Time Accelerates
Smaller firms prepare for the future

Author: Richard G. Stock, CBA National magazine, Vol. 13, No. 4 (June/July 2004)

In the last two months, I have been working with five smaller law firms in four provinces, only one in a large metropolitan area. Each firm was concerned about the steps it could take in the next year to meet its goals. There was a sense of malaise about preparedness for the future.

The symptoms are familiar:

• There is usually a group of partners with an average age of 55 or more. In some cases, there is a gap of several years with the next group of younger partners.
• The younger partners do not have their own clients, and too many do not have strong client relationship skills.
• There is a continuous turnover in associate ranks, and it is quite difficult to develop a long-term proposition to attract new ones to the firm.
• A number of the partners have left or will leave the firm (the bench, health, early retirement) before 65, destabilizing the firm's finances.
• The firm's leadership has no game plan to anticipate and manage such fundamental shifts in its talent pool, because it has no precedents and probing discussions are awkward at best.

Time accelerates as a person ages – or at least, it seems to. A 52-year old lawyer has only 25 % - 33 % of a normal working life remaining. Gone are the days when senior lawyers could count on other partners to “buy them out.” The notion that goodwill, Work-in-progress and accounts receivable are transferable assets requires careful scrutiny.

1. Laterally recruiting partners and groups from other firms, as well as seeking mergers to create a larger critical mass of clients, capital and lawyers.
2. Changing the criteria for partnership to include participation in decision-making and profit-sharing, as well as reducing the number of years before admission to partnership.
3. Getting all partners to prepare formal practice plans, including the transition of partners and clients for each lawyer. These are then documented and monitored.
4. Having all the partners declare their commitment to remain with the firm for two to five years. The managing partner of a small firm should know every partner's plans.
5. Improving the profitability of the firm by at least 25%, so that partners can afford to leave at 65 or to leave earlier than planned. The business model in many firms is seriously flawed, but it can be fixed.

Partners in a law firm can no longer leave it to a few colleagues to deal with problems as they come up. As an owner of the business, each partner has a personal responsibility to review and improve the business model for the firm and for their own practices.

If it is true that clients hire lawyers but not firms, then a backup plan is imperative. Clients should also hire teams and the firm, because they provide the service, the infrastructure and the continuity upon which good clients rely. The good news is that some firms across the country are aware of the pressures and are beginning to develop choices for themselves.