The High Cost of Emotional Decisions

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Two things control the decision-making in most small law firms. Neither is helpful.

1. Our moods

2. Our lack of data for decision-making

We do a lot of “seat of the pants” management and it’s not particularly effective. “Seat of the pants” is not the latest hip/cool/trendy law firm management approach. It’s the source of our worst decisions.

Three clients in a row turned me down

The first one said she’s hired someone else because the other lawyer charged less. The second explained that her sister’s boss had suggested another lawyer and, because he’s helping with the fee, they went with his suggestion. The third implied that I’d said something he didn’t like during our initial consultation. I racked my brain for what I might have said.

A mini death-spiral ensued.

I let my mood take control. I was upset. I had a sinking feeling. I was pretty sure I was never going to get another client, collect another fee, or pay down my credit cards. Never mind that I’d been hired by a pretty good client the week before.

My mood was terrible and I felt like a loser

I was working with a business coach at the time and we had one of our regularly scheduled meetings. I usually showed up prepared, but that day I simply couldn’t find the energy to do anything beyond the basics. I brought my most recent profit and loss statement and a few notes.

I was down in the dumps. Bill noticed my mood immediately as I sat across from him. He wanted to know what was wrong.

He scanned my financials as I told my tale of woe. I whined on and on.

He looked up from the income statement I’d handed him and looked confused.

“Why are you in such a bad mood,” he asked, “when your numbers are in such good shape?”

It took me a minute. He’d surprised me. I hadn’t looked at the numbers, so I wasn’t even sure what he was seeing. I just knew what it felt like to be me at that moment, and I was still reeling from the clients who’d rejected me.

A bad mood often leads to a bad decision

We get stressed about money so we take remedial action. We buy advertising, leads, search engine optimization, and marketing services, when we have no data-driven assessment of what we’re buying. We have no evidence that what we’re buying will work, nor are we even certain that we need more business.

We hire staff members or associates when we feel busy, even if we lack financial numbers demonstrating that we’re doing profitable work, or that we’re really busy rather than just having a challenging week or month.

We fire staff members or associates because we’re convinced they’re unproductive and lazy when an upset client mentions their name, or we spot them killing time on Instagram. We lack simple records we can check to see how they’re performing financially, so we react when something pushes our buttons.

Over and over we’re hit by emotions and we believe they mean something. Unfortunately, an emotional response is nearly always half-baked, short-sighted, and inconsistent with the vision we’ve created of the business we’re building.

It’s kind of funny to watch otherwise conservative professionals get caught up in our own emotional reactions. We don’t think of ourselves as emotional actors, so our moods often appear somewhat muted on the outside. But there’s a raging inferno going on inside. We’re emotional animals, whether we like it or not, and we’re not afraid to take action on mood-inspired impulses. Those who think they’re always rational are the worst offenders. I plead guilty.

Know your triggers

Since we’re so good at rationalizing, justifying, and explaining our decisions, it’s valuable for us to be conscious of when we might be in a mood that could cause bad decisions. We don’t always see it ourselves. We’re inclined to believe we’re just quick at making good decisions. We truly believe we’re doing what we’re doing because it’s the right thing to do.

Lots of things trigger me. I feel it happen, at some level, but I don’t process it as an emotional event. It just happens; it shifts my mood, and I see the world through mood-colored glasses. It’s not pretty.

I can often see my triggers in others. I’ve watched some coaching clients react exactly like I react. It’s easy for me to see it in them, but it’s much harder for me to see it myself.

I wonder if my triggers might remind you of yourself at all? Some of mine–and there are many more–include:

1. Financial losses

I mentioned the clients who don’t hire me. I hate that. I’m competitive. I really like winning. When clients choose other lawyers, every button I have gets pushed. Why didn’t they pick me? Have they lost their freaking minds? My mood goes off in a very bad direction.

