Is it Bad to Be Part of or Join a Law Firm with High Turnover?

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Is it Bad to Be Part of or Join a Law Firm with High Turnover?

[By A. Harrison Barnes] *This is the second part of a two-part series. To read the first part, visit the LawCrossing archives now!

building them may lack good judgment in

of managerial decisions regarding partner

dealing with finances or with the way they

compensation. This is something that

New firms are often exceptionally

acquire and retain new clients. Lack of

has driven hundreds of law firms over

dangerous places to work, and they

judgment can raise the most pernicious

the edge and made them impossible

frequently experience massive turnover in

problems for new law firms.

places in which to work. What typically

The New Firm

happens is that the partners with the most

their early years as their leaders grapple with how to run them. The high turnover

Thus, when you begin to see massive

business-or even outside consultants-

rate can be attributed to a variety of

amounts of turnover at a new law firm,

will make sweeping changes to the firm’s

factors, from financial issues regarding

it is important to ask several questions.

compensation plan. This can cause anger,

compensation levels and the ability of

You will need to understand whether the

factions, and resentment to develop

the firm to make payroll to business

turnover is due to financial uncertainty

amongst the remaining partners. Such

crises resulting from decisions made by

and business problems or due to

anger often causes the firm to implode.

naĂŻve young partners with no business

management issues. If the turnover is

experience to interpersonal conflicts

a result of financial issues, my advice

Small law firms may go psychotic when

stemming from difficult partners who may

would be to avoid the law firm. If the

one or two of the partners no longer

have moved from other firms to assist

turnover stems from interpersonal or

get along or when one partner becomes

with starting the new firm. Regardless of

management issues, the situation may

involved in illegal activity. This even

the reasons for the turnover, significant

require additional examination. New

happens in large law firms from time

numbers of departures from new law firms

law firms may be able to work through

to time. Ultimately, the psychotic law

must be closely examined.

management issues; financial issues, in

firm will be characterized by turmoil and

my experience, generally require a good

nonsensical decision-making.

One major problem at new law firms, which

deal of time to overcome.

has been mentioned above, is that partners who start and run new firms often have

The Psychotic Law Firm

no business experience. In fact, these partners are often completely clueless

The psychotic law firm is generally

about what it takes to run a business.

characterized by the inability of attorneys

Financial concerns such as making payroll

within the firm to communicate properly.

or budgeting for office expenses are often

Thus, the psychotic law firm generally

secondary or ancillary concerns for busy

has an unworkable social structure

partners who are focused on growing a

and/or interpersonal constructs that make

young law firm. What’s more, attorneys

communication between partners within

are generally not the best managers. Their

the firm impossible.

approach to business frequently means farming out work and then micromanaging

Law firms do go psychotic. Psychotic

assignments to make sure they are

law firms are generally small, but large

completed to their expectations. Their

law firms can go psychotic, too. I have

approach does not necessarily involve

seen this happen numerous times, and

nurturing you and making sure you are a

it is not fun to watch. The process can

happy attorney. Finally, a major problem

happen in a number of ways. Typically,

with new law firms is that the partners

law firms end up going psychotic because

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Law firms that have gone psychotic resemble people who have gone psychotic.

They may get better, or they may not.

You need to use your own judgment to determine whether you think the psychotic law firm will stabilize. In most cases, however, you are better off leaving the law firm that has gone psychotic, especially if you are seeing mass turnover.

The Acquisition Target Many law firms are good acquisition targets for other law firms. Generally, an acquisition target is a large, very topheavy law firm that is experiencing rapidly declining revenues or a very successful, specialized law firm in a smaller practice area (real estate or intellectual property, for example). continued on back

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Conclusions

Without going into a lot of discussion, I will

acquisition targets. This is because

note a few facts about acquisition targets.

partners in the target firm often have the

Larger law firms that are top-heavy and

opportunity to make more money if they

When you are seeing a rash of departures

experiencing declining revenues may be

move into a larger, full-practice firm where

from your law firm, the chances are very

in that predicament because they have

they can perform work in other areas.

good that there is an underlying social,

too many partners who are not profitable

For example, partners at a firm that does

business, or economic dynamic at work.

(i.e., older partners without business or

all intellectual property patent work can

In order to decide whether you should be

who do not work hard). For a variety of

increase their income if they move to a

alarmed about these departures, you need

reasons, the acquisition target may not be

full-service firm where they will be able

to determine what is driving them and

letting these people go. (Remember, most

to get corporate, real estate, and other

consider whether there are danger signs

attorneys are not good businesspeople).

types of work from their clients. This is

that hint that there is something seriously

Therefore, what often ends up happening is

advantageous for the partners in the target

wrong with the social fabric of your firm.

that when merger talks begin with another

firm. It can also be advantageous for the

If your firm looks like a flash in the pan,

firm, both parties will sit down to ask what

acquiring firm because it can often acquire

a conformist firm, a new firm, a psychotic

the other side offers and to review the

a practice group that it did not have or add

firm, or an acquisition target, you may have

financials of the various partners in both

a more profitable group to its practice.

cause for concern and may want to exit

firms. The least profitable partners are

along with the herd.

often going to be told they have to go. The

In all instances, the acquiring firm will not

same goes for many of the associates.

want the nonproductive members of the

However, remember that there are no hard

That’s why prior to or during the process

team. Members are labeled nonproductive

lines that govern mass departures because

of a merger involving a large law firm,

when they are not generating significant

turnover can, in fact, be very, very good

you will start seeing a rash of departures.

revenue or new business. Once merger

for a law firm. If your firm is improving,

More often than not, this is not a good sign.

talks have begun but prior to any

growing, and getting more profitable,

Unless you have a very close mentor in the

formally announced acquisition, you will

that is a good thing. In order for a firm to

firm, you could very quickly be out of a job.

generally see a rash of departures of

improve, sometimes people need to leave.

In merger situations, both sides generally

underperforming partners who leave to

If your firm is attempting to better itself

want to retain only the best partners and

work in-house, teach, or practice at much

and people are leaving in response to this,

associates from each side.

less prestigious firms. This is not a good

my advice is to stay put. The turnover may

sign, for the most part, because it suggests

be the result of efforts to provide a better

that you are at a firm that may be dying.

future for you and others within the firm.

When smaller firms are very specialized and successful, they also make good

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