Transitioning to an Institutional Law Firm
Although there might be exceptions, “institutional” law firms appear to have been most successful in attracting and retaining international clients.
These are law firms that either never were traditional family firms nor were built on the vision, reputation, and hard work of a single founder. As a general rule, they are usually best capitalized to make long-term strategic investments. They also are most likely to have reliable and efficient decision-making processes. They have management structures and systems in place that, although not perfect, assure a reasonably consistent delivery of the highest level of professional excellence and client service.
Any law firm, regardless of size, can become an institution in its legal services markets.
This is a special challenge for smaller law firms.
The above observations are not intended to devalue to role or importance of family law firms, sole-proprietor law firms, or other first-generation firms generally. Rather, the “institutional law firm” concept points out that long-term success is not guaranteed for any law firm that has not seriously thought about and acted on the need to plan its transition to the next generation, and that smaller firms frequently face special challenges in doing so.
The issue is not the short-term quality or value of these smaller firm; it is one of long-term viability. Failure to plan and manage succession usually results in an exodus of partners and clients within five to eight years — sometimes sooner —and, in many instances, the dissolution of the firm. Even if a firm survives the departure of its founders, it is likely to remain only a shadow of its former self.
Can your law firm pass these three tests of progress toward becoming an institutional law firm?
There are three factors that are especially reliable indicators of the extent to which a law firm has made the transition to an institutional firm:
Does the firm have a documented governance structure and management system? This is usually necessary for law firms to develop and execute well-informed business development strategies.
Does the firm engage in formal business and marketing planning for the firm and in each practice group? In our experience, business and marketing plans are the most important factors in a firm’s ability to achieve long-term sustained financial growth. Moreover, they are absolutely critical to success in new markets and with new clients. In today’s competitive market environment, no law firm can rely on improvised opportunistic responses. Success requires a disciplined, systematic business development strategy
Does the firm have career management policies and succession planning in place — i.e., documented and functioning? These protect and develop the firm’s intellectual capital for the future. They also ensure continuity in client relationships.
We can help you answer these questions.
For more than 23 years, Walker Clark LLC has been advising law firms on succession planning and its implications for law firm governance and management.
Click here to read more about Walker Clark can help your firm plan and implement your transition to becoming a professional services institution for future generations of lawyers and clients.
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