Law Firm Recipe for Disaster: High Debt, Low Productivity, Weak Leaders

Law Practice Management

Law Firm Recipe for Disaster: High Debt, Low Productivity, Weak Leaders

Posted Nov 20, 2008, 09:03 am CST
By Debra Cassens Weiss

A legal consulting firm’s analysis of law firm failures suggests that “poor financial hygiene,” including high debt and low productivity, are danger signs of a possible failure.

Other problems are weak leadership and an unrealistic or nonexistent long-term strategy, according to the report by Hildebrandt International. The consulting firm urges law firms to diagnose and tackle problems early to prevent them from deteriorating into full-blown dissolutions, according to a summary of the report in the National Law Journal.

Hildebrandt analyzed why more than 80 law firms failed, and found that the problems often snowballed after events such as partner defections, failed mergers or overexpansion. Outside events—such as the recent Wall Street meltdown—can also expose and worsen existing problems.

The report (PDF) concludes that Heller Ehrman and Thelen probably won’t be the only law firms to fail. "Recognizing that the legal market is continuing to segment, we expect that we will continue to see a steady number of both mergers and dissolutions, even after the recovery from the current economic downturn," it said.

Updated at 12:32 p.m. to include a link to the report.

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Posted by B. McLeod - 1 month, 2 weeks, 3 days, 21 hours, 40 minutes ago

Another stellar analysis. “Retaining consultants” might well be an additional predictive sign of possible failure.

Sadly, a “nonexistent long-term strategy” is the current business model of most U.S. businesses.
Posted by Harvard - 1 month, 2 weeks, 3 days, 2 hours, 34 minutes ago

All 1st year lawyers deserve $175,000 a year because they went to Harvard or Yale.
Posted by MJ - 1 month, 2 weeks, 3 days, 2 hours, 30 minutes ago

Really? No! High debt and poor leadership is bad?

I could have told them that for less and I’m a mere associate.
Posted by B. McLeod - 1 month, 2 weeks, 3 days, 2 hours, 26 minutes ago

For those not acquainted with current android product lines, the SOC8 is a few levels up from an R2 unit, but lacks the trim and verbal polish of a C3PO.
Posted by Increasingly Nervous 3L - 1 month, 1 week, 1 day, 15 hours, 49 minutes ago

Do many large law firms have debt? I interviewed with a couple BigLaw firms where one said borrowing money was the norm, while the other said that it had zero debt. I chose the firm with zero debt.

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