Marcie Borgal Shunk.

Smart Strategy

Law firms today are mired, for good reason, in short-term decisions: the best ways to help and support clients and talent, how to preserve cash flow and ensure financial sustainability, and what precautions need to be in place as firms consider reopening. It is easy, in these tumultuous times, to set aside considerations of long-term planning, or even suggest forward-thinking exercises are a waste of time. Yet history tells us otherwise.

We know from experience as recent as the financial crisis of 2009 short-term decisions can have long-term impact. Law firm behaviors today reflect past learnings including fewer unfunded pensions, less overall carried debt, a more modest approach to lateral guarantees, larger nonequity classes and, to date, more furloughs and fewer layoffs this time around. Some firms, like Morgan Lewis & Bockius and BakerHostetler, even continue to invest, demonstrating to the market their resilience and willingness to invest in the firm's future even when the chips are down or the environment uncertain.

Times like these present a unique opportunity to secure long-term competitive advantage or, conversely, to set off a downward spiral. Small banks, for example, that assisted business owners in securing PPP loans when big banks imposed hurdles, or local businesses that stepped up to fill the gap when Amazon's toilet supply ran dry (pun intended) created the types of lasting, emotional connections that drive customer loyalty. At a macro-level, firms interacting responsibly with clients and talent and preparing themselves for a potentially quite different future state are poised for substantial gains. If your firm's goal is to widen the gap between you and the competition, the time is now.

There are many proven approaches to ensure crisis-time choices do not undermine a firm's long-term prosperity. Underlying all of them is a unifying theme: be mindful today to protect tomorrow. Here are some ways to achieve that objective:

Build Long-Term Sustainability Into Short-Term Decisions 

During a webinar hosted by the Legal Value Network, Stuart Dodds of Positive Pricing and I hashed out the tendency for law firms to overemphasize the immediate and short-term impacts of major decisions in times of crisis. Lawyers, after all, are highly analytical and prefer to avoid risk. The appeal of setting aside the unknowns for a "later date" and tending to the here and now is almost too good to resist (it's part of the very fabric of most law firms with their cash-based accounting and partnership structure).

The solution: attach a requirement to every major decision right now to include a consideration of how this action will impact the firm over the long haul; and how to mitigate any downsides. For example, furloughs have the potential to be disruptive not just to those furloughed but also to those left behind. Cultural erosion and employee disengagement are two real and tangible long-term impacts. Mitigating these outcomes demands clear, transparent communication, routine check-ins (with those furloughed and those not), defined expectations and, when possible, empowerment of people to have a hand in their own destiny.

Methodical Cuts, Strategic Investments

Blanket cost-cutting and spending cuts may help the bottom line and improve cash flow in the immediate-term, but taken too far or adhered to for too long, they can have a major detrimental effect on a firm's financial health. Consider an analogy: adopting a strict regimen of caloric restriction for weeks may yield positive results initially. Fasting is documented as creating positive, lasting effects for the human body. However, over extended periods, without associated supplementation, strength training or increases in healthy foods, the body begins to deteriorate, losing muscle and vital nutrients in the process. Simply imposing restrictions, without offsetting with targeted additions, has a detrimental effect.

To counterbalance expense management, use a surgical approach rather than a hacksaw. Resist the temptation to cut across the board, despite the ease of communication and implementation. Instead, invest the time and resources to select places for targeted investments. Client outreach and communications, talent development in select areas, business development coaching and training, certain technology investments, especially those supporting the firm's ability to effectively work remotely and better leverage data, and resources to enhance leadership and strategic decision-making capabilities are critical to enhancing sustainability. Creative solutions, such as the redeployment of lawyers in slow areas to expected growth sectors such as bankruptcy and restructuring, likewise creates competitive advantage.

Don't Make the Same Mistakes Twice

In the words of Rafiki, the wise baboon elder from "The Lion King," "Yes, the past can hurt. But the way I see it, you can either run from it, or learn from it." Many firms made missteps in the 2009 financial crisis, perhaps the most notable being layoffs which waylaid firms from coming back online as quickly as they might and left a permanent gap across the industry in well-trained attorneys of a certain age. Take the time to reflect on and study the errors law firms made during the last downturn. Examine today's top performers for signs of what they may have done right and emulate those behaviors. As a recent European headline read, "Layoffs are so 2009."

Deploy Scenario Planning

Oft confused with the use of scenarios in crisis planning, scenario planning in the context of preparing for enduring viability helps organizations envision a small number of future states based on substantive macro-trends. These future states, or as science fiction aficionados might refer to them, "alternate realities," offer insights and frameworks against which to test hypothetical strategic moves, investments and vulnerabilities.

For example, in a world with a continued increase in nationalism, reduced global cooperation and a rise in domestic manufacturing, how would clients be impacted and, in turn, how might a firm alter its course to adapt and compete more effectively? Layer on another two or three alternative perspectives and a firm can begin to triangulate its path with greater clarity into the likelihood of success and range of possible outcomes. Plus, the timing to deploy scenario planning couldn't be better; which, conveniently, brings us to the final point.

Get the Right Help

In this cost-sensitive, ever-changing environment it is tempting to go it alone. After all, no one knows the right answers. However, even without the right answers, the right resources can provide invaluable support and guidance. For her book, "Getting it Right: How Working Mothers Successfully Take Up the Challenge of Life, Family and Career," psychologist Laraine Zappert interviewed alumna from Stanford's Graduate School of Business as they became mothers about the complexities of how (and whether) to balance a demanding career with motherhood. The single most powerful takeaway: get the help you need. Whatever it takes, even if initially it sets you back financially, invest in the resources to make it work, alleviate the strain and retain your mental and emotional health in the process. For new moms, that means night nurses and nannies, house cleaners and launderers, friends, neighbors and even that crazy aunt.

For law firms, the titles may differ but the concept is the same. Business development coaches, technology experts, crisis managers, strategy facilitators, leadership trainers, talent managers and more are essential to help law firms navigate these challenging times. Tap into existing, well-prepared professionals on the administrative staff (nod to Morgan Lewis for recognizing these assets so publicly) and augment internal resources with experts, seasoned professionals and contract support, as needed. The adage, "it takes team work to make the dream work," couldn't be more a propos.

Author's note: A gracious thank-you to my co-presenter and brainstorming partner, Stuart Dodds, of Positive Pricing for helping to refine, enhance and expand on many of the ideas included in this article.

Marcie Borgal Shunk is president and founder of The Tilt Institute, a firm dedicated to unveiling new perspectives on law firm growth through intelligence, innovation and intuition. She specializes in helping law firm leaders make better, data-driven business decisions. Shunk is also a member of the ALM Intelligence Fellows Program. 

More information on the ALM Intelligence Fellows Program can be found here.