• the formation of the firm in 2007 by a merger that did not appear to make good strategic sense and presented significant business risks that the firm’s leadership could not manage
• rigorous expansion funded largely by optimism (not bad in itself) and credit (sometimes a necessary evil)
• leadership that failed to lead
• management that failed to manage
• over-commitment to future compensation of the top-producing partners
• a compensation system that produced an unacceptably high ratio of remuneration between partners at the top of the scale and those at the bottom
• the deterioration of the firm’s culture into a division between “haves” and “have nots

None of these factors, by itself, would have been enough, by itself, to put Dewey or any other similar firm in deep danger of collapse.  Instead, what happened is a “perfect storm,” with the economic downturn from 2009 through 2011 as the catalyst.

Worse yet, these factors came together just at the time that a newly merged firm is usually least able to handle them: during the first three years post-merger.

I am not one of those who is ready to pronounce Dewey dead.  My outsider’s perspective on this is that, notwithstanding these problems, Dewey & LeBeouf can be saved.  It will take leadership in every aspect: strategy, client relations, marketing, communications, governance, financial management, and internal teamwork.

The real question is whether the partners who have not already jumped ship and the firm’s new management have the will to do so.

Norman Clark

Most law firm partners agree that cross-selling is important to creating sustainable long-term growth.  But that acknowledgment usually is quickly followed by the observation that their firms do not do it well enough — or, in some cases, at all.

I have observed three frequent reasons why law firms — and especially law firm partners — don’t cross-sell well:

1. Lack of a cross-marketing plan.  Just as marketing requires a plan, so does cross-marketing. A firm’s cross-marketing plan should document the target clients, the services to be introduced to the client, and which partner or — better yet — team of partners will be responsible. Developing a cross-marketing plan takes time, but the cost of not having a plan is much greater in terms of lost opportunities.
2. Lack of cross-marketing incentives.  In many firms, there is no significant direct incentive for a partner to sell work for other partners to do (and get all the credit for the fees). This is especially a risk in “eat what you kill” compensation systems that reward only direct fee production.  If you and your partners are not cross-selling, consider whether there is any financial incentive to do so, other than a vague “rising tide raises all boats” benefit.
3. Lack of a cross-marketing culture.  Firms that have a “my client” culture, rather than one of “our client,” will find cross-marketing difficult — even if plans and incentives are present. This is because cross-marketing is dependent on partner commitment more than any other factor.  Don’t expect the marketing department to do it for you.

Norman Clark

One of the worst mistakes that law firms make when making decisions about a lawyer’s career — or even whether the lawyer should be hired — is to use a psychological instrument for purposes for which it has not been validated.  This can result in bad decisions based on unproven assumptions.

Psychological instruments can be useful tools in managing lawyer performance, but law firms should be skeptical and demand a scientific basis for the interpretation of the results.  Misuse can disqualify otherwise fully qualified and capable people from opportunities to contribute to the business results of the firm.  Be skeptical of simplistic labeling of people such as “expert,” “pilot,” “mediator.” and “artist.”  Such labels can create “interesting insights,” but also can easily lead to unvalidated assumptions and bad decisions based in part on them.

Professional interpretation is the key.

For more information, email Lisa Walker Johnson.

Norman Clark

When that share reaches 10% we become very worried, indeed.

There are exceptions, of course. For example, firms with substantial litigation practices often have years in which 15% or more of their fee revenue come from one very large case.

However, concentration of more than 5% of a firm’s fee revenue over an extended period, such as three years, is a “yellow card” that should alert the firm’s leaders to a significant vulnerability.

Simply stated: What happens if that client disappears?

Obviously, the response to over-concentration of fee revenues in a few clients is not to do less work for that client. Instead, the firm should examine the second tier of clients to identify ones that offer the best opportunities for more work. Increasing fees from these clients can reduce the percentages for the top clients and thus spread the risk of serious financial disruptions if one of the top clients departs.

Firms with well-structured cross-selling efforts typically do this best.

Norman Clark

What do you want to reward?

Many law firm partners have never had the opportunity to progress their thinking about this question much beyond generalities such as “hard work,” “commitment,” and “teamwork.” They have never considered what any of these admirable qualities look like in behavioral terms and measurable business results.

Before tackling the complex and frequently sensitive issues that surround lawyer compensation, firms should invest some time, effort, and resources to review their basic business strategy. Otherwise, any attempt to link the firm’s compensation system — whether it is lockstep, eat-what-you-kill, or something in-between — will be little more than guesswork. The results will almost always be disappointing and could possibly make things worse.

Lawyer compensation is one of the most important strategic issues facing any law firm.

