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Common themes from conversations with law firm leaders this week + related insights:
1. Most leaders feel better than previously expected about their firm’s financial performance.
2. But some warning signs: value of time decreasing as discounting pressure increasing. 1/16
1. Most leaders feel better than previously expected about their firm’s financial performance.
2. But some warning signs: value of time decreasing as discounting pressure increasing. 1/16
3. Also concern over year-end collection timing risks growing. As one chair told me yesterday, it’s all about mitigation. An increasingly popular approach: adding mini-closes with interim monthly and quarterly collection targets/goals/accountabilities. 2/16
4. While optimism generally increasing about firm performance to date, pessimism increasing about duration of the downturn. Most leaders thought it would be over this year. Now most tell me it will continue in to next year. 3/16
5. There are groups of outlier firms. Those that are at or ahead of 2020 budget are often known for being among the best in chosen high rate areas and/or the largest firms with diverse mixes of clients and work including practices that perform well in the current... 4/16
...economy and/or the most profitable firms. Many leaders of those firms have told me they are generally expecting to be at or ahead of budget this year.
6. Another group of outliers: firms that were underperforming peers for years going in to the downturn are generally... 5/16
6. Another group of outliers: firms that were underperforming peers for years going in to the downturn are generally... 5/16
...weakening during the downturn. Some are continuing to lose stars and next gen stars who see a brighter and more stable future elsewhere.
7. Of course, this presents opportunity for higher performing firms. Poaching strong people out of firms that are vulnerable. 6/16
7. Of course, this presents opportunity for higher performing firms. Poaching strong people out of firms that are vulnerable. 6/16
8. The weakest firms vulnerable to attrition (and worse) are frequently the ones that are under-sized and/or under profitable relative to competitors for sought after talent. They have more shallow benches of rainmakers and next gen stars. This leaves them exposed. It also...7/16
makes clients think twice about hiring them for too many important matters at one time.
9. Some under-sized firm leaders have told me now is the time to start considering a combination before they risk departures that could potentially destabilize their firm. 8/16
9. Some under-sized firm leaders have told me now is the time to start considering a combination before they risk departures that could potentially destabilize their firm. 8/16
10. Firms often miss the window on when to consider a combination. They often preserve independence at all costs and wait until they lose key partners before considering a deal. By then they usually have fewer compelling options. 9/16
11. It is often the up and coming stars in their 30s and 40s with 20+ years of runway that are most focused on a stable and prosperous future. They often push decisions to move toward more resilience + profitability. Some ultimately leave if a firm’s future is too uncertain.10/16
Since up and coming stars are the future of the firm, smart leaders listen to them and include them in the consensus building process about the partners’ aspirations and options to be on the table to achieve them. 11/16
12. Many firms are revisiting their plans + updating them based on changes in the economy and competitive environment.
13. As I told @XiumeiDong https://www.law360.com/articles/1293139 non equity partners are in the cross hairs at many firms that need to improve performance + pay others 12/16
13. As I told @XiumeiDong https://www.law360.com/articles/1293139 non equity partners are in the cross hairs at many firms that need to improve performance + pay others 12/16
closer to market to protect them from poaching. The money has to come from somewhere so firms are picking the pace up on building a higher performance culture by becoming less permissive or chronically under-performing non equity partners and using the savings to pay high 13/16
performers closer to market to protect them from poaching.
14. As a result, more firms are likely to make more cuts in q 3/4 as they focus on strengthening their balance sheets and giving themselves flexibility to continue to pay significant contributors market even as 14/16
14. As a result, more firms are likely to make more cuts in q 3/4 as they focus on strengthening their balance sheets and giving themselves flexibility to continue to pay significant contributors market even as 14/16
the bar for what is considered market goes up as some firms pull way further in the current environment, giving some a recruiting advantage as they can more comfortably pay more to sought after lawyers.
15. Through all of this, the more resilient higher performing firms 15/16
15. Through all of this, the more resilient higher performing firms 15/16
are increasingly managing to the interest of their mid to high performers rather than to the lowest common denominator. This is good news for the mid to high level performers. 16/16
