on March 31, 2016
Posted in Law Firm Crisis, Law Firm Growth, Law Firm Leadership, Law Firm Repositioning/Turnaround/Restructuring
It has become an all too
frequent occurrence — the story of yet another law firm closing its doors. The
headlines rarely convey everything — displaced personnel, inconvenienced
clients, and the pain and disruption for the firm’s owners.
What drives this result? How
has this become almost commonplace?
I believe any one of five
things can lead to crisis within a law firm. Execute two or three — certainly
all five — failure is virtually assured.
·
Spend
indiscriminately
·
Borrow to
pay partners
·
Recruit, associate with (and
pander to) partners because of the size of their practice
·
Grow simply because you
believe bigger is better
·
Assume successful partners
equate to effective leaders
If you want to avoid these
missteps, consider seriously addressing each issue. Here’s how.
1. Make
commitments/incur cost at a modest and sustainable level.
There is an almost
unexplainable inclination to lease more space than necessary
in expensive office buildings, and to add permanent personnel in advance of an
assured level of client work. Be slow to make long-term commitments on space
and to people.
2. Live within your means.
Duh. Every single one of us
knows this. Yet, bank loans and lines of credit have become the norm for
today’s law firms. If you’re using a line of credit to pay partners before the
profits have been earned, you have embarked upon a proverbial slippery slope. Surviving the ride depends on taking
some quick action.
3. Associate
with those who share your values and aspirations.
Maybe the most under
appreciated aspect of building a successful law firm is affiliation with those
who share a common set of values and aspirations.
Today, a huge factor in
deciding whether or not to add a new partner to a law firm is the size of that
lawyers practice. There is no institutional glue associated with a large
practice. When tough times come (and they always do) practicing with people
that are trying to get where you are trying to get and who have a similar
perspective on what is important along the way will help get you through to
better times.
4. Grow prudently
The days of adding lawyers and
their capabilities to serve the needs of existing clients has largely gone by
the wayside. The new norm is to add lawyers (one at a time or through mergers)
because they are willing to come — and the apparent belief that being
bigger makes us better There are countless studies that indicate that
half of law firm mergers fail to deliver the expected benefits, and the results
of lateral hiring aren’t any better. The bigger is better theory is
significantly flawed. Pursue it at great peril.
5. Develop leadership capabilities
The skills necessary to become
a great leader are developed over time, through a combination of reading,
educational programs, mentoring, affiliating with other leaders and through the
fires of experience. Rainmakers are not necessarily good leaders. Strong
personalities are not necessarily indicative of great decision making skills.
The prudent lawyer that seeks to improve their firm’s future will invest in the development
of firm leaders. It doesn’t matter if you are in a one or one thousand
lawyer firm the message is the same — leaders are made through hard work and
the honing of those skills essential to decision making, consensus building,
compromise, collaboration, and listening. Leaders skilled in these areas have a
shot at leading long-term success.
Is your firm taking steps
leading to success or failure?
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