But it’s not just the loss of revenue that turns a great mood into a mess. It’s lots of things involving money. Tax issues, client refunds, chargebacks, bank mistakes, vendors charging more than I expected, prices going up–any one of these has the potential to trigger me in a negative way.

2. Employee issues

“We need to talk,” she said, closing the door behind her as she walked into my office. This is always a bad sign. She’s leaving, and I’m about to spend the next month hiring, training, and being miserable.

Of course, the departing employee is a significant trigger, but the employees who stay set me off as well. Employees who don’t do things my way push my loss-of-control buttons. Employees who make mistakes–even mistakes I’d probably make too–will shift my mood in a very negative direction. Employees who are just acting like employees can rock my mood backward. I’m a pin cushion and they are the sharp, stinging, pins.

3. Clients

Isn’t the word “client” enough for you to understand my point? Do I really need to say more? Clients, while I love them when they hire me and pay their bills, are a constant source of mood “adjustment.” Why did they do that? What made them say that? Why are they acting that way?

The only lawyer who doesn’t understand the emotional impact of clients is the lawyer who has never had a client. Clients are a gigantic trigger.

Most of us have a range of triggers. Your triggers, of course, are different from mine. Identifying yours helps you connect the dots so that you can more clearly see your mood shifting. If you can be more aware of your emotional reaction, you’ll instantly start making better decisions. You’ll know what to do next, and it’s probably not what you expect.

Wait, wait, and wait some more

The best thing to do when you feel the emotions well up is nothing.

Stop, don’t act, do nothing.

The employee who lied to you, the gigantic client refund, the bad news from the landlord, the receptionist who hung up on your best client, the marketing vendor who did nothing for the money, the low sales closing rates last month, the lowest number of hours your associates have ever billed, the tax problem resulting in a huge bill: WAIT!

Let the dust settle. Don’t hire anybody, don’t fire anybody, don’t buy things, sell things, or make major changes. Just wait.

Moods are temporary. They come and they go. This is not a problem for which you need electroconvulsive therapy. You don’t need to rush to the psychologist (although that never hurts). You don’t need to increase your medication.

Just wait. Give it some time. Hit pause.

Things will look different when the mood passes. You’ll know the mood is improving when you start to wonder if there might be some data hidden away in your financial or client records. When you find yourself wondering what’s in the data, you’re headed in the right direction. Data doesn’t have moods.

How should you manage your law firm?

By the numbers. That’s how.

You gather your data, you get it organized into a slick dashboard, and you drive the business in the right direction using numbers to inform your decisions.

It’s kind of like science. You know certain things, you don’t know other things, and you make incremental changes to move the business forward. If you’re ready for a bold experiment, then you go for it, but you do that with clear knowledge of where the business stood before and where it stands after. The experiment might involve some guessing. But you’ll be able to assess the outcome based on evidence

Sadly, that’s not the way most law firms are managed.

I say ‘sadly’ because it’s so easy to make the shift from the emotional approach to a numbers-based approach, and the upside is huge. Bookkeepers, software developers, and accountants are easy to find, and relatively inexpensive. It’s easy to outsource the creation of a dashboard, for the numbers you need to see regularly. Having numbers in front of you is dramatically better than having to deal with the fallout of bad-mood-driven decisions. Moods cost us in more ways than we imagine.

Numbers drive you faster to get where you’re going

Mood-based management is a sad reality for many law firms. As a matter of fact, it’s a common issue in most small businesses. We lack the systems and resources that would enable us to have objective data front and center at decision time. We go with our gut. Unfortunately, our gut is often wrong.

The solution is obvious. We need data. We need to keep that data visible, so we can use it to operate the business. The investment required to assemble basic financial data, and keep it updated, is minimal. It simply requires a shift in focus and a bit of time. Do it. Get really mad, let the stress overwhelm you, and instead of hiring or firing your staff in a fit of rage, use that energy to put together the information that will help you start making data-based decisions.

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