Law firms are complex organisations, with success rarely attributable to just one or two factors. Similarly, those firms that consistently underperform typically do so for a number of reasons, which are most often interrelated. These include external factors, such as the market dynamics and regulatory issues about which we have so often written, but in diagnosing and remedying chronic underperformance, managers must focus on those things they can influence – they should ‘control the controllables’.
System and Process
The complex dynamics of the legal market in recent years, with globalisation, deregulation and competition from low-cost organisations (often employing cutting edge technologies and utilising outsourcing solutions) all playing a part, have left those firms employing inefficient processes and outdated systems even further behind the competition. Ineffective systems and unclear management information make the task of managing the firm extremely challenging, and complicated processes hinder cooperation.
Strategy and Direction
The partners in some firms have been in post for many years, acceding to the partnership in a growing market in which high demand fed high fees, and, for some, the realities of a much more challenging and crowded marketplace are yet to fully hit home. Although there are, of course, many others who fully appreciate the commercial challenges facing them, the consequence is that clarity on strategy, roles and performance objectives can be lacking, especially if the firm has recently undergone a change in senior leadership. This can lead to a lack of clarity not only in respect of strategy and roles, but also to an absence of leadership and direction – to firms drifting, without a clear sense of the clients they are seeking to serve or their own key differentiators in their market.
Rapid Growth Syndrome
Despite the difficulties that many firms face because of slowing demand and falling revenues, there are also those firms facing another set of issues entirely – the complexities that come with rapid growth. Aside from the overtrading trap into which many businesses fall, of growing too quickly and finding themselves unable to fund larger inventories and, for law firms, higher levels of WIP, growing too quickly can lead to management and staffing structures that are no longer aligned with the profile of the firm. In practice this means that responsibilities and accountabilities can quickly become unclear and staff engagement soon suffers.
Urgent and Important
It is most likely that firms trying to combat underperformance must deal with a number of issues, including several of the above – but that because the underlying causes are complex and interrelated, they are not immediately obvious and may not be identified until problems become chronic. In this situation there are unlikely to be quick fixes, but the priority must be to identify both the urgent and the important issues – and to address the urgent while coming up with longer term, sustainable solutions to the important.