Posted by: johnocunningham | April 12, 2016

What Will Bring Your Law Firm Down?

Legal consulting firm, Altman Weil, just published a short article on “Existential Threats to Law Firms,” suggesting that the greatest threats to law firm survival are most commonly:

  • Long-term bank debt
  • Expiring leases
  • Unfunded retirement obligations
  • Guarantees to lateral partners  and
  • Lack of leadership succession planning.

I think we could sum up four of those five bullets this way: “Don’t over-borrow, overspend or lose your office lease.” That seems pretty obvious to me.

But there are plenty of other dangers that are more subtle, and harder to quantify, but just as real. In my own observations of firms that have fallen in recent decades, I would add the following existential dangers to my list:

  • Lack of cohesive cultural values and common goals (which leads to poor retention at all levels)
  • Lack of training and development of younger lawyers (which leads to not only poor associate retention, but eventually poor lawyering and poor client retention)
  • Rapid growth through mergers without adequate planning, infrastructure accommodations and cultural integration (look at all the firms that grew too fast and then crumbled overnight)
  • A bad senior management team driven more by ego than forward-looking vision (which coincidentally causes the demise of many business clients too)
  • Too many 800-lb gorillas (this was a danger highlighted for me by a hugely successful managing partner who turned around a flailing firm)
  • Failure to adapt to changing client demands and keep pace with competitors (I think we can all recall some firms that tried to live off of their reputation while going stale)

The fact is that law firms, like it or not, are both professional entities and business operations. Just like commercial businesses, they need to consider and act upon the advice of experts in business management, process improvement, marketing, technology, finance and other disciplines to survive. Those that are incorporating other critical disciplines into their culture and operations are generally thriving. Those that are failing to do so, or failing to do so adequately, are the walking dead.

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