When a law firm is challenged by departures, loss of clients, a reduction in business, litigation or other adverse developments, it is troubled. The challenges may not place the firm in dire circumstances, but its situation requires a thoughtful examination of where it finds itself. If justified by the self-assessment, the firm may be spurned into adopting an action plan to deal with the causes of its trouble. If it does little or nothing in the face of that assessment, it likely will see things get worse before they get better.

With any signs of trouble or stress appearing, management can count on five truths. Their presence does not necessarily represent the advent of crisis or command management to take specific forms of action. Rather, these five truths should be viewed as givens that frame the environment where the troubled law firm resides. The Truths:

More Vulnerable. A firm in trouble is more vulnerable to further adversity just as a child with a cold is more likely to get sick. Such a firm is weaker and it needs to respond quickly to any developments, even ones that might have evoked little concern during better times. Because of the added vulnerability, management must develop a greater sense of awareness and sensitivity to change that may be taking place.

Less Control. Clearly, when any company is in full-fledged distress, its ability to control its destiny is compromised. A firm not yet in distress can still be in trouble. As trouble begins to surface the degree of control maintained by the firm over its situation will lessen as the trouble grows in severity.  A sliding scale begins to take hold, meaning that as reason for concern grows, control begins to slide away.

Less Time. Anytime problems begin to afflict a law firm, it becomes important that issues be evaluated, understood and addressed as quickly as possible. The luxury of deferring issue resolution to later is usually not available. Because less time exists, procrastination cannot be tolerated.

Less Do-Overs. One aspect of a law firm being in trouble is that action plans adopted to resolve the problem must be right the first time. Typically there is little opportunity to try something out to see if it works and then come back when it doesn’t and try something new. Careful analysis of the issues and development of a sound strategy is far better than shooting from the hip because of the pressure to “do something.”

Bad News Spreads Like a Forest Fire. When law firm management begins to see signs of trouble, it will not be too long after that when the rank and file begins to sense something is amiss. If bad news or unfounded rumors surface, they will spread like a wind blown forest fire-even if the news that is spread is not completely true or fair.  Communicating clearly and precisely is important to dealing with adverse news and rumor.  And good communication skills are essential to establishing credibility. Silence, or missteps in communication, can allow bad news to go unchecked and can destroy credibility.

Do you see other Truths that are present when a law firm is in trouble?

Disruption in the legal services market presents challenges to many law firms. Most firms are able to adjust when unplanned developments or market pressures adversely upset operations or performance. Recent news reports about a couple of law firm management initiatives reaffirm the ability of most firms to react to market changes on a timely basis. From time to time, however, the unexpected events take on greater significance and amount to a crisis. Meeting that crisis, and managing through it, is critical. For many managing partners, especially ones that only have managed in their firms’ “good times,” they inevitably ask: “what do I do now?”

No law firm crisis is like another. Crisis can take the form of financial stress, personnel issues (like unwanted departures), the loss of a leader without a succession plan in place, bad publicity, the on-set of significant litigation or political infighting. Responding to crisis requires action tailored to meet the particular threat. But in any response, these five fundamentals should guide a managing partner:

Demonstrate Calm and Resolve. Even though you may be awash in shifting currents, it is imperative that you act like the duck motoring around on the pond-calm on the surface while treading vigorously beneath. While showing calm, a leader must not only be resolute in addressing the crisis, but must convey that sense to all that will be watching. Calm and resolute leadership is vital and if displayed with strength, can be infectious.

Assess the Nature of the Crisis and its Depth. Being calm and committed only goes so far. An immediate assessment regarding the crisis, its nature and depth, is a must. Performing this assessment sequestered in a bunker is highly unlikely to provide an adequate understanding of the true nature and depth of the crisis. It also sends the absolute wrong message. Reaching out to as large a cross-section of the firm for data, information and mood is far more likely to deliver the intelligence needed to avert the crisis.

Stabilize the Firm. Without delay, the managing partner must take steps to stabilize the firm–in other words, remove some uncertainty and quell turmoil. The stabilizing steps will depend on the nature of the crisis, but will provide the firm with the critically needed opportunity to back away from the abyss to collect and compose itself.

