This is the second in a series about factors that most frequently contribute to the business failure of law firms.
One of the most difficult challenges for law firm leaders is to lead their partners from a short-term focus on cost (and the effects of operating costs on their end of the year profit distributions) to an investment mentality.
The most obvious failure to invest is usually with respect to people. Unlike other professional services businesses, and subject to some notable and admirable exceptions, law firm partners can be notoriously cheap when it comes to investing in professional development and ongoing education of their associates and staff -- and even of themselves.
Evidence of under-investment in people can appear in a number of forms:
- Newly admited partners who do not demonstrate the business and managerial skills expected of an owner of the firm
- The lack of clearly defined criteria and procedures for electing new partners
- A vague, undocumented career path for associates or, even worse, none at all
- The absence of a succession plan for older partners
- Difficulty in retaining competitively paid associates
The lack of an investment mentality also shows up in decisions not to invest partners' time, attention, and resources in business-critical activities such as strategic planning, reviews of the firm's governance, and in marketing and business development by every partner.
Why is an investment mentality important in law firms? Without it, partners naturally will tend to fall into ad hoc crisis-to-crisis improvisation, rather than focused management. This approach can solve short-term problems, but it will weaken the firm's ability to confront the truly significant, long-range challenges that almost every law firm faces.