Adventure of Strategy

If Citibank’s Law Group Head and friend, Dan DiPietro, is correct, US law firms may soon be battling unprecedented economic pressures. We believe that Law firms must immediately prepare by reassessing their strategies in order to:

• minimize the potentially firm-threatening impact and
• capitalize on competitive opportunities

Managing Partners should consider these seven key strategic factors in order to “recession-proof” the firm:

1.    Strong Leadership

In ancient times, the Cherokee Nation had one chief who would rule during times of peace; another during war. The need for hard, courageous decisions, even sacrifice, is common to both recessions and wars. In both, strong leadership is critical if hard decisions are to be taken and actually executed.

2.    Ramp Up the Frequency of Financial Data Reporting

Things can change fast in a recession. Clients, under financial pressure themselves, terminate engagements. Revenues may contract. Debtor payment periods and write offs may deteriorate, putting pressure on liquidity. The firm’s key financial metrics must be monitored far more frequently than in booming times.

3.    Make the Hard Decisions Humanely and Fast

Layoffs, if required, must be quick and humane not only to preserve capital, but also to get the firm past this trauma quickly and focused on working forward again. Continued employment of underperformers must be carefully assessed. Where the market is no longer buying specific services there are two choices: retool (quickly) or separate. (Do not misinterpret this as a suggestion to rush to lay off people though. Long-term considerations suggest this is a last resort option for all personnel except those who ought to have been asked to leave years ago.)

4.    Get Practice Leaders and Client Team Leaders Focused on Short-term Action Plans

Actions must be executed more quickly than in “good times” and therefore designed for rapid implementation. Plans must be focused, systematic and disciplined. Those that will actually drive plans must be integrally involved in crafting them and managing their execution. Feedback and accountability measures are critical to ensure that the plans are executed, especially when they relate to the hard, courageous decisions (point 1.) Non-billable time becomes a valuable asset and must be actively managed to ensure that key tasks receive priority.

5.    Involve Your Clients

In recessions, client mobility increases. Client needs evolve more quickly as new threats and opportunities emerge. Firms need to go beyond simply expressing empathy and assuring continuing loyalty. They need to actively position themselves to meet emerging key client needs. This cannot be done without actively discussing business (not just legal) issues with clients. If you don’t have client teams in place for your key clients, now would be a good time to start!

6.    Manage Internal Expectations: Business as Usual Could Be Lethal

Remember the tale of the two frogs? The first is dropped into a bowl of hot water. It jumps out. The second is dropped into a bowl of cold water and slowly heated up. It doesn’t jump out and eventually dies. Similar procrastination has been the death of too many good firms. Leaders need to explain internally what is being done to weather the recession and the likely impact on the financial positions of your people. This knowledge will motivate your people to do what is expected of them rather than default to “business as usual.”

7.    This Too Shall Pass: Keep a Balance With Your Long Term Strategy

Think strategically about whether and where to cut short-term resources. Retaining some temporarily unprofitable practice areas and individuals may be advisable if they are important to your long-term goals. On the other hand, a recession is an excellent time to re-engineer or sever areas that have become less profitable but have been tolerated to avoid conflict.

The Chinese character for “crisis” consists of two symbols. One means “danger,” the other “opportunity.” While strategy may be more challenging during recessions, if you grasp the nettle, opportunities will arise to enhance your client mix and your talent base.

What can Edge do to help? Four things, primarily:

• help you assess the features in your current strategy that would need to change in order to “recession-proof” your firm and help you amend your strategy accordingly; and

• help you develop your strategy’s necessary action plans and facilitate the (likely difficult) discussions about executing those actions; and

• help your lawyers develop critical strategic business skills required to bulletproof your existing crown jewel clients from competitors. (Bulletproofing transcends mere “training” and involves a focused methodology that yields immediate results.)

• help you target market new clients whose current providers simply can not continue to satisfy them in challenging times.

As always we appreciate your feedback and welcome inquiries.

Our best regards,
Gerry Riskin & Rob Millard

Rob,
Great post. You have made great insights into what the legal industry should be gearing up for in 2008. Some may think of it as frightening, but only the "prepared shall survive".
Thanks again for taking the time to share this information to the legal community at large. Juliet