Show An Understanding of the Issue and Have a Solution. At some point, usually not too long after the crisis arises, the firm will look to management for a substantive solution. If one is not articulated in a timely fashion, the loss of support from the rank and file likely is imminent and can doom the firm. For that reason, leadership must quickly present its clear understanding of the issues presented and the strategy for their resolution. If an understanding of the issue is not expressed contemporaneously with the proposed solution, the recovery strategy will not be credible and an opportunity to lead the firm out of crisis may be lost.

Regain Momentum with Some Quick Victories. Nothing breeds success like success. To counter the negativity created by crisis, leadership should correct with quick and cognizable solutions some unresolved issues that have lingered for too long. Pick low hanging fruit to create small victories. Victories of any size, as long as they are visible, can build momentum or at least arrest a downward slide occasioned by the crisis. Positive momentum is always a morale booster and can help grow the belief that the firm’s future is bright-or is at least brighter.

When crisis erupts, these five fundamentals can help forge a response that addresses uncertainty and angst—leading to the building of a healthier firm. Have you found some “go to” steps that have proved useful when facing crisis in the past?

In last week’s blog, we reviewed the dire circumstances faced by Kaye Scholer and Jenkens and Gilchrist that rendered the short-term survival of each questionable. Against significant odds, each resolved apparently unmanageable claims. But how? For both firms, the ability to face daunting claims yet live to another day is attributable to five key factors. In both cases:

Great Leadership Stepped Up.  At Kaye Scholer, a highly regarded lawyer stepped forward with a solution that rejected the wisdom of a long-term fight with the government.  As tough as that may have been for Kaye Scholer to forego clearing its good name, the solution placed greater priority on a fight for survival instead of a fight over the merits. Jenkens’ crisis lasted years, but it endured the slow drip-drip-drip of client claims through guidance from a steadfast leader universally respected for his honesty, candor and fairness. Notably, in both cases neither leader was the architect of the circumstances that created the crisis.

A Strong Culture Existed. In time of crisis, great leadership qualities are wasted if the rank and file are unwilling to follow. Kaye Scholer’s solid foundation came from decades of lawyering together. The lawyers that defined the firm’s culture strove to save what had taken years to build. Likewise for Jenkens. Although it had grown dramatically in the years prior to the advent of the crisis, it retained a core of like-minded professionals that were loathe to see their firm slip away.

A Good Plan Was Created. In both firms, leadership developed a plan for dealing with crisis and implemented it immediately. Kaye Scholer’s plan focused on removing the asset freeze. Once the freeze was lifted, the firm was able to function. Further, by resolving its issues with the government, it put behind it the controversy that had threatened its existence.  In Jenkens’ case, however, its plan could not quickly resolve its crisis and involved an extended implementation period. The plan to settle with its former clients through a class action settlement required a commitment to stay on-task over a long period of time. But because the solution was something that the owners and employees could believe in, the time needed to implement the plan was bought.

All Relevant News, Good or Bad, Was Shared. The Kaye Scholer crisis was dealt with promptly.  The quick resolution of the crisis allowed the delivery of welcome news that the firm’s assets were unfrozen.  Not only did that news relieve tensions-it allowed payroll to be paid and benefits honored. Jenkens’ crisis lasted over an extended period of time and necessitated dealing with a long-running ebb and flow of good and bad news.  It realized that while good news was far preferable to bad news, the absence of any news could be as problematic as bad news. Its commitment to keeping its people informed, even when there was nothing to report, smoothed out the peaks and valleys and maintained an even keel of emotions.

Hope Was Created. The combination of leadership stepping forward, having plans and communicating constantly, set in the back drop of a solid cultures, were key to overcoming crisis.  These steps gave the owners and the employees a sense of hope for the future. Instilling a feeling that the crisis would pass and a return to normalcy was possible paid huge dividends.

Other “survivor stories” undoubtedly exist. What factors were critical in causing those firms to survive a crisis created by a catastrophic claim?”

This article won the BigLaw Pick of the Week award.  The editors of BigLaw, a free weekly email newsletter for those who work in midsize and large law firms, give this award to one article every week that they feel is a must-read for this audience.