Some downturn risks

Chasing debt and effective cash flow management are critical in a downturn (see Rob Millard’s Heads of Pigs and Golden Rules, posted yesterday) but also consider:

client take on: not following the necessary risk management procedures when taking on new clients may be disastrous. I hope you aren’t replying to the email scams from the widows and orphans of third world dictators, but the next worst thing is not doing the appropriate DD on the new client.

working outside your competence: it is all too easy to say you will do something that you simply don’t have the expertise to do. At the best of times clients are not impressed by your learning on the job; taking on work because you cannot face turning it away (all too easy when you’re sitting at your desk trying to look busy) is a surefire recipe for an indemnity claim.

soft terms: winning work sometimes requires you to take a view on fees ~ discounting for the future. It is also important to be realistic over cost. But agreeing terms that devalues the work not only sets a precedent that in better times it may be hard not to follow but it also demoralises the team.

Partner ego: in many firms power and politics is intrinsically linked to partner performance. Maintaining this in a downturn may mean that work is kept, not delegated. It all comes back to Spending time wisely.

Not waving but drowning

Train journeys offer an excellent opportunity to catch up on reading, both professional and management. Travelling to London recently, I re-read Rob Millard’s The Strategy Executioner (you will find it in Edge International September 2008 Law Firm Strategy Newsletter).

Millard sets out ten easy steps to ensure your firm’s strategy never sees the light of day; number seven particularly caught my eye,

7. REWARD PEOPLE ONLY FOR PRODUCTION

The successful strategy executioner pays no heed to ridiculous ‘balanced scorecard’ approaches to performance measurement and reward. They keep the focus squarely on production and only production. Measure and reward billable hours only! That way, people are discouraged from poking their noses into areas where they don’t belong. If anybody asks about strategy, smile and wave and tell them that their own interests would be better served by simply working harder. An added bonus is that this approach tends to maximize short-term profit, which your partners will appreciate when they make their drawings. As to the long term: leave that up to the poor idiot who comes after you!

So now you know.

Staying alive

If you haven’t read Rob Millard’s post The Greatest Banking Crisis of our Generation on his blog The Adventure of Strategy, you must.

It is very sobering stuff ~ but absolutely spot on

If you have not yet switched the focus of your strategy to creating contingencies to deal with the very serious possibility of survival under the worst possible economic scenarios, then do so now. Do not delay.

1. Make sure that you have jettisoned all non-essential costs (but not the essential ones)

2. Make sure that you are getting accurate and objective information from the market …. keep especially close to your key clients

3. Make sure that you have a plan based on the “What If?” scenarios that you have identified might emerge

4. Keep your eyes peeled for opportunities as well as threats to be warded off

5. Unless absolutely unavoidable, stay true to your core strategic intent

This time will pass. Right now, a clear mind and strong leadership are absolutely essential.