For some time, the idea that law firms should be run like businesses has been accepted. While lawyers and law firms still benefit from the ideals that underpin the place our legal system has in our society, keeping a law firm’s doors open today requires a proper dose of business principles.

In attempting to apply these principles law firms are deficient in one particular respect. Their approach to management is relatively insular because ideas, perspectives and contrary views generally are harvested only from internal sources. Many managing partners, often not formally trained as businessmen, guide their law firms as best they know how, sometimes through imitation that gets sprinkled with a little common sense.  As Kevin McKeown in Leadership Close Up accurately notes, being a lawyer does not guarantee the ability to lead.

Those same law firm leaders are elected or appointed by lawyers from within the firm, many of whom likewise are not formally schooled in matters of business. And although non-lawyer executive directors today are accepted more readily than ever before, a non-lawyer executive director typically serves at the pleasure of lawyers whose collective skill set weighs heavily towards the law. For an industry that frequently is admonished to “run like a business,” its bench strength in the business arts is light.

Methods to remedy this deficiency, some available now and others requiring industry reform, are worth thinking about. Some ideas include:

Accept the Idea of Executive Directors and Other Non Lawyer Contributors. Many firms have seen the value of executive directors but some circles remain wary. Notably, the State of Texas recently determined that law firms in Texas can’t give their non-lawyer business employees the title of “director.” Tim Corcoran, in his Blog post Bar Associations: Protecting Consumers or the Status Quo?  criticized the Texas opinion and argues that it represents an anachronistic view towards the idea that law firms should run like a business. Is the Texas ruling simply a matter of semantics or does it represent a rejection of law firm progress towards business principles? Hopefully, the former.  And no matter the title, hiring other skilled business people to aid in the law firm’s operations, pursuit of business and delivery of good service also makes sense.

Hire Outside Consultants When Approaching an Out of the Ordinary Course Initiative or Transaction. Appointing a real estate partner to find and negotiate a new 10-year office lease may provide short-term savings, but at a long-term cost. Using the experience and market knowledge of the best lease broker in your city may deliver a more sound business result. As was recently noted by Roger Hayse, lawyers that manage with the aid of outside perspectives delivered by experts or consultants tend to make more informed decisions.

Create a Plan for Law Firm Leader Business Training. Some law firm leaders have business experience, whether by training or through a previous endeavor. But many do not. Creating a plan to educate current and future leaders in business principles would be huge step towards institutionalizing a business-like commitment to management. To avoid a narrow-minded approach to management, the training should teach leaders to solicit and welcome outside views.

Add Outside Non-Lawyer Directors.  Presently, this option generally is not available in the US. But industry reform in the United Kingdom has allowed UK law firms to appoint outside non-executive directors to their governing boards. According to data tracked since 2010, the firms that have added non-executive directors have, as a class, enjoyed revenue growth of over one-third better than firms that don’t have non-executive directors. The added outside perspective is credited for the improvement. Is similar reform in the US overdue?

Bring in Outside Investment.  As shown by the UK experience; having a non-executive director could be helpful. Having an interested director whose interest is premised on his investment could drive a distinctly more business focus at a law firm. While outside investment into law firms is discussed from time to time in the US, the Canadian Bar Association’s recent endorsement of outside investment represents a far more significant commitment to changing the way things are done. The CBA’s decision has spawned a lot of comment, including some from the south.  In the US, is this reform inevitable? Should it be?

Most people accept the idea that law firms should follow business principles and be managed like a business.  It is easy to say, but harder to do.  Is the legal industry doing all that it can to further the goal of having law firms run more like businesses?  Are law firms, on the whole, ready?

Lawyers love lists, especially checklists. They love having a specified list of elements that need to be proven or followed. Lists fit into the way they were trained in law school. It is likely that many of today’s lawyers were list driven even before going to law school.

It is no wonder that lists that rank law firms by any number of criteria are popular. Rankings of law firms based on their profits per partner, revenue per lawyer, or gross revenues get the attention of lawyers and law firm management alike. “League Tables” recognizing the noteworthy practices in a given substantive area are frequently followed, certainly by the law firms that have a place in or desire to make it to a League Table.

