Whether a new enterprise or a venerable brand, the realities of a market in transition are most likely having an effect on your firm. Responses to Altman Weil’s 2018 Law Firms In Transition Survey underscore the magnitude.
- 49% of responding firms failed to meet billable hour targets in 2017
- 59% say equity partners are under utilized
A move to handle work in-house, alternative service providers, and technology solutions are cited as factors contributing to the transition.
As to how 2018 compares to previous years, “…the threat to law firms in 2018 is broader and more nuanced,” according to Altman Weil principal and survey co-author Tom Clay.
If your firm is staring down the double barrel of missing budgeted targets and equity partners with too little to do, you didn’t need the survey to substantiate what you are experiencing. And you are likely among the firms engaged in activities intended to be an appropriate response to these issues. Colleagues Roger Hayse and Andy Jillson of Hayse LLC point to three additional conditions that may already have precipitated action — or at least conversations:
- an increased reliance on credit to fund debt
- the attrition of key clients, and/or
- the inability to recruit the talent necessary to compete
But consequential transition typically begins long before these emphatic challenges announce trouble.
Here are 7 indicia of a firm that, whether recognized by leadership or not, is already in the midst of a defining season.
1. Matters of Succession Are a Mystery
For decades in many firms the question about who would inherit leadership roles and/or key client relationships seemed to be resolved organically (or at least systematically), with a clear and accepted line of succession. But as firms became larger and more diverse in terms of practice offerings, questions swirl on both fronts.
Stable firms proactively address succession — in terms of leadership as well as key client relationships. Firms failing to address this are on the cusp of a transition that may result in the loss of both key clients and young talent.
2. Your Diversity Initiative Is Driven By 60+ Year Old White Guys
Diversity is increasingly a driver in the marketplace — of who clients want to work with, and of where talent wants to work. Firms that address the conversation by relegating it to a committee may find it difficult to make progress.
The conversation not only warrants, but demands fresh perspective and institutional commitment. If efforts, however well intentioned, fail to address implicit biases — individual and organizational — that impact opportunity, compensation, values, and aspirations, diversity and inclusion will continue to be a significant factor when it comes to the transition of today’s firms.
3. Cross Selling Is The Exception Rather Than The Rule
Firms that operate as practice (or even industry) silos fail to capitalize on the real value of partnership — leverage and cultural dynamism. If business development credit, relationship protection, a lack of trust, or simple blindness to opportunity stand in the way of a firm finding ways to make the most of relationships and capabilities, you’re not only leaving work on the table; you’re opening the door to fracture.
4. You Have No Idea What It Costs Your Firm To Take In A New Client or Open A New File
It is vogue to speak of the business of law. But where everyday costs to do business are not understood and factored into strategic and operational decisions, the business side of the firm has yet to be fully embraced. In this environment issues such as project management, strategic growth, the value of culture, and the essential nature of team will pose challenging conversations.
5. Lateral Partners Are A Losing Proposition
When it comes to measurable growth in revenue, firms have historically turned to individuals and groups interested in making a lateral move, trusting that “portables” will follow. Whether the byproduct of mediocre due diligence, worse-than-mediocre integration practices, or strategic or cultural misfit, if laterals are no better than a break-even, this path to revenue growth is an early sign of potentially painful transition.
6. You Are Still Searching For A Silver Bullet For Business Development and Growth
Firms whose knee-jerk response to zero-or-worse-revenue growth is to regularly move from one personnel decision to the next initiative or tool rather than engaging in an honest SWOT analysis are already in the midst of transition. Pulling the trigger on a new silver bullet is easy, whereas the day-to-day roll-up-your-sleeves work necessary for organic revenue growth is uncomfortable. Only one of these two approaches delivers a solution.
7. A Strategic Plan Is A Moving Target
At its best, a strategic plan grows out of four things:
- shared values and aspirations that form the foundation of the partnership
- a clearly defined target market(s)
- an understanding of the dominant drivers at work in the target market
- a plan that
- articulates methodologies and practices that address market drivers, and
- a go-to-market strategy designed to connect with targets
This kind of strategy does not shift quarter to quarter or get thrown out after one tough year. It is the standard against which significant decisions are measured and tested, and the fabric that provides continuity, stability and long-term direction.
Anyone engaged in the marketplace today deals with some measure of on-going transition. Firms that endure have an attentive ear to the ground, identify early indicators, and find a way to manage change. If you’re a part of the leadership team of a law firm or other professional service firm, and would like regular thoughts managing firms in transition, I refer you to the regular musings of my friends Roger and Andy here.
There are exclamation marks that announce big transitions. And there are more subtle, day-to-day signs that indicate whether we are managing inevitable transitional moments effectively, or are on the brink of high-consequence change.