As law firms (and businesses generally) confront the growing financial challenges associated with the Covid-19 crisis, a plan for an escalating response is necessary. The appropriate answer for a particular law firm will depend on its current and projected condition and its culture, but consider the following as you develop your plan.

Government assistance – If you haven’t already, consider one of the assistance programs available through the federal government, including the SBA.

Banker – Engage your firm’s banker in a dialogue regarding your credit facilities and the potential for expanding them.

Vendors – The entire business supply chain needs to work together to weather this economic threat. Proactive discussions with firm vendors can provide relief as everyone concerned works toward getting to the other side.

Bonuses and distributions – Most personal budgets are structured around a regular paycheck. Develop a plan that protects the regularity of this cash flow, while deferring bonuses and other distributions.

Temporary compensation reductions – As the threat to jobs and even firm viability grows, temporary compensation reductions should be considered. How to balance potential cuts across a diverse pay scale will depend significantly on firm culture.

Infusion of capital – As external funding sources are depleted, and other cost reductions fall short of providing needed relief, firm owners in highly stable organizations may consider additional capital contributions.

Voluntary LOA – Some individuals can afford and would prefer a “break” from the demands of their careers. Soliciting optional leaves can be a source of additional cost reduction.

Forced reduced schedules – As conditions worsen, forced reduced schedules and compensation can be considered.

RIF – Permanent reductions in personnel are painful but necessary steps to take for firms running out of options for firm survival.

Informal restructuring – When it appears that none of the above will yield sufficient relief, the firm’s creditors (banks, landlords, and others) should be approached with a plan to restructure the firm’s obligations as a means of avoiding a formal (bankruptcy) restructuring.

Formal restructuring – Finally, when all else appears to be ineffective, a firm can consider a restructuring through the bankruptcy courts.

Liquidation – If it is determined that the firm is not likely to survive, a plan for liquidation should be adopted to minimize the disruption to individuals and clients.

If these thoughts prompt interest in additional discussion, we are offering private, confidential, and free 30-minute discussion sessions from 3:00-5:00 (CST) Tuesdays and Thursdays. To reserve a slot, send an email to either of the below:

RHayse@HayseLLC.Com or

AJillson@HayseLLC.Com

To read more on leading through law firm crisis, visit ManagingLawFirmTransition.com.

Covid-19 and its implications for law firm stability is being experienced industry-wide.  The fallout has many firms in full-on crisis.  Reduced draws, layoffs or furloughs, expense reduction, stimulus loans have become an all too common part of the survival mix.  Resorting to these tools can help little if strong leadership fails to rise to the challenge.

Law firms are people centric organizations that rely on attorney performance and loyalty to succeed.  Keeping a firm’s people focused on their work and believing in the future is an important goal at any time, but especially when crisis abounds.  Morale becomes critical if a firm’s rank and file are to believe all will be well and a path to normalcy exists.  A firm leader that not only frequently explains the plan but shows the resolve to make it work can greatly boost morale.  Simply put, a leader in crisis must be visible.

Holing up in your management bunker directing the firm’s response is the antithesis of leadership visibility.  While focus on the crisis plan is fundamental, remaining shuttered is unhelpful.  Attention to the task must be coupled with frequent and visibility centric communications to the troops.  In this time of Covid-19 and forced isolation, things like video conferencing provides essential visibility and allows leadership to impart its message.

Visibility does a number of positive things.  First, it demonstrates a leader’s confidence.  Only confident leaders’ step into the lion’s den.  Second, a confident leader instills confidence in others.  Confidence is contagious.  Third, with visibility comes interaction and information.  Facts learned allows leadership’s time-sensitive adjustments to the crisis plan.

Under any circumstance, solving law firm crisis requires leadership’s visibility.  Law firms functioning remotely are no exception.

If these thoughts on communication in crisis prompts additional thinking, don’t hesitate to reach out to us for a brief no obligation conversation at either:

ajillson@haysellc.com  or

rhayse@haysellc.com

During periods of crisis and economic uncertainty, the old saying “cash is king” is the appropriate mantra for most businesses. Maintaining the liquidity necessary to stay in business is now job #1 for law firm leaders.

To say that the economic fallout associated with Covid-19 is causing a decrease in cash inflow is an enormous understatement. In some cases, it is due to a fall-off in client/customer demand; in others it is driven by client decisions to purposely slow payments to protect their own cash position.