Sometimes law firm industry lists prove useful in marketing and recruitment; somewhat in the same way that a shiny car ad helps sell a car regardless of its quality. But evaluated in a vacuum, these lists or League Tables really don’t do much-they don’t determine whether a law firm serves its clients, pays its lawyers or observes its lawyer’s satisfaction grow. For one, as Roger Hayse has written, the lists often are based on logic that is unsound, data that can be misreported, manipulated or misinterpreted, or calculations that are skewed away from any probative conclusion. And the rankings or tables don’t last long-today’s lists or rankings are rendered obsolete as the calendar progresses and new ones are published.

So other than general amusement, do any of these lists or League Tables provide any lasting benefit to a law firm and its management? Although tempted to disclaim their utility in toto, in a very basic way these lists are valuable to law firms of any size in one simple respect-they make management think about its firm, its place in an industry that is ultra competitive, and ask about how its own firm’s performance can be improved.

When industry lists or tables prompt this introspection, good things can happen, including:

Internal Performance Is Assessed. Firms that make it to the top of the lists or tables get there because they perform well on the basis of some criteria. Their performance can be a function of many things, including a constant assessment of its attorneys, practice groups, internal business practices, culture and everything else that makes up a firm. Taking the time to internally look at your own house is good.

Industry Best Practices Are Studied. Imitation can be the highest form of flattery. It also can deliver results for the imitator. Other law firm’s best practices can be worth emulating. If something, such as an industry list, prompts management to look at how the best firms gain their advantage, the firm can be improved.

The Firm’s Strategic Vision Is Reviewed. Most firms that make the rankings are resolute in the pursuit of their overall strategy. While each firm has to find the strategy that suits it best, periodically taking stock of your firm’s strategy, its tactics in fulfilling the strategy, and the possible need to make adjustments, is positive. A newly published list or table can cause a firm to reassess its own strategy-clearly a helpful exercise.

Deferred Maintenance Is Addressed. From time to time most firms fall behind in dealing with lingering issues or problems. Firms that are reported high in the rankings tend to be better than others in minimizing the deferred maintenance. If a list or ranking acts as a call to action, the interests of the firm can be served.

Law firm industry lists can be interesting to read, fun to talk about and useful in marketing and recruiting. But they can also compel an internal examination that otherwise would go undone. For the typical law firm, which outcome is better?

The best way a mentor can prepare another leader is to expose him or her to other great people.    John Maxwell

 

Quality decision-making has a great deal to do with shaping the fate of all law firms.  Today’s post focuses on the value of today’s law firm leader engaging the insight and decision-making acumen of seasoned outside business professionals.

Think about it. When we engage in a personal activity that is important to us but for which our experience is lacking, we call on the services of a coach, mentor or guide.

  • On vacation, we often employ a guide to help insure we get the most out of the experience;
  • If you hike in an unknown area, you likely tap the knowledge and experience of one who knows the terrain;
  • An advisor is hired to assist with the creation and monitoring of our financial plan.
  • The guidance and direction of a fitness expert insures we get the most out of time invested in the gym, and ultimately realize objectives.

But what about the often new and unfamiliar challenges that come with the responsibilities of leading a law firm? Unfortunately for most law firms, the senior members of the firm or the leadership body rely solely on their own judgment and relatively limited experience.

In virtually every other business arena, executive leadership has long recognized the value in tapping seasoned and diverse perspectives — especially when facing key decisions related to their organization’s future. That is why so many corporations have a board of directors dominated by professionals from outside their organization.

When you compare the difference in business leadership experience of the typical non-law firm with that of almost every law firm it is startling. And I would argue that the need for outside perspectives for law firms is even greater than other businesses.

Edward Drummond is a UK based executive search firm that recently released the results of a study of the top 100 UK law firms over the last four years. It is telling that this study reports that about a quarter of the UK top 100 use a non-firm member to assist with decision making; and that the firms that utilized this approach realized a growth rate of about a third more than other firms.

The author of the study suggests “To get someone in just for a few days a year often works well for both parties. Having someone with strong commercial experience – sometimes within the FTSE 100 – can really drive growth through commercial experience.”

Tapping the perspective and experience of outside advisors can help design a winning strategy, and accelerate a “leadership orientation” for the law firm management team. The risk is extremely low and the upside is limitless.

Do your firm’s strategic decisions benefit from the wisdom of a seasoned business professional(s)?