Norman Clark

Some law firms have decided to withdraw from the price-sensitive practice area.  Our clients have focused on two other options, each of which requires investment, but can be very successful, depending on the client base, internal capabilities, and competitive forces that each firm must manage:

• Reengineer the internal operations to improve productivity
• Spin off the price-sensitive practice area as a separate business to lower costs

Norman Clark

An article by Alan Levin and Mary Schlangenstein posted today on Bloomberg web site provides one interesting answer:

When people think that something is going wrong, they speak up.

The article is based on an incident earlier this week, when the captain of a commercial flight in the United States began to display bizarre behavior and his co-pilot locked him out of the cockpit. Levin and Schlangenstein point out how such a response probably would not have happened 30 years ago in the airline industry, with tragic results.  This cultural change in the airline industry has undoubtedly saved countless lives, just as it did  this week over the skies of America.

The lesson for law firms — especially smaller firms that have been dominated traditionally by a founder with an authoritarian personality — is clear.  When the faulty thinking or aberrant behavior of a senior partner threatens the business performance of the firm, junior partners and associates have a duty to the firm and to each other to speak up and hold their seniors accountable.

Is a conspiracy of collegial silence risking the continued survival of your law firm?

Norman Clark

1. Pay attention to clients. Be sure that you know what you know what your clients need and expect, and how those needs and expectations might be changing.
2. Pay attention to the business. Establish and monitor key indicators of your financial performance. Make business decisions based on strategic goals and measurable facts, not “gut feeling.”
3. Choose innovation. Some innovations will fail; but, over the long term, most of them will succeed.
4. Treat people decently. Law firms should be among the best places to work, not some of the worst.

Norman Clark

Careful planning and due diligence are absolutely essential in law firm mergers and acquisitions. However, most law firms give only passing consideration to what is likely to happen six to twelve months post-merger, when the new organization is stress-tested and the “honeymoon” between the two antecedent groups of lawyers and staff has ended.

As one of our firm’s clients recently commented, “We discovered that we needed to spend more time and attention during the first few months after the deal closed than we did in the entire six months that the merger was being negotiated.”

Important differences in professional culture, client relations practices, and decision-making styles that can cripple the ability of the newly merged law firm or office to develop into a high-performance team. Even with the best advance planning, some of these problems might not emerge in full fury until the deal is done. Sadly, in too many firms, partners who raise these issues are too often dismissed as “pessimists” or “not good team players.”

For more information about Walker Clark merger services to law firms, including our Cultural Due Diligence service, click here.

We have also seen a dramatic increase in the past year, especially, in the interest that law firms in using social media as a marketing tool.  (Yes, I know: The legal profession is usually five to ten years behind the leading edge of anything.)

But how important is all this to most law firms?

I would like to suggest a good lawyer-like answer, “It depends.”

It depends on what you want to accomplish.

Some law firms — including some very large and prominent ones — are successfully using social media for ongoing client communications, such as press releases and roll-out of new services. But most of these same firms, as well as smaller law firms that want to build their client base in corporate and commercial practice areas, have found that they are worthless in attracting new clients to their firms.

As one general counsel told me, “We just don’t buy legal services that way.”

Our firm’s interviews of in-house counsel and corporate executives, in businesses of all sizes, support a conclusion that social media and search engine optimization have no impact on selection decisions by sophisticated purchasers of legal services — the clients that most business law firms want to have. Moreover, they are among the least-used tools even to identify law firms for consideration.

It also depends on whom you want to attract as clients.

Small law firms that specialize in providing legal services to individuals can use the internet and its tools as an excellent way to “cast a bigger shadow” in highly competitive markets, especially in practice areas such as personal injury, bankruptcy, family law, estate planning, and criminal defense. Possibly these firms could have attracted the same clients through a more sophisticated application of traditional marketing tactics, without investing the $500 to $1,500 per month that search optimization services typically charge. Nonetheless, this is the sector of the legal industry that tends to report the best results, when social media and search engine optimization are applied as part of a well thought-out, well-informed marketing strategy.

The lesson for any law firm — large or small — is this:  Before you allow your marketing staff to spend time, attention, or money of search engine optimization or social media, be sure that these efforts will make a difference to your current and potential clients.

How to do that?  Ask them.

Invest in a client survey, such as the ones offered by Walker Clark.  Even our “top of the line” Strategic Business Development Survey will cost much less than a year of search engine optimization services from a credible provider, and it will get you better financial results. Our Snapshot survey costs less than what many law firms pay for one month of SEO service.

Or, invest some of your partners’ time in interviewing your clients about their service expectations and the importance and persuasiveness of various types of marketing communications. In addition to getting valuable intelligence about client needs and preferences, an interview also helps to reinforce the relationship and will differentiate your firm from most, if not all, of your competitors.

Get some answers before you invest.

Search engine and social media have genuine potential for some businesses; but will they produce a good return on investment for your law firm, with your practice specialties, with your clients, and in your market?

Before you invest in these tools, be sure that you have the facts to answer each part of this question with confidence.

Norman Clark