Smart Growth – The 2015 Mantra for Smart Law Firms
When Ken Young and Barbara Mayden started practicing law at different large law firms in the late 70’s, most law firms were convinced “bigger is better” because they had leverage driven profit models. They hired lots of associates, worked them hard, and the partners at the top of the pyramid made very nice profits. We now live in a post-recession/large layoffs legal climate, however, where most law firms look more like a diamond than a pyramid. The days of “for services rendered” bills are but fond memories; clients have become so insistent on not paying for “research” by young associates that large law firm starting salaries in some states are actually going down despite the uptick in the national economy.
Another mantra formerly preached by large consulting firms to law firms was “merge or die.” But we are all painfully aware of the many national and international law firm mergers that have failed just as miserably as the Mercedes Benz-Chrysler experiment. And conversely, there are many small to medium sized law firm boutiques around the country that have their own unique “niche,” and are doing just fine financially.
“Firms doing well are more apt to have a clearly defined strategic plan that the partners understand and support.”
So as we head into 2015, what do we see as the defining factor between firms doing well, regardless of size, and those that are struggling? Firms doing well are more apt to have a clearly defined strategic plan that the partners understand and support. Instead of the dreaded “collecting dust on the shelf,” firm management executes the plan as opposed to making ad hoc decisions as various challenges and opportunities arise. However, many law firms still have no written strategic plan and accordingly have not furnished their managing partners a road map for firm direction. These firms are often at best standing still, but usually going backwards because valuable senior associates and partners sense the firm’s lack of direction and jump to better-positioned, more profitable firms.
Firms that engage in the planning process usually agree that smart growth is always desired. What is “smart growth’? Number one on the smart growth list is client driven growth. If a firm needs to grow to better serve valuable clients and attract new ones, it’s a no brainer.
“Annulments are as painful and costly in the legal arena as marital ones.”
The smart growth list also includes hiring partners and associates who are team players and do not damage the culture or reputation of the firm. Our advice when guiding firms through merger discussions, acquiring new practice groups or opening offices in new geographic regions, is to carefully assess the culture fit before digging through the dollars. Of course, there is no need to talk at all if there are insurmountable client conflicts or significant rate/compensation differences that can’t be reconciled. Where those are not issues, however, the courtship and synergy discussions need to move at a deliberate rather than breakneck pace. Firms should heed the advice their management labor lawyers often give corporate clients: “Hire slow-Fire fast.” Annulments are as painful and costly in the legal arena as marital ones.
Last but not least is “one and one should equal more than two”. Firms discussing a combination are wasting valuable, billable time if the merger merely increases administrative headaches, client conflicts and year end financial issues. But where two firms combine and bring new expertise to the table that can be used by their respective clients, as opposed to the clients having to use other law firms, definitely a good result. Or where a firm/practice group is located in a geographic region desperately needed by another firm to serve valuable clients, and both groups will utilize each other for legal work they previously would not have received, also a potential “win-win.”
If your firm needs guidance through the strategic planning process or assessing potential smart growth opportunities, Young Mayden is here to help. Since launching in January, 2008, we have enjoyed helping firms merge, assess opportunities and open or grow offices in Massachusetts, Ohio, North Carolina, Florida, Illinois, New York, Texas, Washington D.C., Georgia, Virginia, Tennessee, Michigan, Indiana, South Carolina, Pennsylvania, and London, England.
And to all our friends and clients, we hope 2015 is your best year ever!