Learning to dance in the rain?
One of the lessons that has been learned the hard way over the past few, very difficult months, is that the survival instinct is astonishingly powerful.
From an external point of view it has been very interesting that compared with the last big recession in the late eighties and early nineties, the speed of reaction of law firms to ensure survival has been far quicker and far more comprehensive than might have been anticipated.
Why should this be?
One possibility is that events themselves have moved far more swiftly in the current recession.
It may, however, be as much indicative of the increased commerciality of business life generally as to differing circumstances within the profession.
This is not to deny that changes in the legal industry have altered our approach. On the contrary, we are all aware that the last fifteen years have seen the introduction of some of the most far-reaching developments in its history. Remember the days before the Franchise? Just think how much has happened since then - IiP, ISO9000/01, Lexcel. And the net effect of the changes has nearly all been directed at the profession becoming more business-like in its dealings. Even the regulatory-driven measures have leant in that direction. Money-laundering and complaints handling are just two of them. Diversity and compliance with a new Code of Conduct are others.
The business-like approach has meant that there have been lightning-fast cuts in areas of expenditure where we were once far tardier. Although this has meant that we may currently be perceived as less people-orientated and more hard-nosed than may have heretofore been the case it is now accepted that there is nothing unusually harsh in being business-like.
But proof that we are more business-like than we used to be encompasses more than spotting storm clouds on the near horizon and battening down the hatches and riding out the storm.
The quite extraordinary changes we have been witnessing in recent months in fundamental parts of business life are unlikely to be repeated in our working lifetimes. But do they mean that life as we know it has come to an end? No; but they mark the start of a different era to the one we have all been working in for the past fifteen years or so.
The firms that are really going to be showing their management mettle are the ones that are doing something positive. There is still business to be done and actually being done. The firms that are going to benefit are the ones that aren't just battening down the hatches during the recession, waiting for its storm to pass.
They are the ones who are actually using the time that they are finding on their hands in working on their businesses and in looking at just how they can adapt best to changing market conditions.
If we take a look at what other industries are getting up to - and, save for questions of scale and product there are many common factors with them - then there is much to be learned about life in the harsh lane, marketing and positive thinking. Just watching the international motor industry re-invent itself under pressure is an absolutely fascinating process. The changes accelerated by the threat of imminent execution show how the rate of acceleration of change can benefit us all.
Like the motor industry, the level of legal business having fallen off a cliff over recent months has left us with plenty of time to ponder over how life will be in the future. Are we using this time as wisely and as profitably as we can?
One approach is the deployment of the head in the sand argument. This has been done very effectively in the past on the basis that we should all "go back to our rooms and get our heads down and do some real work". But this time we have surely learnt from past recessions that there is more to recovery than this and there is now a real opportunity to be different.
So how can we start to apply this positive thinking to our own legal businesses?
How do we join the ranks of those most likely to succeed?
It's actually a very straightforward checklist:
How's the war chest?
Surprisingly, the fundamentals in this area are often ignored.
How healthy is your office a/c and what are you doing to maintain it?
How is your time recording and how much WIP do you have stacked up? Are you converting it effectively?
Have you put effective interim billing processes in place?
What are the debtor and disbursements ledgers like?
What levels of profitability and profit are you maintaining?
Are you monitoring all these performance indicators regularly at all levels in the firm?
What major expenditure projects do you have coming up? Should they be going ahead anyway or should they be reviewed - even if to re-affirm them?
Carry out an expenditure review. Take the game to your suppliers.... the same thing may be done to you...
When did you last meet with your bank?
Despite the all too obvious current ironies in this area the relationship that you enjoy with your bankers is an absolutely crucial part of successfully managing a recession. So by all means make the jokes, but don't compromise the relationship!
It is vital to demonstrate that you are running the business - rather than the other way around. This means above all else having a good current working knowledge of all the KPI's mentioned in the preceding paragraphs
How are your people?
We cannot afford to view staff as an expense rather than a vital part of the money generating process.
How are their motivation levels? How do you know? Do they know what your expectations of them are?
Do they know what's going on? Are you keeping them properly informed?
How are you managing their fears about the recession?
And are their personal development reviews up to date?
Make sure that you are looking after existing staff well so that they do not choose to go as soon as there is an upturn. Keep a careful eye on staff benefit/salary sacrifice schemes as reward mechanisms when salary increases are a remote option.
Department operational plans and (infra)structuring
Have you got the optimum levels of resourcing in the relevant departments to look after business now AND in an upturn?
Review how your IT systems are operating. Are they going to stand up or let you down? Review the existing maintenance contracts. Are they delivering what you need? Don't be afraid to challenge your suppliers - they might even be refreshed at the positive levels of interest you are taking!
Review the delivery systems for work in each of the firm's departments. This is another key area where there is a tendency to carry on delivering the same old product in the same old way. Look for ways to enhance internal efficiencies to help your product be delivered to a higher quality standard. Consider how external standards might help your business.
Following these pointers will gain you some basic business fitness that will enable you to think far more clearly about the steps needed to grow your way out of the recession
NOW.... WHAT CAN WE GAIN FROM A PERIOD OF RECESSION?
There are opportunities open to positive thinking firms in a number of areas. These relate to:
internal management - This is a good opportunity to do some strategic housekeeping and get people into new habits through necessity. Don't come out of the downturn looking exactly the same as when you went into it (give or take a few battle scars). Your market will be anticipating a refreshed, if not new product, and your competition will also have moved on. Again, the motor industry is a good parallel.
internal investment - This is an excellent time to strike bargains on capital expenditure when suppliers who are also suffering badly are highly enthusiastic about doing deals
staff - It is not just about redundancies. There is also a much greater pool of high quality people to choose from and it is very much a buyers market. Don't compromise your options by leaving it too late so that all the high quality staff have already been placed and those that are left can dictate salary levels.
marketing - Keeping the product fresh is just part of this. Increase your networking. Look at what the competition is doing. Carry out a market positioning exercise for your key areas and make sure that they don't conflict. Don't be afraid to purge your client base of rubbishy clients who take up disproportionate fee earning time for low margins that they then don't pay. They do not fit comfortably with recovery plans. Above all have a clear idea of where you're going. Not easy in difficult times, so keep your plans under very regular review.
Why is all this important?
We must be fit for action when the economic tide turns for the better - as it surely will. We cannot yet be certain of the effect of extraordinary government measures on the usual performance indicators - but those indicators are coming close to where a recovery might normally start. Money is starting to trickle back into the mortgage market. New Legal Marketing Networks are being launched. If we wait for a full recovery before we take steps to be a part of it we will be too late to reap the longer-term benefits.
In other words, "life isn't about waiting for the storm to pass, it's about learning to dance in the rain". What will you be doing?