Most law firm retreats are not what you’d call somber exercises in austerity. Lawyers don’t go out that often, but when they do, they usually go in style. Smaller firms might gather in high-end lodges or resorts adjacent to lakes or golf courses, while larger firms will convert a luxury hotel ballroom into a casino or book entertainers for a private concert; in both cases, the food is abundant and the drink flows freely.
I’ve come to think that firms shell out the money and crank up the fun at these bonspiels for a couple of reasons. First, they serve as internal messaging to signal the firm’s success and self-confidence to its shareholders; and second, they act as an incentive strong enough to persuade lawyers to give up perfectly good billable time for mere socializing.
Often, the business agenda at these meetings will strive to match the upbeat vibe. Because really, who wants to fight about partner succession or de-equitization just before hitting the links? So when lawyers gather to talk about their firm, they prefer to visualize a sunnier future and to discuss expansion, rate increases, new business opportunities, and the like. And so they should, of course: Growth is essential for law firms, so obviously these are good and important topics to tackle.
But hard issues and tough choices are no less important, especially now, when challenges to law firms seem to multiply around us. The understandable tendency is to punt these issues to an “offline discussion” or hurry past these parts of the agenda. But I would submit that the more uncomfortable a topic makes everyone, the more important it is to deal with it, and soon.
So in the time-honoured spirit of Spoiling It For Everyone, I’d like to propose that at your firm’s next retreat (or at least, at an upcoming executive or partnership meeting), you engage in a strategic visioning exercise that’s more of a downer. Specifically, I suggest that you and your colleagues contemplate the following unhappy scenario: It is two years into the future, and your law firm has just failed. (Credit where it’s due: I picked up this idea in a discussion at the Toronto Legal Innovators Roundtable earlier this year.)
The scenario goes like this: Your small group (and there can be multiple groups pondering this question at a larger gathering) is part of the cleanup team charged with sorting through the fallout of your firm’s collapse. Your group’s specific task is to conduct a post-mortem on the firm’s failure, to ask and answer two questions:
- Why did our firm fail? What was the proximate cause, and were there contributing causes? What was the general sequence of events that led to this outcome?
- What could we have done two years ago (i.e., today), to prevent the firm’s collapse? What steps could we have taken, in what order, and at what cost?
You’ll need to provide the group(s) with enough information that they can make informed predictions about extinction-level events. This would include summarized financial indicators from the last few years (e.g., revenue per lawyer, collected realization rates, profitability by firm and sector), client churn, lawyer departures, and so forth. But you don’t want to drown people in facts and figures; just give them enough that they can detect troubling or dangerous trend lines and reasonably extrapolate from them. And ask your people to focus more on the second question, the “if only we had” part, because our goal here is not to find scapegoats, but to reduce the need for any scaping at all.
You’ve surely read accounts of major law firms that have failed, publicly and spectacularly, in the last few years. You may also have heard insider stories about less publicized failures of smaller firms in your region or community. What all these reports and accounts share is their dazzling 20/20 hindsight. It’s easy to pick apart the entrails of a deceased firm after the fact, but it doesn’t do the departed much good. Travel back in time before the disaster, though, and you can stop the chain of causation before it gets started.
It might also be helpful, especially if your people haven’t given these issues much thought before, to provide the participants with some potential “failure trigger” candidates for their consideration. Here are some seriously important issues that I know law firms are (or should be) seriously concerned about right now:
- Client attrition during a process of key partner succession.
- Technology changing the old rules of workflow, leverage, and pricing.
- Shrinking market share in sectors critical to firm revenue.
- Over-distribution of profits relative to contribution and cash flow.
- New and discomfiting client criteria for satisfaction and firm retention.
- Cybersecurity and the inevitability of a client data ransom attack.
- Dangerous clients that could ruin the firm’s brand and reputation.
Your firm almost certainly faces some of these challenges. (If your firm is facing them all simultaneously, you might want to rethink the partners’ retreat at the ski resort.) But not all challenges are risks, and not all risks pose an equivalent threat. So encourage your visioneers to rank these challenges in order of their risk payload; that is, which challenges does your firm face that have real potential to:
- Drive away clients,
- Push out key personnel,
- Cripple your operations,
- Damage your brand,
- Infect your culture,
- Invite regulatory scrutiny, or
- Expose your firm to liability?
Rare as they might be, these risks are nonetheless existential; that is, they threaten the firm’s continued viability. But few law firms convene their partners to think about potentially ruinous developments, not least because it’s kind of a drag. Who wants to spend a weekend at a posh resort thinking about all the ways the firm might go belly up? No one’s in the mood to listen to Hootie and the Blowfish after that.
But risks and rewards await your firm in equal measure, tomorrow and in the months to come. During times of intense market dynamism like this one, the peaks are higher, but the depths are deeper. You don’t want to keep your firm’s eyes so fixed on the mountains that you stumble into the valleys. And there are assuredly valleys ahead of you right now.
So ask yourself: What risks does your firm face today? Which of them are more threatening than others? Which of these has the potential, alone or in combination with other factors, to wreck you? Then, once you’ve settled on the clearest dangers to your firm, select the most acute one and assemble a crack team of the firm’s leaders and power brokers, with instructions to demonstrably reduce this risk in the next 120 days. It might put a damper on the party; but it could also go a long way to ensuring there’ll be many more parties in the future.