I asked Perplexity Pro for its thoughts on this issue. Here’s what it said:
The newly imposed 25% tariffs by the Trump administration on Canadian goods, coupled with Canada’s retaliatory measures, will significantly impact Canadian law firms and their clients across various industries.
Impact on Law Firms
Increased Demand for Legal Services:
Law firms specializing in international trade, customs, and compliance will see a surge in demand as businesses seek advice on navigating the new tariff environment. This includes guidance on supply chain restructuring, tariff classifications, and exploring exemptions.
Firms may also handle disputes arising from cross-border contracts disrupted by increased costs or supply chain issues.
Opportunities in Market Diversification:
Lawyers will assist clients in identifying alternative markets to reduce reliance on U.S. trade. This involves understanding new regulatory environments and negotiating agreements with new partners.
Corporate Restructuring and Financial Advisory:
Small to mid-sized law firms may find opportunities in helping businesses restructure operations or secure financial support through government programs like the Trade Impact Program or loans from the Business Development Bank of Canada.
Franchise and Industry-Specific Legal Needs:
Industries like franchising, agriculture, and manufacturing will require sector-specific legal expertise to address challenges such as cost increases, supply chain disruptions, and employment impacts.
Litigation and Dispute Resolution:
Disputes over contract modifications or terminations due to tariff-related financial strain will likely increase, providing work for litigation-focused law firms.
Impact on Clients
Higher Costs and Reduced Competitiveness:
Clients exporting to the U.S. face higher costs due to tariffs, reducing their competitiveness in American markets. Similarly, Canadian importers of U.S. goods will deal with increased prices due to retaliatory tariffs.
Supply Chain Disruptions:
Businesses reliant on cross-border trade will need legal assistance to renegotiate supplier contracts or find alternative suppliers to mitigate disruptions caused by tariffs.
Contractual Challenges:
Cross-border contractual obligations may need to be renegotiated or terminated as financial incentives shift, creating legal complexities that require expert guidance.
Government Support Navigation:
Clients will need help accessing government support programs like the Trade Impact Program or Farm Credit Canada financing to manage liquidity challenges and diversify markets.
Employment Law Issues:
Companies facing reduced revenues may turn to law firms for advice on workforce management strategies, including layoffs or restructuring under employment laws.
Strategic Considerations for Law Firms
Law firms must proactively position themselves as experts in trade law and market diversification strategies.
Offering comprehensive risk assessments and contingency planning services can provide a competitive edge.
Collaboration with financial advisors and government agencies can enhance client support during this period.
In summary, while the tariff environment creates challenges for Canadian businesses, it also presents significant opportunities for law firms to offer critical legal support across trade compliance, dispute resolution, market diversification, and financial advisory services.
Originally published in BCLMA Topics, Winter 2022 Edition
A fractured partnership, compensation concerns, retention headaches, work delegation issues and a myriad of other significant struggles inside a firm are massively disruptive, stressful, distracting and ultimately, very expensive. In the past few years, we’ve seen managing partners and executive committees who are hard-working and well-meaning but frustrated and tired.
Strategic planning assignments are significant undertakings and sometimes with a lot at stake. Firms invest time and resources to ensure they get it right, and implementation requires long-term commitment to achieve goals.
Colin’s AI assistant Eric
To get most partners on side, a bespoke plan must:
Reflect the culture of the firm and desires of the partners
Be powered by your firm’s data with a professional financial analysis
Be developed at a pace that achieves a tipping point of support by key partners
Emphasize implementation of strategies
Be facilitated by credentialed experts with experience in law firm planning
Every major component of the firm is connected. For instance, if compensation doesn’t reward desired behaviour most lawyers will only focus on current work. When firm governance is unclear or poorly structured, decisions take too long and leadership is lacking or missing altogether. Leadership is fundamental to a highly functioning operation and essential to implementing your strategic plan.
Talent retention is another significant issue lately. When associate retention is low, partners lose the benefits of leverage and spend too much time on billable work rather than mentorship, business development (BD), recruitment, or management. And average costs of losing an associate are now north of $300K, and some suggest more.
Let’s look at some of these issues further.
Compensation model isn’t working for us
Many firms mistakenly decide on a compensation system before developing a plan. This often results in one of two compensation models: An “eat what you kill (EWYK)” formula-based model or an equality model with a lockstep compensation system. Both options have risks.
The EWYK model encourages “lone wolf” behavior at the expense of a team effort or what’s in the firm’s best interest. It can be divisive and stunt growth as only individual effort is rewarded. The equality model can lead to mediocre firm performance and underperforming partners. We’ve seen firms lose high performers under this model.
Instead, we recommend a “subjective merit” model where both qualitative and quantitative criteria are considered in partner compensation. A compensation committee typically evaluates partners’ contributions with the Managing Partner. As a performance-based model, it motivates high performers, rewards good management, encourages team effort and discourages lone wolf behavior. Partners are motivated to do non-billable tasks, help achieve firm goals, and encourage the right partner behaviors, such as firm building and levering work to associates.