Legal industry veteran Eric Fletcher takes the view that law firms perpetually are in transition. Certainly, in the changing legal environment that has existed since 2008, transition among law firms is common. Law firms in transition can face any number of business altering decisions, whether they be fundamental adjustments to its business strategy, considering merger, implementing layoffs, pursuing aggressive lateral hiring, facing crisis or winding-up and closing.

When it comes to any kind of transition, timing is critical. A recent series of interviews with Al Togut and Joff Mitchell, key players in the Dewey and Patton Boggs transitions, touched on the need for law firm leaders to face reality sooner rather than later. A law firm leader that “gets his or her house in order” when the first signs of trouble surface stands the chance to avoid a Dewey disaster and realize a Patton Boggs or better result.

Not all law firm transition results in such game changing outcomes like a law firm failure or merger to survive. Indeed, the nature of law firm transition can mean any number of alternatives along the law firm decision maker continuum. The relevance of “timing” is that important decision points recognized early can allow a law firm leader the luxury of having the greatest control over the law firm’s destiny. Procrastinating, lacking decisiveness or failing to recognize an existing or impending transitional point can narrow a law firm’s options and squander firm sustaining opportunities.

Procrastination and indecisiveness represent failures in leadership. Finding an alternative leader may be the best remedy for those two problems. But a lack of recognition can befuddle even the best leaders and changing out leadership is not usually the best solution. Rather, all law firms and their leaders can deal with the challenge of recognition by exercising a vigilant discipline designed to identify the advent of transitional events, developments or trends. To exercise the necessary vigilant discipline, a law firm leader should focus on four areas to heighten early recognition of potential transitional events.

Internal Performance. For any number of reasons, law firm leaders commonly pay attention to how the firm is performing internally. Tracking internal performance traditionally is used to aid in short-term decisions. But the same data and trends in that data should be viewed to forecast the potential for business altering events or developments.

Client Performance and Preferences. Without clients law firms can’t exist. Following the performance of clients and the trends they face provides a good barometer on how your firm may fare in the future. If clients are undergoing changes, your firm should be prepared to react-whether it means finding new clients or serving your existing clients’ needs in a different way. Moreover, clients’ demands or expectations may be changing. Today, reports are more common of corporate general counsel looking to other law firms on the basis of price.  It is imperative that those changes be recognized and, if appropriate, responded to.

Industry Trends. Following the initiatives of other law firms, especially your competitors, is always helpful. The “best practices” of the most successful firms can be very instructive. Even the strategies of less respected law firms can be useful to observe. From tracking the industry, a law firm leader will have greater context when thinking about his or her law firm’s performance and the steps needed to move it forward.

Industry Challenges. The industry is ever evolving and these days faces challenges from non traditional legal services providers, more efficient delivery systems and in some sectors, greater competition fomented in part by price wars and a glut of lawyers. Any leader wanting to direct his or her firm into the future will be fully aware of these current industry challenges while looking for others. Not all industry challenges require a response, but being aware of the surrounding world is critical to recognizing the advent of transition.

Telling a law firm leader that he or she needs to move develop a response when a transitional event is burgeoning is not all that helpful. It is more helpful that the leader exercise vigilant discipline so that the transitional event is recognized. Without adequate recognition, effective action in response is impossible. In your experience, are there other tools to assuring timely recognition?

 Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny. -Aristotle

 

In a recent post I suggested some of the unique characteristics associated with effective law firm leadership. Today, let’s look at the unique dilemma facing a law firm leader.

First of all, it should be noted that there is a clear correlation between the size and practice diversity of a law firm and the amount of time the leadership role demands of its Chief Executive (Managing Partner or Chairman). But regardless of size and complexity, all law firm leaders face the dilemma of how to balance the tension between their practice — serving clients and building client relationships — and the demands of being an effective leader. The further from retirement the leader is, the more their personal practice is at risk while serving as a firm leader.

Managing The Dilemma

Here are a few steps that can be taken to help manage this conflict between maintaining a personal practice and charting a course for a firm’s profitability and stability.

Role clarification

One of the biggest favors a partnership can do for its leadership – or, for that matter, the leader can do for himself/herself — is to establish clearly written objectives regarding the role and the expectations associated with it; to the extent the amount of time committed to the role will be limited, so should the expectations.

During role clarification, the prudent leader will use the process as an opportunity to introduce (if it isn’t already in place) the concept of strategic direction, and to set related goals for the firm.  These goals, in conjunction with specified actions and accompanying timeline, provide a basis for a reasonable assessment of the leader’s performance.

