Bad Growth: Destructive to Your Law Practice

Every successful law firm strives for growth. But growth – unbridled – can be dangerous. Our article “Bad Growth: Destructive to Your Law Practice,” published today by Attorney at Work, covers a different kind of growth: bad growth. Read our article to learn how to distinguish good growth from bad growth, and ensure your firm is on the path to productivity and profitability. You can also read the full text here:

The focus of “One of a Kind” has been on growth. Growth that’s good. The steps and strategies identified in prior posts — establishing a niche expertise, a compelling personal brand and a robust content marketing strategy — will lead to more clients, more revenue, more staff and more opportunities. Exciting stuff.

But growth — unbridled — can be dangerous. Things can get out of control. If you’re not careful, your practice can get on a “bad growth” path that is, at best, counterproductive and, at worst, personally and professionally destructive.

Slow and Steady Wins the Race: A Model for Firm Growth

Becoming a “One of a Kind” lawyer requires thoughtful consideration and strategic action to build a practice that has good growth rather than bad growth.

Bad growth happens rapidly and unexpectedly. Many times lawyers and law firms don’t realize they are on a bad growth trajectory until it’s too late. There are many high-profile examples of the unraveling of fast-growth firms, such as Dreier LLP, which result in liquidation and indictments. But more common, if less spectacular, are instances where bad growth leads to anguish, stress and distraction for individual lawyers and small firms.

Many lawyers have experienced bad growth, most often in the form of difficult clients. For some a difficult client is one that is unreasonably demanding. For others, it’s a client that always pushes back on fees. You may not even be aware of the problems particular clients are causing if they act one way with you and another way with associates and staff. While there will always be difficult clients, the key is to limit their impact on your firm or practice.

If you have too many of the wrong type of clients, you may experience growth, but of the wrong variety.

That’s why it’s important to periodically stop and assess your client mix and business objectives. Rather than taking on whatever work comes in the door, strategically determine the type of clients you enjoy working with and the type of work that is interesting and profitable. Instead of selling your services, focus instead on aligning with the right types of clients. If parameters are set in advance, it makes it much easier to turn away work that is not the right fit.

An ad hoc approach to business development leads to bad growth. A more thoughtful one results in good growth.

The Ostrich Problem: An Impediment to Good Growth

Bad growth is often fueled by “The Ostrich Problem,” which is how a group of psychologists in England describe the widespread tendency to avoid information that would inform us as to whether we are — or are not — making progress toward our goals. For example, someone may want to lose weight, but consciously avoids tracking daily calorie intake or stepping on a scale.

In a law firm setting, “The Ostrich Problem” may manifest as ignorance of associate billable hour write-offs, increasing age of accounts receivable, declining profitability, or lack of client diversification. Whatever the symptoms, the cause is often the same: fear.

The “Ostrich” researchers assert that monitoring progress conflicts with the “self-enhancement motive,” which is the idea that people want to maintain a favorable view of themselves, and are fearful of information that would negatively impact that view. At some level, most lawyers experiencing bad growth know it, but refuse to gather or acknowledge the information that would confirm their lack of progress. Without information, there can be no planning. And without planning, there can be no forward progress. Ignorance may be bliss, but it’s bad for the bottom-line.

Establishing a Growth Plan

Adopting a strategic plan for growth helps fuel good growth. When you foster and sustain a manageable growth trajectory, you control your practice, rather than allowing it to control you. Instead of being reactive to the pressures of increased workflow, it’s much better to stay a step ahead by hiring great people, acquiring appropriate office space, creating systems and policies, and implementing helpful technology in advance of the crush of new business.

One paradox of a good growth model is that it often results in — indeed requires — slow, purposeful growth. But once you have the right plan in place, it’s much easier, and more profitable, to attract and retain new clients.

Onboarding New Clients

One of the most important steps in building a good growth practice is to establish an effective client onboarding process. But what is onboarding? It’s a process of engagement and discovery that helps you determine whether potential new client is a right client.

Too often the only prerequisites to forming an attorney-client relationship (a difficult one to end) are a retainer check and engagement letter signature.

Onboarding constructs some speed bumps that slow down this process and help validate that the prospective client is a good fit. It involves conversations with clients about expectations, timelines and financial issues. It’s also a chance for the client to get to know you and your firm.

Bad clients may be put off by this process. That’s the point. Good clients will appreciate the opportunity to explore alignment and set expectations at the outset. It’s a sign to the client that you and your practice are stable, mature and thoughtful in your approach to business. No one likes to find out halfway through an engagement that there were different expectations about objectives or pricing. Having those conversations up-front will preempt uncomfortable ones down the road.

Pruning Clients

Beyond being more selective and thoughtful in developing new clients, good growth can be fueled by pruning your existing client base. Difficult clients can suck up all the oxygen in a room, consuming the energy and focus of a firm and its lawyers. Consequently, good clients feel neglected and leave, or at least pull back. That’s why it’s critical to carefully, responsibly and judiciously part ways with difficult clients.

Pruning is not easy and requires a change in mindset. Many lawyers cling to bad clients like a handhold on a sheer cliff out of fear of losing revenue. But “losing” a bad client frees up capacity — most importantly, mental capacity — to pursue better work and opportunities. Clinging to bad clients leads to bad growth, then stagnation and, ultimately, decline.

Parting ways with a difficult client is not a loss, it’s a gain. It’s much better to “shrink” and marshal resources around good client relationships that hold future promise.

Get On the Right Path

Progress monitoring, planning, onboarding and pruning are all key elements of a good growth plan. If you find yourself on a bad growth path, stop. Cut yourself some slack, because you are most definitely not alone. Armed with real data, start making some small changes that will result in big improvements in your practice.