No matter the reason for decreased revenue, a firm must plan an appropriate response. While specifics will naturally vary depending on the severity of revenue decline, the following framework can help you approach the challenge.

We recommend firms create a simple net cash flow model using varying degrees and multiple durations of revenue decline. For example:

  • Begin by forecasting a 10% decline in revenue for each of the next 3 months;
  • Next, determine the steps necessary to manage cash balances for this period under these conditions;
  • Next, substitute a 20% decline or a longer duration for each scenario, and develop detailed responses that allow the firm to survive in each case.

Now is the time to determine your response in the event of cash flow challenges. Don’t wait until the problem is upon you. Advance planning allows for better planning, better communication, better buy-in and a greater probability of survival.

If these thoughts prompt interest in additional discussion, we are offering private, confidential and free 30-minute discussion sessions. In order to manage client time demands and requests for these sessions we are limiting them to time slots from 3:00-5:00 PM (CST) on Tuesdays and Thursdays. To reserve a slot send an email to either of the below:

RHayse@HayseLLC.Com or

AJillson@HayseLLC.Com

To read more on leading through law firm crisis, visit ManagingLawFirmTransition.com.

 

The Coronavirus is causing broad-based law firm disruption.  Reports of law firms reducing draws, decreasing salaries, furloughing or laying off of lawyers and staff, and modifying summer associate programs appear daily.  Besides creating concern for health and well-being, the pandemic presents real and substantial challenges for law firms.  All firms will feel it, and some will struggle for their existence.

Overcoming crisis in a law firm is a time for leadership.  When we consider leadership, we often associate it with a single individual.  Washington, Lincoln, FDR and Churchill evoke thoughts about big lives in big moments.  But these legends did not succeed alone.  Other people helped.  In law firm crisis, the same should be true.

Great leadership in a time of law firm crisis draws upon other talented people to protect and preserve the firm.  Tapping others to help is prudent because crisis can be all consuming, far too much for a single person to handle alone.  Besides helping avoid “too little time for too much to do,” creating a team to tackle crisis allows a firm to draw on diverse talents necessary to solving a crisis.  Creating a crisis team allows a law firm leader to avoid being overwhelmed and direct needed skills to critical tasks.

Expanding the crisis team helps in another way.  With added involvement, the task of getting “buy-in” to a survival strategy is easier.  If more people have ownership in the solution, it is more likely that the firm can count on their support and commitment to sell others on the chosen path forward.

In crisis, a talented team can help leadership succeed.

If these thoughts on leadership in crisis prompts additional thinking, don’t hesitate to reach out to us for a brief no obligation conversation at either:

ajillson@haysellc.com  or

rhayse@haysellc.com

To read more on leading through law firm crisis, visit ManagingLawFirmTransition.com.

The phrase “extraordinary times” is an understatement when it comes to describing these days as each of us is forced to focus on new ways to achieve personal and business survival. As law firms attempt to envision a path through this crisis, a new working relationship with vendors should be considered as part of the solution.

When thinking about communicating with your vendors, there are two general approaches our clients are taking.

  • Some are proactively starting conversations, discussing if and to what extent vendors are willing to cooperate with a program that defers some or all payments.
  • Others are merely submitting reduced payments with a statement describing the firm’s intent to catch-up.

The approach taken is based, in part, on the firm’s projected liquidity challenges, and on a vendor by vendor basis.

A vendor or creditor that deserves special attention is the firm’s banker. We recommend a face-to-face visit (these days this means Zoom, Skype or some video conferencing platform). Not only is your banker a potential source of additional funding, but they typically have some form of a security interest in firm assets. Best to engage your banker early in a dialogue around where you are, how the future looks, and how you can work together to ensure a profitable long-term relationship.

For those interested in a conversation about leading during crisis, we’re providing a no-cost 30-minute consultations as long as our schedules permit. Send us a note to either email address below:

Roger Hayse – Rhayse@HayseLLC.Com or

Andrew Jillson – Ajillson@HayseLLC.Com

For more of what we have written on this topic click here.

Stay safe!

A law firm in crisis is in a different world—a world in which leadership must learn to adapt.  It is a place that requires thinking differently, acting decisively, and making choices count.  In battling crisis mistakes inevitably happen, but successful crisis leaders keep the number and magnitude small.  A law firm leader flexes brain muscles not recently used or never known to exist.

Leading in crisis fundamentally requires two things.  First, a capable crisis leader immediately determines the roots of the problem.  Not uncommonly, the crux of the problem is not limited to one issue.  Multiple setbacks may have occurred, whether all at once or sequentially, to upend business as usual.  A good crisis leader is not fooled by tangential oddities, irrelevant anomalies or fixated on global causes.  Rather, a good crisis leader eliminates the noise and focuses on the fundamental business problem(s) that turn the firm’s practice on its head.

Second, once the problem is diagnosed, the next step is finding a solution.  By understanding the challenge, a leader can identify a fix.  A misdiagnosed culprit can lead to an ineffectual remedy and compound the crisis.  Turning to others in the law firm’s orbit when crafting a strategy can help. Feedback, perspectives and ideas from colleagues can avert leader tunnel vision, contribute to a holistic solution and widen recovery strategy buy-in.

Identifying the problem and creating a plan to solve it are high priority duties for a law firm leader facing crisis. Bypassing these two critical steps can doom a law firm confronting crisis.

If these thoughts on leadership in crisis prompts additional thinking, don’t hesitate to reach out to us for a brief no obligation conversation at either:

ajillson@haysellc.com  or

rhayse@haysellc.com

To read more on law firm leadership in crisis or the fundamentals of confronting crisis, visit our blogsite Managing Law Firm Transition at law firm leadership or confronting crisis.

The vast majority of law firms are already or in the throes of or are about to experience a marked decrease in revenue, whether to closed courts, stalled transactions, or simply because clients are pulling back and paying more slowly.

For a very small minority of law firms declining cash balances aren’t a problem thanks to a strong contributed capital position. But, these are few, and far between.

For everyone else, improving the cash position will be necessary to weather this storm. To strengthen liquidity, we recommend the following six steps:

  1. Establish a rolling 60-day cash forecast and monitor performance to it every day.
  2. Evaluate existing credit facilities to determine what funding is available to you.
  3. Initiate conversations with your bank related to increasing or extending credit.
  4. Determine what if any funding will be available to the firm from the government’s stimulus package.
  5. Slow vendor payment in all possible cases and contact major vendors (landlords) to gain their support for partial payment deferrals.
  6. Immediately consider decreasing the level of partner (shareholder) draws.

In our experience, there are strategic processes and conversations around each of these ideas that will accelerate solutions which will ease pressure, reduce stress, and help provide stability. And we are committed to providing help.

If you would like to explore your best options, we’re providing a no-cost 30-minute consultations for as long as our schedules permit. Send us a note to either email address below, and we will respond as soon as we can.

Roger Hayse – Rhayse@HayseLLC.Com or

Andrew Jillson – Ajillson@HayseLLC.Com

For more of what we have written on this topic click here.

Stay safe!

 

Thoughts on Navigating a Law Firm (Coronavirus) Crisis – continued.

Experience tells us that crisis in law firms can happen fast.  Once presented, its consequences can race past leadership’s ability to effectively respond and leave a firm reeling.  Whereas crisis traditionally caused by lawyer departure, client loss or revenue decline has often been predictable or foreseeable, today’s law firm crisis by pandemic was, for the most part, unexpected.  Whatever its genesis, to overcome crisis leadership must communicate clearly and credibly.

Communicating in crisis must be prompt but also thoughtful.  Finding a quick solution to crisis is critically important but a “ready, shoot, aim” approach to navigating a firm’s way out will almost always prove harmful.  A firm’s people will rely on every word said so creating a sound solution first before deeply substantive messaging is essential.  If a plan has not yet gelled, a communication that says a comprehensive plan is in the works is better than touting a half-baked plan that subsequently falls apart.  Crisis seldom allows for “do-overs.”

Once deciding on a solution, telling and selling the path back to stability must be consistent and believable.  Disparate messages delivered by uncertain and confused spokespersons will do more harm than good.  It will destroy leadership’s credibility.  And, because credibility is so vital in crisis, nothing is more important than consistent and truthful messaging.

The breadth of law firms experiencing crisis due to the coronavirus is, by every measure, unprecedented.  For firms feeling the pandemic’s impact, beating crisis presents a multi-level challenge.  In meeting that challenge, the role of communication should not be overlooked.  It is enormously important.