Leverage 

To balance the demands of serving the client with those of leading the firm, the law firm executive must assemble a talented team of professionals. This team will not only leverage the leader’s time; a professional team will improve operational efficiencies and leader inspired initiatives.

The leader’s team should include appropriate expertise in each of the firm’s critical operational areas (finance, technology, human resources, marketing, etc.) as well as each of the firm’s offices and legal practice disciplines.

Kevin McKeown, President of LexBlog, presents some interesting perspectives on the mindset changes necessary in many firms in order for the lawyer-leader to successfully navigate the shift in roles from lawyer to leader in this recent post.

Career change

The profession is changing, and changing fast.

One option, that would have been unheard of just a few years ago, is a career as a law firm Chief Executive. I expect that in the relatively near future we will begin to see law firm leader mobility similar to what we have seen for decades in other businesses. So, for the law firm leader who enjoys the unique challenges associated with the position, a new career field may well be on the horizon.

How are you and your firm managing the leader’s dilemma of client vs. firm work?

News about the search for a merger partner by Bingham McCutcheon has been in the media the past few weeks. If the search leads Bingham to the altar, its transaction likely will be among parties equally sophisticated and aware of the intricacies of law firm merger. After all, Bingham owes its current size to a series of mergers over the last decade or so. While its merger partner may have leverage due to Bingham’s current state, Bingham will hold its own in representing its interests in the arms length negotiations.

Not all law firms jumping into the merger game are as experienced as Bingham. Some larger law firms have extensive merger experience. Many times, smaller firms do not. In addition, when size disparity exists, the larger law firm may have a more intricate way of managing its operations, performance and strategic activity. For the smaller law firm, it is important that it understand the fundamental character of the larger law firm so that it can realistically assess the wisdom of the proposed merger and negotiate the best deal possible. Anything less risks irreversible change based on short-term excitement and infatuation.

There are many compatibility considerations-everything from culture, financial metrics, operations, clients and compensation systems to grasp and understand. For the small law firm being romanced by the large firm, it is also helpful to approach the discussions with these thoughts in mind:

Understand the Terminology. The older and larger a law firm, the more likely it will have a language of its own that describes some basic concepts. Sometimes the terminology seems unintelligible, sometimes it seems to make sense and on rare occasions it describes concepts that match perfectly. But don’t assume that familiar sounding terms have meaning to you. Unless you get behind all the nomenclature, you’ll be lost when it comes to understanding key components of the proposed transaction.

Determine How Other Merger Partners or Groups of Laterals Have Fared. In this day and age, a lot of the firms seeking to do a merger have been at it for a while. If so, dig deep into the firm’s track record of integration, post-merger success and failure. Bingham McCutcheon merged with Riordan & McKenzie in 2004 and by 2007 only 50 percent of the new additions from that firm remained. There has to be an explanation and whether it is good or bad it needs to be heard.

Delve Into the Firm Policies. No one would contemplate a merger without digging into the other firm’s constituent documents. But a lot of what gets done in a firm is contained in the firm’s policies. Many law firms use policies extensively as management tools-those tools can make day-to-day life starkly different from the happy talk heard during the courting stage. Read them and understand them-they tell you what your future may be like.

Understand the Firm’s Strategic Plan. If the firm has a strategic plan, read it to make sure the firm’s strategy and tactics are clear, but also read between the lines. Gaining a holistic understanding of a firm’s strategy can help determine if your acquisition fits within the larger firm’s plan. For example, if the larger firm’s strategy seeks to eliminate low margin practices, some of your smaller firm’s practices may not fit that well. If so, the larger firm’s discipline or post-merger plans have to be questioned. If your prospective merger partner doesn’t have a strategic plan or it is old, its commitment to management has to be questioned.

Get a Handle on Recent Financial Performance. No doubt your suitor is pouring over your data in an attempt to determine whether a merger will be a net benefit or burden. You should do the same and not assume that just because it is bigger it is financially stronger. You should also assess the value of your equity pre-merger and post-merger. How a delta in capital, and other financial disparities, is resolved may be the difference between doing the deal or not.

For the smaller firm involved in a law firm merger, getting it right is very important because a “do-over” is seldom available. What other key thoughts should a small law firm consider when facing the prospect of merger?

