CKR Law is only five years old but has over 50 offices around the world. The rapidly expanding firm came on the scene after we all determined that Growth Is Dead, yet jumped full force into the mindset of success through expansion.
Now, according to reporting from the New York Law Journal, CKR is facing a “cash flow crunch” that could send some partners packing:
In emails in the last month, the firm’s management began blaming some partners for the financial crunch. In a May 10 email viewed by ALM, Rinde said only partial payments would be paid May 15 and June 15, prioritized to certain partners. He wrote that certain practices “did not meet financial commitments previously made to the firm,” and said some partners failed to collect “hundreds of thousands of dollars” in bills that could have been used to pay lawyers.
He also said “substantially underperforming” partners will be let go, and the firm will be eliminating “certain redundancies and making adjustments to other fixed expenses.”
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If the culprits really are underperforming practices and realization failures, then the firm must have played its finances pretty close to the bone because the impact has spilled over to a number of partners all over. According to the NYLJ, “[t]wo sources close to the firm said many partners haven’t been given their regular draws for at least the past two months.” Apparently, some emails from the managing partner blamed these holdups on bank errors but taking a holistic view of the emails at the heart of the NYLJ story, that feels like that might not be entirely accurate. At least some additional explaining is necessary. And that’s another problem the firm now faces — once the partnership feels they can’t trust the leadership team, it’s hard to earn that trust back.
Still, the firm feels it’s getting its ducks in a row. As recently as last week, an internal email expressed confidence that enough of the underperforming practices had already been dealt with and that CKR could put the cash flow problems behind them. Another partner on the firm’s executive committee indicated that the “overall strategy is sound” despite these hiccups.
On the one hand, rapid growth is going to lead to some troubles absorbing practices and ensuring that everyone’s pulling in the same direction. That may not be the fault of either firm or partner — sometimes things just don’t gel. A firm that’s honest with itself can address those issues quickly to get itself back on track. Still, even in a rapid growth phase, a firm would do well to make sure it has the reserves or some line of credit available to consistently pay its obligations.
If we’re taking the firm’s most recent emails seriously, they’ve weathered this crisis. But hopefully everyone involved in the firm’s leadership will walk away from this properly chastened that they need to keep an eye on their cookie jar funds. This time around, it might have been some deadweight that can be easily tossed aside but someday soon the market is going to take a fundamental hit and the firm is going to need to be able to keep itself in the black.
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NY-Based Law Firm Faces Cash ‘Crunch,’ Struggles to Pay Partners [New York Law Journal]
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.