There is an old saying that “When an alligator is gnawing on your leg it’s hard to remember that the only effective way to handle the alligator problem is to drain the swamp.”  Perhaps the greatest value of strategic planning is that it focuses firms on long-term issues.  Law firms are notoriously myopic and it can be difficult to look beyond the current year’s profitability when considering the future.  But there are occasions where current issues are so overwhelming that they must be strategically addressed before the firm can begin thinking about the long-term future.  That is, situations where you have to do something about the alligator—now!

But here is the problem – short-term strategies can be so appealing to firms that they will always find an excuse for forestalling thinking about the future.  Worse, short-term issues are almost invariably internally oriented when what most firms need is to become more focused on market driven external issues.  Indeed, we constantly hear firms say that they can’t really start thinking about strategy until they increase their profitability or open a New York office or get their associate development program in line or whatever is the worry of the day.  The truth is that there will always be some internal problem that you ought to fix before you worry about the big stuff.  As a result, you never get to the big stuff.

But there are situations in law firms that truly constitute an emergency and are worth discussing as legitimate justifications for emergency strategies.  That legitimacy can be tested by three questions:

1.  Is the firm in mortal danger, i.e., is there the likelihood that, given its current course, the firm will be forced to dissolve within the next year?  Mortality can, of course, be difficult to predict but there certainly are some warning signs.  Law firms typically close their doors for three reasons.  The first is the loss of significant partners (either in terms of a significant number of partners or the significance of the partners who have departed).  Like a run on a bank, once the outflow begins it can be almost impossible to stop.  The second reason firms dissolve is if they have acquired so much debt that they are either technically insolvent or loan covenants come into play which effectively place the management of the law firm in the hands of the bankers.  A third reason is that a firm loses its continued viability as a business.  This can be the result of a number of factors but often involves the loss of a significant group of clients.

2.  Are there rational short-term strategies that could, if successful, avoid dissolution?  This is often not an easy question.  Sometimes firms get themselves in so much trouble that there is no realistic end result other than dissolution.  The key here is rationality.  If a firm is about to lose a client that makes up 50% of its revenue and its emergency strategy is to find another client to take its place—forget it.

3.  Is there a will among the partners to have the firm succeed?  This is hard to gauge.  I’ve sat through meetings where all the partners locked arms and swore to hang tough, only to have several of the same people announce their departure the following day.  There has to be the realistic vision of a bright future.  Just surviving is not enough to justify loyalty.

Often emergency strategies require a degree of ruthlessness.  Even in very difficult situations, law firm partners would sometimes prefer to see the firm dissolve than take the steps necessary to survive.

Emergency Strategies

If there is a positive answer to each of these three questions it is probably in the firm’s best interest to set aside any semblance of a normal strategic planning process and focus on an emergency strategy.  It is impossible to enumerate all of the possible emergency strategies but they are almost always economic.  In most cases they involve:

  • Accurate identification of the two or three greatest issues and strategies that mitigate the effect of those issues.  For example, the cause of the problem may have been the loss of the firm’s largest client but the issue for the firm is that the firm’s revenues are not sufficient to support the cost base that was assembled to support the large client.
  • Dramatic downsizing.  While strategic planning is typically about growth, emergency strategies focus on matching operations to the requirements of current client work.  This often means not only reducing the number of attorneys, but also firing clients who do not produce sufficient profits for the turnaround.
  • Focus on core competencies.  Firms typically have strong revenue bases involving those things that they know how to do extraordinarily well.  These practices are not always sexy but they can provide short term revenue and stability.
  • Spin.  Public relations is often an important element of a strategic plan.  With an emergency strategy, putting the right face on issues is a necessity.  And, it usually involves more of what you are telling your clients than what shows up in the media.

I hope it’s clear that emergency strategies are for tough turnaround situations and should not be engaged in lightly.  Trust me, if the alligator is only lightly nibbling at your leg, draining the swamp may be a much better alternative.