of the underperformance.

In the earliest stages, underperformance is manifest in declining market position. In this context, a number of things conspire to undermine market position, including how the firm is perceived by owners, employees, clients, law schools, and vendors.

A declining position left uninterrupted ultimately triggers a loss of confidence among clients and partners…which leads to a loss of partners…which leads to the loss of clients…which pressures the economics of the organization, leading to the further loss of partners and clients.

This cycle ultimately leads to a potentially fatal loss of confidence among vendors. Creditors begin restricting or even ending lending relationships – the harbinger of an ultimate loss of the organization. When troubles reach this level the most fortunate firms find themselves to be an acquisition target; the least fortunate file for bankruptcy.

The recent Sedgwick announcement demonstrates just how quickly developments can accelerate toward the point of no return. No doubt the firm had been faced with some revenue driven financial challenges in the preceding couple of years; but it was the relentless attrition of partners that led to the firm’s demise.

A quick summary of their  past 11 months tells the tale:

  • January 2017 – 30 plus lawyers and staff, including the firm’s former chairman, leave to form a boutique
  • February – 23 lawyers leave to open the Dallas office of Drinker Biddle
  • April – a couple of Los Angeles partners depart for Cozen
  • June – a couple more partners including the former managing partner of the DC office and partners in Los Angeles move to new firms
  • August – a dozen partners and associates in Miami and New York move on
  • September – New York office head and others leave
  • October – Head of Chicago office departs as does the Bermuda office

By November the firm had lost more than a third of its attorneys. A very sad ending to the once highly regarded firm formed in 1933.

The pressures of a profession in transition are relentless.

For firms seeking to avoid a similar outcome, a routine review and of performance-to-expectations along with corrective action is essential. It doesn’t take long for the “run on the bank” to result in closure.

For additional reading on restructuring or turning around the troubled law firm see–> here.