 

 

We cannot accomplish all that we need to do without working together. – Bill Richardson

A number of attributes define a great business. Being a great place to work is high on just about any list you’ll find.

Every year Fortune magazine publishes a report on the 100 greatest places to work in America. In 2014 six law firms made that list!

This is not a pay-to-play or I’ll-vote-for-you-if-you’ll-vote-for-me puff list. Fortune process for identifying its list of 100 is exhaustive. Last year, in conjunction with the Great Place to Work Institute, more than 250,000 employees were surveyed, representing more than 250 companies that applied for the recognition. The survey includes a combination of specific questions; a series of open-ended and essay type questions and an audit of each applicant’s culture.

The mere application for the honor reflects a unique orientation. To actually make the final 100 demonstrates a commitment to doing the things that make a company a healthy and desirable place to work.

The list includes some very familiar names like Google, Goldman Sacs and Edward Jones  and —-

Six Prestigious Law Firms

Almost every firm I know says it wants to be a collegial, enjoyable place to work. To this end, it is instructive to briefly review the six law firms honored with a position on the 2014 list.

1. Memphis based, Baker Donelson is chaired by Ben Adams, a guy that is often described as direct, unassuming and willing to go against conventional wisdom to advance the interests of his firm.  2014 was the 5th year his firm made Fortune’s list, placing 31st — the highest of any law firm.

Reflective of Baker Donelson’s commitment to its people is their Women’s Initiative. The firm notes that more than 50% of law school graduates are female; yet, fewer than 25% of law firm Equity Partners (Shareholders) are female and barely 11% of firm governing bodies are women. According to Christy Crider, head of Baker Donelson’s women’s initiative, the firm’s efforts to support women in the profession will continue until the percentages of women in leadership positions is consistent with the percentage of law school graduates.

2.  Atlanta based Alston & Bird, ranked 40th, making its 15th consecutive appearance on the list. Cathy Benton, Alston’s HR Director says that “the firm strives to create an environment where people can do their best and most productive work; a place people want to come every day…” This aspiration is supported by Fortune’s findings that more than 95% of the surveyed employees at Alston & Bird describe it as a “friendly” place to work. Not the adjective used to describe the majority of law firms.

Also of note, 90% of the respondents reported that the firm’s benefit package was special — even unique — and 83% said that the firm truly values a work-life balance. A unique law firm indeed.

 3. Perkins Coie, a Seattle based law firm received the top 100 award for the 12th consecutive year, finishing number 41 on the list in 2014. According to Managing Partner Robert Giles, “ We promote and are committed to an environment that emphasizes teamwork and valuing the contributions of every member of the firm.”

 The firm’s people-focus has yielded several awards reflective of their commitment, including:

-Gold Standard Certification from the Women in Law Empowerment Forum each of the last two years;

-Top Ten Family Friendly Firms, from the Yale Law Women’s group each of the last five years.

 4. Bingham McCuthchen was ranked number 60 on the list, being honored for the 10th consecutive year. The firm’s 2014 ranking is especially impressive, given the market challenges the firm has encountered over the last couple years. Even when facing market pressures, the commitment to be a great place to work has not faltered.

5. Arnold & Porter has also made the list 10 times, being ranked number 80 this year. Consistent with several of the winners, Arnold & Porter has made significant progress in addressing the needs and realities of their female work force. The firm has been named one of the 100 best companies to work for by Working Mother magazine.

6. And ranked number 100 — making the list for the fifth time is Cooley. According to Joe Conroy, the firm’s CEO, the firm’s culture fosters inclusiveness and creates an environment in which all of their people can grow personally and professionally.

Certainly these six firms are not the only great law firms to work for. Fortune’s list is limited to companies with 1,000 or more U. S. employees, so instantly many outstanding firms that strive to provide a great environment are eliminated from the discussion.

One thing that screams at me when reviewing these six firms is a real and serious commitment to the female work force. Women represent a large percentage of the law firm population, and these firms have made great strides in recognizing their unique needs.

Each of these is an outstanding, high-performing law firm. Each recruits extraordinary talent, wrestles with the same issues of a market in transition that every firm faces, and each represents an enviable list of clients.

And each one clearly believes there is measureable value in paying more than lip service to the ideal of being a great place to work. They are to be congratulated.

How would your personnel rate your law firm as a place to work?

