The article below asks whether a strategic plan can compensate for a lack of leadership. I suggest that it can’t since you need leadership in order to execute a strategic plan. The answer for most law firms is that you need to address the leadership question as part of the strategic planning process. You may also need to appoint a managing partner to oversee the planning process and execute the strategic plan. The fact is you really can’t have one without the other. Without leadership your strategic plan will probably end up sitting on the shelf just like many other firms.
The attached article discusses the decline of the COO. In my experience, the most successful law firms have a strong managing partner (CEO) as well as a strong non-lawyer COO. As the legal industry gets more competitive with the rise of NewLaw and global law firms, it’s even more important for small and midsized law firms to be effectively managed.
Consider a management audit and review the authority that you’re giving your managing partner and COO. If you have an office manager now, consider upgrading their duties and responsibilities to a COO level. Your firm will become more profitable and nimble in tackling the challenges ahead.
Law Firm Patton Boggs Lays Off 65
The above article cites another cost-cutting campaign by a large US law firm. 65 associates and staff are let go to trim costs because of reduced profits:
“Mr. Newberry said the layoff of 30 lawyers and 35 staffers were an effort to “align head count with revenue”…There were no partners who were let go, Mr. Newberry said. The firm now has 455 lawyers. But in recent months the firm has notified 18 partners their contracts won’t be renewed unless their performance improves.”
As a general observation, law firms often cut associates and staff during tough times but don’t cut partners. Why not cut unprofitable equity partners as well and optimize your firm’s leverage? Cutting associates and staff boosts short-term profit but often sacrifices long-term profit by reducing leverage. This is a real problem for most law firms, and highlights the deficiencies of the traditional democratic law firm business model.
Most law firms focus on short-term costs like associate and staff head count, but don’t address the really important “costs” such as unproductive partners and equity partner head count. Many large law firms have 20%+ excess capacity in their partner ranks, which is a huge drag on PEP profitability. You need to cut your ownership ranks and optimize leverage to compete with new law firm business models and ABS structures coming out of the UK. Easier said than done, however, when the owners must hold a democratic vote on who’s going first..