Although rapidly-changing, intensely-competitive market dynamics will continue to shape the strategic context in which most law firms will operate in 2018, the new year is also proving to be internally challenging, especially for small and midsize firms.
We have noticed, beginning in the third quarter of 2017, a sharp increase in requests for advice and service with respect to three issues: partner compensation, governance, and succession planning,
This level of interest has continued into 2018.
As one of our clients in Europe told me recently, "We have to get our house in order now, if we hope to continue to survive the next ten years out there in our market."
Three things are striking about this comment, and similar observations that I have heard from other law firm leaders during the annual Client Planning Conferences that our firm is currently conducting.
- First, there has been a shift in the outcome-based language that leaders of small and midsize firms are using. They no longer talk in terms of "continued success." Now they express these issues as being essential to the very survival, not just success, of their firms as profitable, competitive business entities.
- Second, there is an urgency that I haven't heard expressed since the global financial crisis and recession in 2008-2009. There is an increasing sense that problems and issues in these internal areas can no longer be deferred. They must be addressed now.
- Finally, there is an increased awareness of how internal governance and management operate together as part of an integrated business performance system with business strategy. Both parts are essential. All the brilliant strategies and dazzling marketing campaigns in the world will not help a small or midsize law firm that lacks the internal structures and processes that it needs to implement strategic initiatives and differentiate itself from its competitors. Likewise, the strongest, best-documented, most efficient internal structures will have little lasting effect if the firm lacks a coherent, realistic set of strategic priorities at which to aim its internal strengths.
Good governance, competitive partner compensation, and sustainable succession planning are important for large law firms, too. However, with their limited financial and professional resources, most small and midsize law firms lack the tolerances for false starts, mistakes, and inefficiencies that larger firms usually can absorb.
In other words, smaller firms need to keep looking out the window to watch closely what is going on in their markets; but, for most of them, it will be more important to get their houses in order inside.