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August 2010

Aug 31, 2010

Characteristics of Successful Law Firms: Basic Building Blocks – Block Two – Leadership

Last week I discussed the characteristics of successful law firms and introduced the basic building blocks that successful firms typically have in place. These are:

Last week we focused on partner relations as a core foundational building block.

The second basic building block is leadership. Successful firms have good leadership in place. This may be a single individual or a core group of individuals. Leadership does not always come from the formalized management structure of the firm.

Leadership is one of the major problems facing law firms. Leaders are needed for managing partner posts, executive committee chairs, and practice group heads.  

Leadership behaviors include:

Leadership skills will need to be included in compensation systems.

Seven traits of effective leaders include:

  1. Make others feel important
  2. Promote a vision
  3. Follow the golden rule and establish trust
  4. Admit mistakes
  5. Criticize others only in private
  6. Stay close to the action
  7. Walk the talk.

Leadership is what makes things happen and propels the firm forward, facilitates new directions and attainment of strategic goals, and provides the firms the resiliency needed in today's challenging competitive climate.

Law firms without leadership are easy to spot. They are the firms that are "stuck-in-a-rut", unable to reach agreement or concensus on new ideas, stagnating profitability, partner defections.

Firm must pay attention to this key area and develop leaders for all roles mentioned above.

Click here to read my article on leadership

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC




Aug 23, 2010

Characteristics of Successful Law Firms: Basic Building Blocks – Block One


My partner and I just started our firm two years ago. We have one associate attorney and one staff member. As we grow our firm what should we keep in mind so we don't repeat some of the mistakes that I have seen in other firms that have not been successful?


I often refer to what I call the Basic Building Blocks of Successful Law Firms which are:

Lets take the first one – Partner Relations. This is the foundation (bedrock) of a successful firm. A successful firm has a healthy partner culture – a good marriage. In such a culture partners share common vision and purpose, respect one another, shoot straight with each other, and have difficult conversations and discussions when needed and deal with issues and problems. In many firms this is not the case and these firms often are characterized by the following:

Such firms are often doomed from the start. Firms that don't get this foundational building block right will build a firm on a shaky foundation. Before forming a partnership – go slow and get to know the other lawyer or lawyers and insure that the marriage makes sense, that you share similar goals and values, that you will be compatible, and you will be good partners. Once you have made the commitment – communicate, communicate, communicate and deal with issues in real time.

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC


Aug 17, 2010

Law Firm Partner Compensation – Should We Change Our System

  • Question: 
  • We are a three attorney law partnership that does primarily business transactional work. My partner and I have been in practice together for four years. We are equal partners (50% each) as far as our partnership interests and we use these same interests for determining partner compensation. In other words we receive the same compensation. We recently have been discussing whether we should look into a different method for determining partner compensation. Currently we produce about the same level of fee revenue. What are your thoughts?


    I could write a whole book on compensation systems – but here are a few thoughts:

    1. Over the past 30+ years I have seen just about every form of compensation system that there is – from "even steven" systems such as yours to "eat-what-you-kill", other formula systems, profit center systems, objective systems, etc. No particular system is better than another system. It depends upon the firm – the culture – strategic goals – and the environment.
    2. If the system is working – sometimes it is better to leave it alone. There is nothing wrong with an "even steven" system as long as the contributions (fee generation, fee origination, firm management, and otherwise) made by both of you to the firm are perceived as equal. Frequently, partners start out making even contributions and down the road contributions change (often due to life or family changes) and are no longer in alignment.
    3. When perceived contributions get out of alignment partners are reluctant to have the candid discussions that need to occur as well as changes in the arrangement or compensation system. It could be the system – percentage interest is fine – but as contributions have changed the percentages need to change.
    4. Resist the temptation to look at financial contributions in a single year. Look longer term – say the past three years.
    5. Consider not just the compensation as to whether people are happy with what they are getting – but consider whether the system in encouraging the behaviors that you need to achieve firm goals? For example – management of the firm, marketing activities, mentoring and training associates and others in the firm, etc. Often we discover that firms that are not realizing their strategic goals (those firms that have such goals) – for example growth – are victims of their compensation systems. The systems are motivating "lone range behaviors" rather than firm strategic goals. Often this is the primary reason that firms decide to change their system – to transition from "long ranger" to "firm-first" team-based firms.
    6. Consider bonus pools and other methods of supplementing the base system.
    7. Start slow.

    John W. Olmstead, MBA, Ph.D, CMC

    Aug 10, 2010

    Personal Injury Law Firm Profitability


    We are a 5 attorney (all partners) personal injury plaintiff law firm in Central Illinois. We are all working hard, are extremely busy, but we don't seem to be seeing the results of our hard work in our earnings and compensation. We are making hefty marketing investments – in fact we are spending around 6% of revenue on marketing. What are your recommendations on how we can improve our profitability?


    It is hard for me to comment specifically with the limited information that you have provided. There are numerous variables that need to be examined. However, in general terms:

    John W. Olmstead, MBA, Ph.C, CMC

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