Firm governance needs adjusting or an overhaul
Many firms have governance systems that are not advancing the firm’s interests. We have seen the following symptoms when the wrong structure is in place:
Leadership can’t make decisions
The firm is stuck and not moving forward
There is a lack of focus
Decentralized decision-making without oversight
Firm-wide confusion of who does what
No written firm plan
Many firms run as a democracy where partners operate independently and are not accountable to anyone. Firms are hesitant to manage themselves like other businesses with a CEO with authority and responsibility. Instead, committees handle day-to-day operations, including a management committee with little power to execute a plan, if there is a plan.
Indecision results in lower profitability, missed opportunities, high opportunity cost of partner hours spent on slow decision-making, and a loss of good partners who grow frustrated with the lack of firm progress.
The solution is to appoint a Managing Partner (MP) to act as the CEO and coordinate creating a firm plan approved by the partnership. The MP will execute the plan with authority to achieve the firm’s goals. The partnership will evaluate the MP’s performance to recognize the MP’s efforts like any regular business is key. Once this centralized governance system is in place, your firm will become far more profitable and competitive in the market.
Retention of associates is a significant challenge
Retention challenges are causing significant disruption for partners and interfering with firm profits and growth. Of course, associates leave for a variety of reasons, however, firms can recalibrate to better accommodate their needs and desires to win loyalty and a long-term commitment.
Susan’s AI assistant
The associate experience is not what it was 25 years ago, which is stating the obvious. But we regularly engage in discussions with partners who are either puzzled or inflexible to the needs of today’s associates. Many are looking for alternative career paths, meaningful opportunities for growth, client contact, fair compensation, some flexibility to work from home, robust mentorship, coaching and skills training, and work/life balance. Partner investment in associate development should be baked into annual plans.
Engaging with associates on these issues, welcoming ongoing dialogue and taking corrective action are essential in creating an associate-friendly culture.
Our lawyers don’t know how to develop work
A fulfilling career and an opportunity to earn a greater income usually requires developing skills to attract new work. Again, this investment must be supported by rewarding non-billable time for marketing and BD and skills training. Most associates are interested in learning how to retain clients and win new work and expect firms to support this growth. Without associate participation in BD the firm’s succession plan in rainmaking is hindered.
It takes years to generate work, benefit from referrals and develop a desirable practice. Some leave training too late and provide this support too infrequently. Aside from mentorship, BD is one of the largest investments you should make in associates.
Partners frustrated that associates aren’t participating in attracting new work should revisit their training programs, individual business plans, BD budgets and how they reward participating in marketing and BD and origination of work.
Strategic planning connects all your organizational components and links your vision to your goals and actions to create a high-performing firm with an enduring legacy.
Colin Cameron is a chartered accountant and former COO of a large regional Vancouver-based law firm and founder of Profits for Partners, Management Consulting Inc. Susan Van Dyke has held several senior legal management positions and is Principal of Van Dyke Marketing. Together, Colin and Susan bring 60+ years of vast legal management experience in small to large law firms to their strategic planning projects.
With the New Year comes an opportunity to re-energize your people and help your firm achieve its profitability objectives. The pandemic has created new opportunities which you can capitalize on as well.
Update Your Firm’s Business Model
The pandemic has created an impetus for law firms to accelerate remote working options and they have invested heavily in new technology to facilitate remote working as a result. This has spurred some firms to take this further and move to remote hybrid models which allow them to access talent they wouldn’t be able to access otherwise. The remote hybrid model usually includes a central hub with “spokes” out to remote partners who may be distributed in other states, provinces or countries. The advantage is that firms can now provide clients with top talent to meet their needs without the cost of setting up new offices in these jurisdictions.
Colin’s AI assistant Christopher
Update Your Firm Governance Structure
Many firms are still run as democracies where every partner has an equal say in the running of the firm. Often firms have an assigned managing partner who is handling the firm’s management and administrative matters but does not have the authority to make optimal operational decisions on a timely basis. The managing partner’s job description should be updated to provide her the authority to make the best operational decisions and be rewarded accordingly. Firms that make this change usually increase their firms’ profit per partner significantly on a long term basis.
Review Associate Profitability
Do a profitability analysis of all associates taking into account all direct and overhead costs. Many firms find that a significant number of their associates are not profitable. That’s due to either a lack of production or work not being delegated from partners to associates. This may also require adjustments to your partner compensation system to incentivize partners to delegate more work to associates.
Create a New 5 Year Firm Strategic Plan
Many firms don’t have a written strategic plan. Create a new vision for your firm and agree on goals and strategies to achieve your vision. This will help you prioritize your goals and focus your planning efforts in an optimal way.
Update Your Partner Compensation System
Along with your new strategic plan, update your compensation system to motivate partners to align their personal goals with firm goals. Once you have firm goals established, your updated partner compensation system will help the firm achieve its goals.
These 5 strategies will help set your firm up for success. Please call me at (604) 512-8104 if you have any questions and I’d be happy to provide further information on implementing these strategies.
Welcome to my blog. I am a management consultant in Vancouver, Canada providing strategic profit-focused advice to small and midsized law firms. I can help your business realize its true profit potential.
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