When a real business (as distinguished from most law firms) is struggling, it sometimes calls in a “turnaround specialist.” I have a friend who did turnarounds for many years.
Basically, the turnaround experts come in and stop the bleeding—quickly. How do they do this?
- They fire excess personnel since the prior management couldn’t bring themselves to do it.
- They cut costs and negotiate with lenders and vendors.
- They take the business from the red to the black, and they do it quickly. They have to move fast because the money is usually gone or running out.
- They do it without the emotion of the owner or prior management. They have no history with the business. There’s no connection.
- In a worst-case scenario, these specialists market the business for quick sale or they liquidate the business.
It’s Not Personal; It’s Business
The key to being a good turnaround specialist is objectivity. The basics of business aren’t complicated—buy low, sell high—but the emotion makes it murky for those of us mired in the day to day.
We hesitate to cut costs because we know how hard it was to find those people (and it’s usually people we mean when we say “costs”). We know how hard it was to train them. We know how valuable they’ll be to our competitors, and we know the pain we’ll inflict if we let them go.
Turnaround companies don’t come to the business with all that baggage. They pull out the sharp knife and trim away the fat. Red ink turns black, and the business is back on track if the turnaround experts do their work well.
Does Headcount Still Matter?
It’s especially difficult for us lawyers to cut costs. We hesitate to let people go because, for us more so than in other industries, headcount matters so much.
The first question lawyers ask each other is “How many lawyers do you have?” That’s the way we size one another up.
Headcount is our status symbol.
The ego involved in our headcount is huge. It’s a big part of our culture.
Unfortunately, it’s irrational.
Can you be your own turnaround expert? Can you trim the fat when necessary?
New Metrics for a New Economy
Things have changed, and a high headcount may be associated with lower profitability. In fact, a high headcount should probably be associated with lower status, not higher.
In an environment of increasing efficiency, we should be getting more done with fewer people. That enables us to better compensate our people and increase our profitability.
In an environment of available, flexible labor, we should be outsourcing pieces of our work at lower cost. That enables us to pass along those savings to our clients.
In an environment of project-based engagements, we should be assembling and disassembling teams as requirements change. That allows us to give our clients the best experts for their complex problems and change teams as the issues evolve.
We shouldn’t feel like we need to maintain headcount in order to maintain our status. That’s crazy. Unfortunately, for many of us, that’s our reality.
By taking the status out of headcount, we can become our own turnaround consultant. We can reorganize the firm as requirements change. We can recalibrate our egos around more important metrics like client satisfaction, client outcomes, price, and profitability.
Letting emotion get in the way keeps good managers from succeeding. Reorienting our emotional triggers empowers us to make better decisions for our clients, our employees, and ourselves.