The issue of succession planning at law firms has received the attention of commentators and I have written about it as well. Demographically, the need among law firms to address succession is mounting as the boomer generation ages. Because the number of firms facing succession issues increase with each passing year, planning at firms is now more important than ever.

Succession planning among firms is a mixed bag. Some firms are well prepared for succession. Those firms recognized the issue some time ago and have prepared for the eventual need to turn the reigns over to the next generation. Other firms have not had the requisite foresight or discipline. Sometimes lulled into a false sense of security by the continued vibrancy of their partner ranks, many firms have continued to focus on the day to day blocking and tackling instead of giving succession planning the attention it deserves. While the level of preparation at firms varies, at least five common mistakes are made in succession planning that every firm should seek to avoid, including:

Waiting Too Long. The press of business and attention to more immediate matters can distract a firm away from planning for succession. Waiting to a later date to plan is not a good idea. Succession issues can be complex, the personalities affected can be many and the time it requires to get it right can be great. Like waiting to the night before your spouse’s birthday to buy a present, leaving succession to the last minute can have lasting negative effect.

Failing to Prepare Leadership. A by-product of waiting too long is failing to develop leaders that can be integral to your firm’s future. Scouting future leadership is one thing, but developing your future leaders is as important as prospect identification. Inattention to development is bad for two reasons. One, your future leaders may have inadequate time to mature into readiness. Second, despite high hopes for the future “leader,” the development process may reveal that he or she is not up to the task. In instances in which your future “leader” is uninspiring, your firm will benefit if it still has time to think of alternatives, including looking for leadership laterally or by merger.

Failing to Make Succession Part of a Larger Strategic Plan. A succession plan should not stand alone-it should be part of an overall strategic plan. Simply changing out leadership without knowing where the firm is going long-term will be inadequate. Installing new leadership due to the existence of a succession plan is helpful, but if he or she does not have a strategic plan to follow your firm may end up resembling a game of Pong-back and forth, back and forth.

Overlooking the Impact on Morale. A well-planned and transparent succession will be far more comforting to firm personnel than a succession cobbled together when a succession crisis arises. Discussing the upcoming succession and the future of the firm will instill confidence in the firm and its management. Forgetting about how the rank and file feels can undermine morale and make an otherwise smart transition plan problematic. Good communication is critical in any succession plan.

Failing to Prepare Clients. At the end of the day, law firms don’t exist if they don’t have clients. A smart succession plan realizes that clients can be concerned about the stability of its law firm and deals with that concern by keeping the client informed about succession. A personal visit to key clients is not only important for the purpose of keeping the client informed, but making the pilgrimage shows the client that it is valued and important. There are worse things to do.

When your firm handled its succession, did it face obstacles or issues that it wishes it had handled differently?

 

 

A genuine leader is not a searcher for consensus but a molder of consensus. Martin Luther King, Jr.

Today there will be reams written and distributed on the idea of leadership. Characteristics, success factors, how to become one, how to identify one – you can find scores of articles on multiple facets of the topic.

And tomorrow it will begin again.

It would be difficult to find any disagreement that one of the greatest factors in determining whether an enterprise succeeds or fails is the quality of its leadership.

Does anyone believe that leadership isn’t critical to a law firm’s success?

Yet, I would suggest that today’s law firm leader faces a number of challenges that are unique to our industry; and punctuated, if not exaggerated by the transitional nature of the marketplace.

Four Monster Challenges Faced By Law Firm Leaders

Challenge 1: Career risk. Quality leadership demands quality time. And for the law firm leader, every moment spent on the firm equates to time away from serving clients and generating new relationships. The “personal business” of the effective law firm leader often shrinks over time. For all but those approaching the end of their career, this makes accepting a leadership position a risky proposition.

Challenge 2: Limited Experience. The leader in other business environments typically follows some type of leaders career path – often gaining experience in a fairly low-level management position. Over time, effective leaders work their way through positions with increasing responsibility.

By contrast, law firm leaders often acquire their first significant management or leadership role when chosen as a practice leader, or the Chair/Managing Partner of the firm. And while experience is a great teacher, so much of learning is the by-product of mistakes, trial and error. This on-the-job-training creates a risky reality for both firm and leader.

Challenge 3: Disparate Goals and Agendas. Most business organizations are built around a primary product or service. The vast majority of law firms are structured around multiple and diverse practices, serving different markets and market segments. This diversity of service is accompanied by goals and agendas as disparate as the individual partners and their respective practices.

