What lessons can we learn from the 2008/09 financial crisis to help law firm leaders manage the escalating disruption of the coronavirus outbreak ravaging populations and crippling economies?
What lessons can we learn from the 2008/09 financial crisis to help law firm leaders manage the escalating disruption of the coronavirus outbreak ravaging populations and crippling economies? Every crisis is different and this one is very different and it’s no use merely fighting the last war. Nonetheless, in terms of dramatic economic upheaval and rolling uncertainty, the impact of the banking crisis shares some common ground and there are some principles that hold good for any financial crisis.
The first principle is that if you’re the leader when a crisis strikes, you need to act like one. My experience as senior partner of Allen & Overy during 2008/09 was that a crisis will probably define you in that role, for better or worse. There is nowhere to hide, so don’t even try; this is showtime and you are centre stage. Put yourself out there so people know someone with calm assurance is in charge.
In essence, leadership in a crisis requires brutal clarity about priorities. Your job is to ensure the firm can weather the storm and come out stronger than ever. That trumps all else. Act swiftly to clear the decks for action. Form a crisis management team. Put non-essential projects on ice. Rearrange non-essential meetings. Cash is king and demands a sharp, daily focus. Immediate steps include a hiring freeze and lower limits on discretionary spend.
Start planning for when further action may be necessary. Reducing partner drawings is an obvious next step to consider – not just to conserve cash but to impress upon partners the importance of cash collection and timely billing. This is not panic or a knee jerk reaction, this is prudent business planning.
During all this, your personal feelings, your doubts and fears, must be managed. This is not about you. At the height of the Deepwater Horizon oil spill in 2010, Tony Hayward, the BP chief executive famously remarked: ‘There’s no-one who wants this thing over more than I do. I’d like my life back.’ No-one wants to hear it.
We also learnt from 2008/09 that reputations are often made and lost in difficult times. Genuinely doing the right thing for your people, your clients, your business partners and the wider community now will have a lasting impact long after the crisis abates.
In 2008/09 some law firms rushed to withdraw cash from their banks as confidence crumbled. This time some firms are said to be drawing down credit facilities so they can sit on the cash. There could be circumstances where that is smart, but neither will endear you to your bank for the long term.
A consensual style of leadership, common in many law firms, will probably have to be an early casualty of the crisis. In wartime, you need a wartime leadership style. Leaders need the confidence to make timely and effective decisions. There isn’t generally time for lengthy debates or consultation. We saw in the last crisis that partner-wide consultations in some firms over partner exits created a poisonous, dog-eat-dog environment that paralyzed those institutions mid-crisis.
As leader, you are also communicator-in-chief. People are anxious and confused. Curiously, some people can be blissfully unaware of rising threat levels. ‘I’m busy, what’s the problem?’ one partner said to me at the height of the 2008/09 crisis.
It’s impossible to over-emphasise the importance of regular communications using crystal clear and straightforward messages. What’s the essence of your message? What tone do you want to convey? If you don’t know, no-one else will. There’s also a risk of ‘over-communicating’ through a constant stream of ad hoc messages. Maintaining regular, scheduled communications with a consistent tone from the top will help in managing in difficult times effectively.
And remember that communication needs to be honest. Many law firms in the last crisis feared letting people go was a sign of weakness and tried to pretend it wasn’t happening. Your people aren’t stupid. Everyone knew what was really going on. The perceived lack of honesty bred fear, resentment and cynicism, all of which were highly damaging. Be sympathetic but above all be straight with your people.
This crisis won’t go forever. A myopic focus on the short term will mean missed opportunities when things do improve – as they will. What can you start doing now to be ready? What new ways of working will evolve? What business areas will be in most demand? Which sectors and clients are likely to be winners? How can you hit the ground running?
The sooner you have such considerations in mind, the sooner you can make them happen. That’s the burden and reward of the role.