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Guest Post: Three Leading Indicators of Failure

Can you remember a time when there was so much talk of more BigLaw firm failures? I can’t.

Count yourself a believer or a sceptic (and there are hard core advocates on both sides, including gleeful cheerleaders in the first camp and diehard deniers in the second camp), this is a new phenomenon on our landscape.By way of comparison, not incidentally, think of all the industries where cocktail chatter about the next firm to fail is coin of the realm: Silicon Valley, most prominently, but also broad swathes of the economy from manufacturing to service providers to small business, which features the highest mortality rates of all. I have news for you: failure is commonplace; decades in existence is rare; survival across multiple generations is exceptional.

And no one is entitled to continued survival.

Which brings us to today’s topic.

If failure, even prominent failure, may become a more regular feature of our landscape, what might be the early warning signs?

I nominate three.

I. Fuzzy, non-existent, or delusional strategy

This may seem obvious, but I have a fairly rigorous definition of what strategy means, and of how well – if at all, actually – you’ve communicated it to the rank and file. Virtually any firm you ask (I’ve asked a lot of them) will tell you they ‘have’ a strategy, but as soon as you begin to explore matters, you all too often discover there’s no thing there.

What are the ways a putative strategy can turn out, upon examination, to be devoid of content? Here are a few:

The strategy statement actually has nothing whatsoever to do with strategy, it has to do with nebulous self-congratulatory assertions: What makes our firm distinctive is ‘our culture,’ ‘our collaborative nature,’ or worse, ‘our entrepreneurial spirit’ I have bad news: As precious as your culture may seem to you, clients don’t care a fig about it. When was the last time you saw an ad for clothing, cars, liquor, or anything under the sun, that enticed you by asserting how strong the culture of the sponsoring firm was? Sorry, but get over it.

Celebrate it internally to your heart’s content; it’s not a strategy.

The strategy is aspirational and generic, but not distinctive or concrete. ‘We aim to provide superior client service through the most talented professionals in each of our practice areas.’

Nice. As opposed to substandard client service through mediocrities?

Nobody at the firm has the remotest idea what the strategy is.

(A variant on the above): You have a thorough, comprehensive, and intelligently developed strategy which sits in ring binders on everyone’s shelf and has for five years.

Increased revenue or profitability are not strategies. They are the results of a market-driven strategy executed with consistency and discipline.

You don’t know who you are, and your strategy statement exposes that for all the world to see. The most common error in this category is along the lines of, ‘We [do/want to do] only the highest value work for the best clients in “bet the company” mode.’

Unless the name in the lobby is Cravath, Cleary, Davis-Polk, Paul Weiss, Simpson-Thacher, Sullivan & Cromwell, or their ilk, good luck with that.

Know who you are.

Unless you know who you are, any client, any matter, any lateral opportunity, is as good as any other. You will be rudderless, and your clients, lawyers, and staff will know it.

II. Gorillas

As in, you have too many gorillas—and you tolerate, or worse, indulge them. Even one gorilla is too many if he’s sufficiently obnoxious (and yes, they always seem to be ‘he’s’).

What’s so bad about gorillas?

Where to begin?

They are living, breathing embodiments of the proposition that the firm exists to serve their personal self-interest. By extension, anyone else who doesn’t treat the firm the same way is a chump.

They wilfully repudiate any notion that being together in a common enterprise should be expected to create bonds of mutual obligation and responsibility.

They adopt a posture of conspicuously poking their thumb in management’s eye and daring you to do something about it. This achieves two goals for them:

First, they make it undeniably clear to the rest of the firm who’s really in charge; and

Second, they unilaterally deprive you of one of your greatest sources of power in a conventionally organised law firm—moral suasion with your partners.

The very fact that you continue to tolerate them exposes anything you might care to preach about ‘collaboration,’ ‘collegiality,’ and so forth as a transparent Big Lie to everyone in the firm. People have acute antennae for hypocrisy, and they’ll know what’s hot air and what’s reality. The gorilla is reality; you are hot air.

They demoralise the good citizens, and the less powerful people are the more demoralised they are. Imagine yourself an associate in the office of a gorilla: Do you have a fighting chance to have a real conversation or learn anything constructive?

About this time you’re probably thinking, well, they’re gorillas for a reason; they have a huge book of business. This matters if your time horizon is measured in terms of this fiscal quarters; it doesn’t matter if your time horizon is measured in years, decades, or generations.

This is where it comes down to spine and backbone. If you care to solve the problem, you need to take the biggest one out back and shoot him. It will deliver the most powerful message you can imagine, and you won’t have to do it again any time soon.

Or don’t.

III. Weak leadership

Weak leadership, as with our first indicator, fuzzy strategy, may seem obvious or even vacuous. Permit me to dimensionalise it.

Weak leadership as I use it in this context means deference to the lowest common denominator, the partner(s) with the reflexive opposition complex.

You know who these people are: Without needing any prompting whatsoever, they can spin out far-fetched objections to even the most commonplace suggestions, and their resistance is immune to any sense of context or proportion. Unfortunately, in far too many firms their opinions carry the day for fear of ‘offending anyone’ or in order to ‘preserve our culture.’

Sorry if I’m about to offend anyone here, but indulging the irrational reservations of the minority is to preserve a ‘culture’ which is more deserving of euthanasia than reinforcement.

I’ll give you an example.

This past week I was a moderator and panelist on a webinar about entry-level associate recruiting practices, and I’d presented information about the percentage of the Fortune 500 that use objective testing as part of their recruiting process—90%—and the attrition rate at Google, which has notoriously rigorous, some would even say laughable, recruiting practices. And even though the turnover rate at Google is relatively high—we’re talking about a lot of 20-something’s with rich opportunities at their feet—job satisfaction, at 84%, is among the highest in the Fortune 500. Given this broadly positive track record across corporate America, I confessed that I was perplexed that the legal industry, obviously a high-stakes recruiting environment, hadn’t embraced testing as well.

A question came from the audience: ‘But what other firms are doing this? We don’t want to be the first.’

My answer was that 90% of your clients are doing it, so it’s a bit too late to be the first. Nevertheless, my heart sank; I knew that person’s mind had slammed shut on the concept.

In the management literature, you occasionally—not often enough for my taste—see reference to the syndrome of ‘planning for failure.’

That’s exactly what the naysayers with their far-fetched hypotheticals are doing. They have already decided that nothing we’re not already doing could possibly work, so why risk it? They’re planning for failure.

This actually illustrates another slightly different dimension of weak leadership: Not just catering to the lowest common denominator, but adopting a default posture of following the herd—no matter where it may lead you astray. At the very least, following the herd guarantees mediocrity.

Great organizations are not created by consensus. Committees don’t create.

What do all three of these conditions have in common?

They all reinforce, or at best do nothing to oppose, the inherent centrifugal forces innate to a loosely governed law firm partnership. I started this column by talking about firm failures; here you are staring at the very ingredients that increase the odds on that sorry and grossly unnecessary outcome.

If you diagnose any of these conditions in your firm, take a harder look.

There better be a compelling reason why you have an exception on your hands.

Bruce MacEwen is president of legal management consultants Adam Smith, Esq. You can read the blog here