This variety can enrich cultural fabric; but it also makes it difficult to develop consensus around strategic direction and resource allocation. And this absence of alignment robs the organization of its best chance to succeed.

Challenge 4: Lack of Appreciation For The Leaders Role. The three things most valued in a law firms are usually:

  • Origination of new client relationships;
  • Expansion of existing relationships; and,
  • The production of billable time.

Leadership and its skills are simply not on the list of contributions most valued by the typical law partnership. It is, begrudgingly, viewed as necessary; but rarely endowed with the level of appreciation – therefore, support – that facilitates consensus and the decisive assault on a strategic path that foreshadows success.

The opposite is true in most other business enterprises. If you doubt this, take a look at levels of CEO compensation.

What to do?

The smart partnership understands that our industry is in the midst of high-consequence change, and that highly effective leadership is critical to navigating the transition. Great firms invest in the development of leadership skills, and provide significant compensation recognition for those willing to effectively serve.

The prudent law firm leader will seek compensation and career assurance as part of agreeing to serve.  Seeking ongoing opportunities to learn and improve are pivotal to development. And a clear, fair time-frame for transitioning back to a full-time practice is essential. Far too many law firm leaders have found themselves replaced with a new leader during tough times and are without a practice to fall back on.

 

How does your firm value leadership? What does it do to protect the leader’s transition back to a full-time practice?

 

Every year law firms of all sizes merge. For some of the smaller law firms merging, the decision to combine may have been driven by the need for an effective succession plan. In these cases in which long-time management is unenthused about the prospect of turning the keys over the next generation, merger can be pursued in lieu of the more traditional internal succession.

From the point of deciding to seek a succession plan merger to getting to the closing table, a lot of things must happen. Indeed, care is essential in any merger but especially when a succession plan merger is pursued. Mistakes along the way can make the plan impossible to achieve or result in the options available being less than desired. An undisciplined approach may yield no merger while leaving the firm weakened. To maximize the outcome in a succession plan merger strategy, there are at least five key considerations.

Establish Your Objectives.   As in any major transaction, a clear set of objectives should be established at the outset. If the succession plan merger is primarily designed to wrap up the smaller law firm’s affairs with dignity, then the approach will be far different than for mergers designed to “cash out” or to leverage the combination into the next achievement for a law firm steeped in a history of success. But if the objectives are not well understood from the beginning, pursuit of a merger will not only be haphazard but also potentially ineffective, or worse yet, harmful.

Objectively Assess Your Attractiveness.   Nothing can waste more time than being unrealistic about your firm’s attractiveness. Conversely, nothing will be more disappointing than to realize that your merger strategy undersold your value. To avoid missing the mark, hire an advisor experienced in law firm mergers that will provide an unbiased assessment of your place in the market. If the advisor concludes that no market exists for your firm, you clearly would want to know in order to avoid pursuing a fool’s errand. If a market exists, geography, legal strengths or specialties, size, financial performance and personnel will be relevant factors to developing a strategy.

Make Your Firm Look Good.   Many times, a home sells more quickly and at a higher price if it is “staged” to look more attractive. The same can be true if proposing to enter the merger market. Deferred maintenance needs to be remedied, lingering problems need to be addressed and contingent liabilities need to be resolved or at least contained. Presenting your firm in the best possible light, with professional assistance, can be very helpful to optimizing your results.

Develop a “Sale” Strategy. Law firms are best marketed discretely and without being on the market for too long. For that reason, it is essential that your advisor develop a strategy that presents your firm to good candidates without shoving a “for sale by owner” sign in the front yard. An indiscriminate blanket approach to marketing your law firm can be counter-productive. And a law firm marketed for too long will become market worn and perceived as rejected by the market.

Communicate Internally. The fact that your firm is seeking a merger partner should be closely contained. But because word has a way of leaking out, it is essential that an internal communication plan exist. A plan serves at least two objectives. First, it keeps key law firm contributors on board and minimizes their premature departures. Second, it can build support for the merger. But because pursuit of a succession plan merger is based on the conclusion that an internal succession plan is not desirable, any communication plan needs to be carefully developed.

A succession plan merger can be a useful strategy for law firms of the boomer generation. Pursuing that strategy requires care and commitment. Has your firm considered a merger as a way to address its succession issues?