One of the explanations often offered by managing partners to explain why lawyers (really, their organizations) are so slow to change is lawyers’ well-establish aversion to risk. Change involves risk, to be sure, though the assumption implicit in the statement–that the status quo does not involve risk–is demonstrably untrue. That debate, however, can be had another day. Rather, I wanted to share something I read in Jim Collins’ How The Mighty Fall about how to look at risk and whether it is "too much:"
Bill Gore, founder of W.L. Gore & Associates, articulated a helpful concept for decision making and risk taking, what he called the "waterline" principle. Think of being on a ship, and imagine that any decision gone bad will blow a hole in the side of the ship. If you blow a hole above the waterline (where the ship won’t take on water and possibly sink), you can patch the hole, learn from the experience, and sail on. But if you blow a hold below the waterline, you can find yourself facing gushers of water pouring in, pulling you to the ocean floor. And if it’s a big enough hole, you might go down really fast, just like some of the financial-company catastrophes in 2008.
Just as an example, it would be an imprudent firm not doing something in the fixed fee arena these days. Do you have the whole firm start doing all of its work on a fixed fee? That would be a "below the waterline" risk. But doesn’t it make sense to start somewhere and develop data and experience? On a measure scale, that effort would be an above the waterline risk.
This is a simple but effective device for analyzing risk to your organization.