If these thoughts on communication in crisis prompts additional thinking, don’t hesitate to reach out to us for a brief no obligation conversation at either:

ajillson@haysellc.com  or

rhayse@haysellc.com

These are exceptional times for all of law firms. Staying safe and assuring good health is of paramount concern.  But for all but a few firms, these times also will test leadership as it seeks firm stability in uncharted waters.

In crisis,  leadership must  be seen and heard,  manage cash flow/liquidity prudently, and confront tough personnel decisions. The soon to be passed stimulus bill could be  of substantial value to  law firms fighting to survive.

For the last 15 years, our firm has served law firms in transition, in many cases firms facing crisis. In a series of perspectives to be published until normalcy returns, we will share our experience, provide guidance and give direction.

Our series  will address:

  • Leading a Law Firm During Crisis
  • Managing Law Firm Liquidity
  • Communicating During Crisis
  • The 2020 Stimulus Package and its Role in Law Firm Survival

Our insights will be  available widely, including through our blogsite, website, Twitter and Linkedin. You can guarantee receipt of the series  by registering here.

If our perspectives stimulate your thinking further or raise questions, don’t hesitate to contact us for a free 30 minute conversation at either:

Roger Hayse – Rhayse@HayseLLC.Com or

Andrew Jillson – Ajillson@HayseLLC.Com

Stay safe!

Recent years have been good for law firms of all kinds and sizes.  But good days can’t last forever.  Whether the next downturn hurting law firms gets traced to a world-wide virus, political disruption, or just a plain old recession, it doesn’t really matter. What matters for law firms having to ride the looming bumpy road is whether they can respond when the inevitable downturn hits.

In any downturn cycle, there are law firms that are winners, survivors and, unfortunately, losers.  Where your law firm ultimately finds itself in that spectrum does not reflect on its innate goodness, quality of work, or dedication to the finest tenets of the profession.  Rather, winners, survivors and losers experience different consequences because they are positioned for a path not anticipated.  Making that path a favorable one depends not just on their existing profiles, but also on the way they prepare those profiles for an uncertain future.

Based on past experiences, five things will play a big part in deciding your firm’s fate:

Financial Strength.     The foundation for surviving any downturn is financial strength.  A firm whose current success is built on strong financial principles, solid attorney productivity, and reward systems that motivate positive performance should do well in good times, but also in a downturn.  Conversely, a firm whose financial strength is based more on recent infusions of talent through lateral hires or mergers may be less strong than seemed.  Because financial strength is so important in any recession, understanding your firm’s financial ecosystem is critical.

Operational Flexibility.          In any downturn, cash flow can become constricted, so preserving liquidity by eliminating discretionary items, unproductive people, and excess real estate can be important.  While cutting back on some of these items can be achievable to a degree, paring back on long-term liabilities like real estate leases may prove more challenging.  This can be particularly true for a firm that has recently grown with the addition of multiple offices and the incurrence of long-term obligations.  For the firm facing potential inadequate operational flexibility, a review of its long-term commitments is an important first step.

Culture.           As the Great Recession showed, firms that survived owed no small thanks to solid and cohesive cultures in which key contributors stayed calm by taking long-term views.  Shaky cultures, especially ones built primarily on compensation or aggressive growth, heightened the risk of failure.  When challenges arise in the next recession, will your firm’s culture stimulate votes in favor of firm or self?  Assessing the kind of culture present at your firm is useful when thinking about the next downturn.

Leadership.     Steady and experienced leadership is an important element to surviving a downturn.  Does your firm have respected and trusted leaders who have exhibited sound judgment?  Or are your leadership young, inexperienced and/or untested in crisis?  The profile of your firm’s leadership says a lot about how it may fare in the next recession.  Working with green leadership today to build experience, demonstrate sound judgment and instill trust and confidence is an important step before crisis erupts.

Preparation.   No matter how your firm’s financial strength, operational flexibility, culture or leadership stack up, preparing now while things are good is critical for conquering the next recession.  Because there is always room to improve, shoring up these four elements is essential while other eyes at the firm remain fixed on the good times.  By preparing now, it will be far easier to confront recession when it comes.

Where your firm sits today and where leadership takes it prior to the next downturn will help decide your firm’s future. Firms whose profiles are suspect and not improved prior to the next recession have a future directed towards struggle if not disaster.  Other firms, blessed with solid profiles or vigilant about improving them, likely will not only survive but may be positioned for opportunity.  As you enjoy your current success, have you thought about where on the spectrum your firm will fall in the next recession?