September 29, 2005
Law Firm Failure and Success
Progress is the history of errors. Man began his great leap forward when he began to record history. Unfortunately, it seems to take mankind an inordinate amount of time and repeated errors to learn from history. Law firms tend to fail for the same reasons—a "me" vs. "we" culture and a lack of dedicated management.
Law firms fail. They fail often. This has not been necessarily bad for me. One law firm customer turns into several as partners scatter and reform into new start-up firms. However, those failures don’t do much for the owners of the failed law firms. I don’t want to pick on just law firms. Other types of businesses fail. But law firms are unique and often start with their own seeds of destruction sewn within. Most law firms start with a “kill- what-you-eat culture" and compensation systems that encourage the maintenance of that culture. Somewhere along the way the firm has to go through a metamorphosis for long-term success. Without that metamorphosis, somewhere down the road (in 5 years or 35 years) it will disintegrate from within
The research firm of Greenfield/Belser Ltd., www.greenfieldbelser.com, and its affiliate, The Brand Research Company, www.brandresearchcompany.com, conducted a survey in an attempt to identify the variables that made a difference between law firms that failed and those that didn’t. As I review their reported findings, it clearly confirms to me that culture and management are the keys to success.
- Successful firms differed from those that failed in that the successful firms had a “we” culture vs. a “me” culture including:
- Strong brand identity
- Common vision
- Consensus-driven
- Open communication
- Firm ownership of clients
- Successful law firms paid more attention to the numbers:
- They planned, measured, held accountable and rewarded.
- They pay attention to Key Performance Indicators, leverage, productivity, realization, etc.
- They engage in prompt billing and collections.
- They reinvest more of their profits in the firm.
- Successful law firms have dedicated management—the number one factor that separated success from failure was the presence of non-lawyer C-level executives like a COO, CMO, and CIO empowered with decision-making authority in their areas.
More Partner Income’s position has consistently been that long-term survival depends on the development of a “we” culture. That takes leadership to align the firm behind a shared vision. It takes consensus building and frequent communication to build and maintain a shared vision. Visions aren’t important if progress isn’t measured, people aren’t held accountable and milestones aren’t rewarded. Doing so takes dedicated management - something that requires more than 25% of the managing partner's time.
If you asked me for a law firm success checklist, it would look like the following:
- Leadership
- Shared Vision (Unifying brand or value proposition)
- Common set of beliefs — Firm Culture
- Dedicated Management
- Plans
- Measurement
- Accountability
- Reinvestment
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Filed under Firm Culture, Management by Tom Collins