Despite all the Big Law mega firms that (mostly) continue for decade after decade there are equally others that struggle and occasionally fail.
But, as consultant Andrew E Jillson pointed out in an article at Hayse LLC all law firms can face tough times unless they heed key warning signs.
As with personal health risks, ignoring the warning signs can lead to disaster.
As Jillson points out, while warning signs can take many forms, five common indicators worth watching for. Included among them:
- Succession Planning – ” A firm whose succession has received inadequate attention is highly susceptible to risk. An underdeveloped succession strategy can be as bad as no strategy at all. If your firm’s succession planning is lacking, take heed.”
- Reactive Operations – These are the firms that are not proactive in their approach to client care. “As the industry moves further and faster, the reaction time for the complacent firm slows comparatively-it is positioned for an uncertain future. When you realize that your firm is reactive, not proactive, it may be time to worry.”
- Unclear Retirement Plans – If a firm has an ineffective or underfunded retirement plan it can be a danger sign. Older lawyers will continue to work beyond their most productive days, which is bad for them and the firm.
- Non-Rationalized Real Estate – This is the situation where law firms have more real estate obligations than their needs require. It places pressure on the bottom line of the firm and creates financial pressure that signals potential danger ahead.
- Unguided Growth – Firms will grow differently and at different rates, or perhaps decline in growth, but unguided growth can also be a major danger sign signalling that the firm is lacking proper strategic direction.
Keeping an eye on the law firm danger signs is one of the keys towards ensuring law firms’ succeed in an increasingly challenging environment.