Friday, February 6, 2015

Finding the Silver Linings in Partner Departures

In 2014, lawyer departures reached another record year, up 7 percent over the prior year to more than 2,700 moves, according to The American Lawyer's 2015 Lateral Report. While nearly 3,000 lateral moves in one year may seem like a lot, it represents only a fraction of the total head count of U.S. law firms. Still, it's a troubling trend that's fraught with challenges for firms and one that is, most likely, just in its infancy.

For the law firm losing an important partner, the notice often comes as a shock. Questions swirl within the firm's leadership as well as among the partnership: Who else will leave? Why are they really leaving? Why didn't we see this coming? Which clients will follow them? Do they know something I don't know about the financial health of this firm? Should I be looking too? In many cases, the impulse is to circle the wagons and ease any concerns.

Take a Step Back

But the departure of a partner can also be a strategic opportunity for law firms. Departures can be good timing to reassess the practice group's strategy, improve communications, demonstrate client focus, provide opportunities to younger talent, improve practice group and firm financials and learn more about how clients value the firm. At their core, partner departures offer a unique opportunity to reassess the firm or practice group. It's a chance to deepen your understanding of the firm's culture and its competitive advantage, and it provides a unique and timely opportunity to communicate this both internally and outside the firm.

Take a Hard Look in the Mirror

The reasons a partner leaves a firm are as varied as the lawyers themselves. Despite what many would have you believe, it's not all about the money. Money is important, to be sure. But compensation is more often a symptom than the cause. Changing law firms is a huge risk for an established practitioner. A move to a new firm more often than not must solve several challenges for the lawyer. It's the job of firm leadership to unravel those motivations regardless of where they may lead. The health of the firm demands that you be objective, dig deep and take the time to understand the lessons to be gleaned from the partner's departure.

Demonstrate Client Focus

Acting quickly and decisively to assure clients of a smooth transition regardless of their decision to stay with the firm or go with the attorney can do wonders for client goodwill. Take the opportunity to learn as much as you can about how the client views the firm, the attorneys who have worked with the client, what alternatives the client is considering and their legal needs going forward. These interviews should be conducted by the managing partner of the firm or the practice group leader. The goal here is to convey to the client that the firm is focused on what is best for the client.

Assign a new relationship attorney but choose the succeeding partner carefully. Make sure you understand the client's needs and preferences and select an attorney that will enhance the relationship. Sometimes that can be a younger partner who will reenergize the relationship with better support and servicing.
A partner's departure represents an opening to competitors. Clients who plan on staying with the firm and who know a firm's leadership is listening, attentive and proactive can help protect the firm from poaching attempts by other firms.

Clarify the Firm's Strategic Direction

In some cases, the exit of a partner offers an opportunity to clarify and reinforce the strategic direction of the firm. Sometimes the practices of departing partners are outliers to the firm's core growth strategy. Other times, the practice may lack the bench strength or client base to warrant a reinvestment in the practice. Often times the partner does not take as many clients as they had planned to take, leaving the firm with an opportunity to improve the financials a bit. Conversely, the lawyer's practice may have been focusing on an emerging area of law that represents an important growth opportunity for the firm. In that case, reinvestment makes sense. Regardless, the decisions by firm leadership and how they respond to the departure can help crystallize the strategic direction of the firm.

Culture is the glue that holds a partnership together. An attorney's book of business that can easily be unbolted from the firm is an indicator of at least one underlying problem in the firm's culture. Departures present an opportunity to talk openly about difficult issues such as the lack of cross practice servicing of clients and explore what to do about those challenges. Tolerating territorialism in the firm has very real and damaging cultural and financial implications, as that experience can so aptly demonstrate. Getting to the root causes of this behavior is difficult but essential to the long term health of the organization.

It's hard to find a silver lining in a partner leaving the firm, but an objective look at the situation and asking some tough questions can reveal opportunities for law firm leaders to benefit from an otherwise difficult separation.

New Practice Area? Three Simple Questions That Will Save You From Wasting Time And Money

Emerging legal issues, new legislation, new regulations and new technologies often present sexy new opportunities to form a new practice area. But the time, cost and use of marketing resources to launch a new practice area can be substantial. It can also distract the firm's focus from other, more promising opportunities. As a result, many new practice area initiatives sputter along in name only on the website, never reaching their full potential.

Why is that?

One reason is that the decision on whether to build a new practice capability is rarely subject to a rigorous due diligence process.  Questions with regard to how much opportunity there is, the level of investment required, the ramp up time and learning curve required and other important factors that underpin the success of the initiative rarely get asked, let alone thoroughly answered.

It's hard to douse the enthusiasm of a partner who is motivated to do business development. But constrained time and resources being what they are in most firms, it's important to choose investments in new marketing initiatives carefully. To hedge your bets,  the firm will need to answer three key questions: How will attorneys monetize their knowledge of this issue? Who needs the services? And, how well positioned is the firm to provide the services?

To dig deeper into the practice area's potential and guide the analysis of the market opportunity, follow this line of questioning and gather specific evidence where possible.

1. What is the billing potential of this work?

  •     What are the substantive legal issues in the new practice area?
  •     What are the questions of law that have not yet been addressed?
  •     What is the degree of regulatory oversight related to this issue currently. Is that oversight intensifying or easing?  
  •     How predictable are these issues? Are they fairly routine or are they dynamic and unpredictable?
  •     What other practices in the firm might benefit from or contribute to this new practice area?

2. Who is the target audience for the services?

  •     Which types of businesses and in which industries would the services be needed?
  •     Which existing clients of the firm would have need for this service /expertise?
  •      How strategically important are the issues to the company? What degree of risk do the issues present companies? What opportunities for growth do the issues present companies?

3. How well positioned is the firm to provide the services?

  •     Which other law firms or attorneys provides the advice or service currently?
  •     What areas of the law firm's current practice offering could lend credence to this new practice?
  •     Which lawyers in the firm currently have the experience and knowledge in this area? What substantive legal knowledge needs to be developed or researched?
  •     Which attorneys will dedicate the time to market the new practice area? What is their level of commitment to this project and their ability to dedicate other demands on their time?
  •     How would this practice be marketed and what costs would be associated with marketing this new practice?

While it's tempting to dive into a new practice group to gain an early entry advantage, the haste can make for a waste of valuable resources in the firm. Taking the time to clarify the opportunity will help to articulate the business opportunity clearly and lay the groundwork for a more strategic approach to the market.