A key insight from Lean Adviser is the “Just In Case” pause. This is where lean lawyers take a planned break from the efficient, effective and highly structured work delivery, to stop and ask themselves what have we missed? In this lesson, we take that idea and apply it to our discussion about redefining law firm profit. We started with how making associates more efficient boosts profit and aids retention (Lesson 2-14). Then we put this into a catchy formula which said Profit = Client Focus + Efficiency + Effectiveness, or P=CE2 for those who like symbolic shorthand (Lesson 2-15). Then, in the previous lesson, we added our guide to sustainability, where we turned some thinking on its head (Lesson 2-16).

But we can’t close this series on redefining profit without asking the best question of all: What have we missed? One of the great acronyms which we can borrow from the world of manufacturing is “TGW” — Things Go Wrong. Manufacturers expect TGWs and look out for them. If you think that things can go wrong in scientifically engineered machines, imagine the capacity for this in our world, where causing TGWs for each other is considered part of the daily fun. So, no redefinition of law firm profitability can be complete until we introduce the last component — risk.

In-house and outside firms have an entirely different perspective on risk. To corporate counsel, it’s what they’re paid for. It’s also the aspect of the job that their non-lawyer colleagues understand the most. C-Suite inhabitants will ask about the risks involved in any project. Outside counsel are less comfortable with risk. They are risk averse, by design and by training, and they’re all too aware that they can trip each other up, trip themselves up, or just get hit by random capricious events.

If risk is unexpected and unmanaged, it can imperil not only the project, but also the client relationship and so affect long term sustainable profitability. If you don’t expect risk, then don’t expect repeat business. In contrast, if you do anticipate risk, factor it into your work and advice, then it’s a big part of earning the trust of the clients, which leads to repeat business, which, in turn, leads to sustainable profit for the law firm.

So here’s our tip list for law firms to live with risk and factor it in.

  1. Remember, the first risk was taken by the GC in hiring you, and it’s the only one that can hurt them.
  2. Start with alignment on client expectations, always.
  3. Agree a plan and a road map with the client — if in doubt follow the planning stage in the first Lean Adviser module.
  4. Things will go wrong, so expect setbacks and be ready for them.
  5. Plan ahead and try to anticipate where the big risks might be, and the less obvious ones.
  6. Give business advice with an element of risk recognition and assessment.
  7. Think of risk management as a test of your skill set.
  8. Keep asking what could go wrong, and what might already have gone wrong?
  9. Build active monitoring and risk mitigation into your work and your mindset.
  10. When something goes wrong, detect it, be transparent, tell the client without spin, and then agree to a mitigation plan.