Beware The Temptations of Short-Term Thinking

I recently had a discussion with a client about the issue of firms backing away from supporting practices that were hot and now are in the doldrums but are likely to bounce back. He had been vigorously sought after as an information technology and corporate lawyer just a few years ago. Since technology is not bound to disappear from or be less important in our lives, these areas of practice can be predicted to have a sunny future.

Most practices tend to be cyclical, but firms also tend to have short memories. Despite the fact that senior lawyers and managers have seen the patterns before, they may be over-zealous in adding attorneys (usually expending sizable recruiting fees) and resources to capitalize on an area when it is hot and then back away or go as far as pulling the plug when it cools down ' even if it is an area with good future promise. This is short-term, reactionary thinking rather than taking a strategic position and investing in it for the long term. When the area turns up again, they will be caught unprepared to handle the work and will have demoralized a significant portion of their personnel. This way of operating discourages loyalty and encourages people to keep the lines open with headhunters and jump from place to place.

We have seen this repeatedly in real estate practice, in the mid-1990s with bankruptcy, and now with technology (not dot-com) practices. What approach might a firm take instead? First, each firm should have a strategic framework to operate within, and partners must commit to it, with review and adjustments at reasonable intervals. The strategic plan or framework needs to be based on market research, not partner navel-gazing. Making strategic 'investments' means that all partners cannot expect to have the same compensation they did in their best year every year. Remember that businesses are subject to the laws of supply and demand.

If market research indicates a future upsurge in a practice area or industry now in the doldrums, don't abandon it or cut back too far. Don't make the lawyers feel like second-class citizens. Clearly, they must earn their keep until a lot of billable work returns. Ask them to spend more time marketing the whole firm, with credit for work they bring in for others. Have those who are willing cross-train in another area so that they can better withstand peaks and valleys. (In fact, I recommend some cross-training of associates at an early point in their careers so that they are more likely to be flexible and productive when their main area hits a down cycle.) Have them work on knowledge management projects and development of new services and products to make the firm stronger and better able to capitalize on market changes.

Looking toward the business world for guidance, a survey reported in the Wall Street Journal (July 9, 2002) by TEC International of 1,450 CEOs and business owners in the second quarter of 2002 on the most important lessons they learned from the economic slowdown revealed the following: First, they learned to respond rapidly to economic changes, and second to maintain their business plans and to continue to invest in marketing. Many wish they had taken action sooner. Asked what are the most important strategies to implement now to help long-term growth, over half said recruiting and hiring top talent. Repositioning the company for growth was the second most important strategy (48% of respondents). Only 12% thought retrenchment was a good strategy, and about as many thought that 'increase expenditures for growth' was as important as 'decrease expenditures to preserve profits' (18%). They want to be ready, not to lose market position, when the rebound comes. That is longer-term thinking.

Firms lose good people because of their short-sightedness and insensitive treatment of people, and it costs them more in the end in dollars expended on recruiting fees, outplacement, training of new people and business opportunity costs.

Phyllis Weiss Haserot is the president of Practice Development Counsel, a New York-based consulting, training and coaching firm that helps lawyers obtain and build profitable and satisfying internal and client relationships, and its new division, AuthenticWorkstm. She is the author of 'The Rainmaking Machine' (West Group). She can be reached at 212-593-1549. URL: www.pdcounsel.com. ' Phyllis Weiss Haserot, 2002.

I recently had a discussion with a client about the issue of firms backing away from supporting practices that were hot and now are in the doldrums but are likely to bounce back. He had been vigorously sought after as an information technology and corporate lawyer just a few years ago. Since technology is not bound to disappear from or be less important in our lives, these areas of practice can be predicted to have a sunny future.

Most practices tend to be cyclical, but firms also tend to have short memories. Despite the fact that senior lawyers and managers have seen the patterns before, they may be over-zealous in adding attorneys (usually expending sizable recruiting fees) and resources to capitalize on an area when it is hot and then back away or go as far as pulling the plug when it cools down ' even if it is an area with good future promise. This is short-term, reactionary thinking rather than taking a strategic position and investing in it for the long term. When the area turns up again, they will be caught unprepared to handle the work and will have demoralized a significant portion of their personnel. This way of operating discourages loyalty and encourages people to keep the lines open with headhunters and jump from place to place.

We have seen this repeatedly in real estate practice, in the mid-1990s with bankruptcy, and now with technology (not dot-com) practices. What approach might a firm take instead? First, each firm should have a strategic framework to operate within, and partners must commit to it, with review and adjustments at reasonable intervals. The strategic plan or framework needs to be based on market research, not partner navel-gazing. Making strategic 'investments' means that all partners cannot expect to have the same compensation they did in their best year every year. Remember that businesses are subject to the laws of supply and demand.

If market research indicates a future upsurge in a practice area or industry now in the doldrums, don't abandon it or cut back too far. Don't make the lawyers feel like second-class citizens. Clearly, they must earn their keep until a lot of billable work returns. Ask them to spend more time marketing the whole firm, with credit for work they bring in for others. Have those who are willing cross-train in another area so that they can better withstand peaks and valleys. (In fact, I recommend some cross-training of associates at an early point in their careers so that they are more likely to be flexible and productive when their main area hits a down cycle.) Have them work on knowledge management projects and development of new services and products to make the firm stronger and better able to capitalize on market changes.

Looking toward the business world for guidance, a survey reported in the Wall Street Journal (July 9, 2002) by TEC International of 1,450 CEOs and business owners in the second quarter of 2002 on the most important lessons they learned from the economic slowdown revealed the following: First, they learned to respond rapidly to economic changes, and second to maintain their business plans and to continue to invest in marketing. Many wish they had taken action sooner. Asked what are the most important strategies to implement now to help long-term growth, over half said recruiting and hiring top talent. Repositioning the company for growth was the second most important strategy (48% of respondents). Only 12% thought retrenchment was a good strategy, and about as many thought that 'increase expenditures for growth' was as important as 'decrease expenditures to preserve profits' (18%). They want to be ready, not to lose market position, when the rebound comes. That is longer-term thinking.

Firms lose good people because of their short-sightedness and insensitive treatment of people, and it costs them more in the end in dollars expended on recruiting fees, outplacement, training of new people and business opportunity costs.

Phyllis Weiss Haserot is the president of Practice Development Counsel, a New York-based consulting, training and coaching firm that helps lawyers obtain and build profitable and satisfying internal and client relationships, and its new division, AuthenticWorkstm. She is the author of 'The Rainmaking Machine' (West Group). She can be reached at 212-593-1549. URL: www.pdcounsel.com. ' Phyllis Weiss Haserot, 2002.