Managing Principal Steve Nelson spoke to Law360 on ways law firms can retain partner loyalty and prevent them from rushing out.
By Cara Salvatore | August 25, 2015
Law360, New York (August 25, 2015, 9:31 PM ET) — When partners start departing en masse, law firms may panic and take desperate measures that will only make them sink faster. But experts say there are a number of steps that a firm can take immediately to stem the losses and keep the firm afloat.
What drives firms off a cliff isn’t usually debt or other financial issues. Failed firms with high debt usually took it on in the year before failing, says John Morley of Yale Law School.
“Law firms have freakishly robust capital structures,” Morley says.
In this situation, the partnership needs to do everything in its power to limit inaction, mismanagement and miscommunication.
Fortify Partner Loyalties
Many firms are held together by strong relationship glue, and for those that are, having internal face-to-face meetings can be a valuable marketing strategy. It’s a matter of tugging on existing strings to remind the people who can affect the firm’s future that they want to stay.
“You’ve got to walk the halls,” says Steve Nelson of The McCormick Group Inc. “And you’ve really got to have a person-to-person meeting with all your key partners.”
Morley refers to ties of friendship and trust as “bonding capital.” These are crucial in the U.S., where firms are not allowed to lock partners in with noncompete clauses or similar agreements.
“Firms are more likely to collapse if these bonds are weak and less likely to collapse if these bonds are strong,” he says. “In May of 2014, for example, the chairman of Patton Boggs slowed down a partner run — and may have saved the firm — by simply asking each of the remaining partners to commit to stay.”
The firm successfully completed a tie-up with Squire Sanders LLP last spring.
External Crisis Communication
It’s crucial to start conversations with those who might care that a firm is in trouble because they’re the ones who can save it — or bury it. Use the skills of communications specialists — whether it’s firm employees or an outside public relations team — to get out in front of stakeholders’ doubts.
“You have to get your ducks in a row,” Nelson says. “There is usually someone in the marketing department who has experience in crisis communication. If not, then consider whether you need an outside crisis communications counselor.”
Nelson advises to prepare news releases with bullet points that note ongoing strengths. It’s also important to focus on financials and any steps a firm is currently taking, he says.
It may also be helpful to be forward-looking and feature upcoming highlights because it will remind stakeholders that the firm has a future and isn’t stuck in this moment.
Stave Off Recruiters
Don’t forget about the people who can make money from a firm’s downfall. Not all recruiters are opportunistic, but if a firm is seen as being in trouble, hungrier recruiters will swoop in and start talking to the best people first.
If those lawyers take the bait, there’s a problem, because those are the ones law firms can least afford to lose.
Spend any available relationship capital telling recruiting firms to stay away. And it’s essential to brainstorm how to ward off any recruiters with whom the firm doesn’t have an established relationship.
Coming up with the best way to fend off recruiting firms may take some thought and planning but is well worth the time. The last thing a firm wants when partners perceive a stick pushing them out of their offices is a carrot waiting in the lobby of the building.
Convince Clients to Stay
Persuading clients not to jump ship is vital, and based on their key needs and desires, it actually may not be that difficult to convince them that the grass is actually greener at the firm.
Many clients are focused on dollars and cents, so show them that it might be cheaper not to follow an attorney out the door or seek other counsel.
Also increase the quantity of clients’ ties to the firm. Work to integrate them into the firm and make sure that a single rainmaker isn’t the only point of contact.
And if a partner has already chosen to leave, tell clients that loyalty to a departing attorney just isn’t worth headaches like integration and training.
A lateral move “often disrupts their caseload, because then all of a sudden you have to have new people integrated, new people trained, et cetera,” Nelson says.
“Now … clients want a team. They want to have an integrated group of people they can rely on for their work at all levels within the law firm,” a new development over the last 10 or 20 years, according to Nelson.
“Therefore, in terms of the lateral partner departures, it’s a lot more problematic for lawyers to take a large chunk of business with them,” he says