How to Protect Your Law Firm’s Competitive Advantage

How to Protect Your Law Firm’s Competitive Advantage

 

“At the end of every day, the assets of most companies walk out the door. The challenge facing those companies is to provide an environment that will encourage their assets to want to return the next morning.” – Lynn Yates, modified by Grant Bright

 

“A truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital.” – Warren Buffet, 2007 Berkshire Hathaway shareholder letter

 

Law partner departures are an accepted practice in the US and UK legal industries. Being prepared and accepting this as a course of doing business in the legal industry will help reduce risk and protect culture. Creating a culture of mutual trust, collaboration and autonomy for lawyers is a function of leadership and a competitive advantage. High turnover is costly and reduces a law firm’s profitability. One of a law firm’s greatest competitive advantages is a strong healthy culture. When a law partner decides to leave and the law firm reacts negatively, it can fracture firm culture and create relational liabilities with clients, the departing partner, internal culture and future laterals. Because law partner departures are inevitable, I want to briefly outline an alternative approach for law firm leadership.

Editor’s Note: Are you a partner with a book of business or a law firm looking to hire lateral partners? Click here to receive our free 2016 Lateral Moves Guide.

 

Elephant In The Room

Law partner departures are here to stay. Kicking against the goads will only create negative relational and equity branding problems that drive down the value of the law firm. When uncomfortable subjects create elephants in the room, the leader’s role is to address the subject head on and implement a safe culture of open communication, thus removing the stigma, the fear and shame.

 

Open Communication

From the beginning, a law firm should set the tone and expectation if a law partner should decide to lateral to another firm. These policies and procedures will be communicated verbally in annual reviews through relational supervisors, practice group or office, all attorney meetings and in all partner meetings. When written, they are communicated in partnership agreements, the firm policy handbook, and in memos via leadership celebrating the departing partner.

 

Policies And Procedures

The tone from the top could sound something like this:

 

It is our desire to create an open environment of communication and mutual respect when a partner decides he or she can no longer call our law firm home. So we request the following:

 

Fiduciary duty: We know you walk in the tension of fiduciary duty to the partnership and to the clients. Understanding this we require that you 1) continue to bill clients to the end of the last day you remain at the law firm, unless we ask you to leave sooner than your notice period 2) refrain from any behavior that could be construed as representing your prospective law firm before you leave. It is a violation of fiduciary duty if you do.

Giving Notice: As soon as you have decided this law firm is no longer called home, and you have accepted an offer from another law firm, we require that you notify us first in person and in writing. Then you are permitted to notify your clients. Some law firms require their partners 30 days after giving notice to their firm to then approach your clients. We do not feel this is fair since we agree that clients choose their counsel. Our requirement though is to speak with us first. We require that you refrain from speaking with your clients before giving us notice; it is a violation of fiduciary duty if you do.

Client matters and files: Our clients are why we exist. In this process consider if your move would jeopardize the client’s current matters and if you should wait until they are more manageable to follow you. Also consider you if you can properly staff your client engagement at your prospective firm. We require that any client files moving to the prospective law firm first have written authorization from the client. Do not take physical or electronic files from the premises of the law firm.

Recruiting: Our people are our assets. We invest in them and hope they come back every day. Thus we require that you do not solicit any staff or non-partner attorneys to join you before you leave the law firm.

Conflicts Check: In the interest of our clients, only submit what is minimally necessary to check conflicts with the prospect law firm. Do this prior to giving your notice to us.

Criminal Behavior: To prevent disputes, please adhere to our requests and avoid “conduct involving dishonesty, fraud, deceit, or misrepresentation in connection with a planned withdrawal.” ABA Formal Ethics Opinions 99-414

 

Make It Easy

I would go further and provide a checklist of steps that departing partners are required to follow. If there are plenty of opportunities for risk to be introduced into this process, why not educate and make it as fluid and safe for everyone?

 

Conclusion

A law firm culture that is proactive, preemptive, and models open communication, will better mitigate the risks of law partner departures and reactive leadership. Remember your assets walk out of the door everyday. Give them reasons to want to come back. A strong culture is an excellent competitive advantage.

 

 


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