Law Firm Survival and Succession Planning – 3 Steps

Succession and succession planning are hot topics in the legal profession. One statistic explains the focus on the topic – only about 30% of law firms make it beyond the first generation.
Why Do So Many Law Firms Fail?

 Why do so few law firms make it to the second generation? Consider this progression of logic:

• Few goals are realized by happenstance;
• The greater the objective, the less likely it will be realized without serious intent;
• A written succession plan is a reflection of serious intent;
• 95% of law firms have no written succession plan;
• For a majority of law firms, 25% or more of revenue is generated by or closely associated with lawyers that are 60 or older;
• Few firms will survive the loss of 25% of revenue in a short period of time.

So What?

If you are a law firm leader, this reality does not surprise you. We regularly visit with managing partners and governing bodies that see the writing on the wall. With the exception of those who choose to bury their in the sand, most agree succession must be addressed. A comprehensive and workable succession plan is essential if a law firm hopes to survive beyond the current generation.

A 3-Step Path to Survival

Step 1 – Start now. As simplistic as this may sound, it may be the singles toughest part of developing a plan. The day-to-day demands of managing a practice make it difficult to step back and consider the future. This reality is one of the biggest reasons many firms find themselves in the current predicament — years of not having time to address relationship continuity and succession.   The first step is to be done with hand wringing and more talk.

Improving the Odds in Law Firm Merger

Law firm mergers remain popular as law firms everywhere seek an edge. Despite the high interest in merger as a difference maker, law firms considering merger need to be careful-merger can be fraught with risk.  Indeed, it is reported that only about half of all law firm mergers succeed.  So not only can a merger not be the panacea envisioned, but it can destabilize a firm in ways not envisioned.
For every firm thinking about merger, Identifying the pathways to success is essential.

What are some of the important considerations for a law firm that wants to improve its odds of having a successful merger?  What should be in a law firm’s plan as it embarks on the journey of merger?  A review of law firm merger successes and failures provides five important fundamentals:

Have a Rational Strategy that a Merger Will Advance.  Merger should be a tactic to further a clear-eyed strategy adopted in an atmosphere free of the pressure to grow.  A firm may perceive a need to improve its substantive capabilities, enhance a burgeoning expertise or grow market share in an area it is known or needs to be known. A firm may need to merge because declining performance augers in favor of a rescue. Or sometimes a need for leadership succession drives a decision to merge.  Whatever the impetus, merger as an option should be based on meeting a strategic imperative identified by the firm before it tactically begins moving on merger.

Establish Clear Requirements and Be Disciplined in Their Pursuit.  Once merger as a tactic towards the strategic goal is chosen, good leadership will pause to identify the important criteria for any prospective partner.  Only after being armed with an articulated set of criteria should a firm enter the market in pursuit of a match.  Even then, a firm should be disciplined to only kick the tires on potential candidates that meet the firm’s earlier identified criteria.  Remaining faithful to the criteria keeps a firm from allowing the thrill of the hunt cloud its judgment.  By staying true to the criteria throughout the process, a firm likely will be more disciplined, unemotional and not swayed by deal momentum.

5 Keys to Resolving Law Firm Crisis

Realizing that your law firm is in crisis can be unsettling, to put it mildly. Take heart, though crisis is a concerning condition, it need not be fatal.

Crisis can arrive in many different ways. At times it is the product of an extended period of underperforming. For other firms it can be brought on by events such as litigation, the departure of a group of lawyers or loss of a significant client relationship.

No matter the cause, here are five key areas to consider when addressing crisis.

1. Calm leadership – Someone has to be in charge of addressing the crisis situation. This person may be the firm’s managing partner; it may be someone else — but someone must be on point. From day one this individual should demonstrate a calm confidence in the firm’s ability to address the crisis.
2. Regular communication – Whether the point person or a designated spokesperson, someone must be accessible and provide routine communication. The absence of information creates anxiety that will certainly make a tough situation more difficult. The communication must provide needed information with confidence and complete honesty.
3. Triage – Immediate attention must be given to the conditions that create the most immediate threat to the institution’s survival. In medical parlance, you must first stop the bleeding.
4. Plan – A plan must be developed for working through the crisis. Sorting through the primary issues and the options available to address them is an immediate priority. Once the plan is developed, to the extent appropriate, the plan and progress on it become part of the routine communication to relevant parties.
5. Help – Most law firm leaders have never addressed a crisis that may threaten a law firm’s viability. Learning to lead a firm through crisis is often best accomplished by tapping resources that have been there. Better to spend a few extra dollars and secure needed insights than save a few dollars and lose the firm.

If addressed properly, a crisis can be an experience that makes a law firm stronger!

Five Signs Your Law Firm Needs New Energy

Law firms that lack energy dim their prospects for the future.  Too often law firms pass over the issue of their own vibrancy (whether by a failure of recognition or simple indifference) and plod along without taking corrective action.  A becalmed law firm, especially in these times of legal industry disruption, is flirting with danger.

Allowing a firm’s malaise to continue can institutionalize a momentum towards decline.  It fosters a culture where expectations are lessened and acceptance of mediocrity metastasizes.  A lack of energy cannot go on for long or it will grow into a potentially irreversible condition.  If a firm finds its energy levels scaling down, it must take quick action.

Recognizing that an energy issue exists is the first step.  Is the firm’s vibrancy at levels that are below acceptable?  How can it know?  Five common signs of a law firm’s waning energy can include: