Law Practice Management Asked and Answered Blog

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February 2011

Feb 23, 2011


Times are Tough – How Are Other Small Firms Doing?

Question:

I am a partner in an 8 attorney firm in the Chicago suburbs. Our firm has started having discussions about what we need to be doing differently. This is huge for us – one meeting a year is our typical meeting frequency and then only to discuss how we are going to cut the pie. How have other firms done during the recession? What are you seeing?

Response:

In general small firms in the midwest have fared pretty well during the recession. Last year some firms had the best year ever while others experienced flat or 10% revenue declines. Small firms that had the biggest problems were those that had issues before the recession or were in problem practice areas. Big law firms have had to face unique challenges.

Small firms that have weathered the storm and fared the best were those that:

I believe that law firms that fail to focus their practices, set goals, measure accomplishments, and foster accountability will fall short and not meet their financial objectives. Law firms that fail to plan are planning to fail.

Law firms as well as solo practices need to begin focusing their firms and practices, setting firm and individual production goals, measure accomplishment and implementing systems to instill accountability from all members of the team – attorneys and staff alike.

Consider using budgeting which is a tool that can be used to measure goal attainment and how well the firm is doing.

What gets measured is what gets done.

Click here for our blog on law firm strategy

Click here for my article on creating strategic (business) plans.

 

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

Feb 17, 2011


Starting a Virtual Online Practice

Question:

I am a partner with an 8 attorney firm in central Illinois. Last week I attended the Illinois State Bar Association web-cast that you and others presented on Building and Managing the Virtual Law Firm. I thought the program was excellent. I do have a couple of questions.

  1. I can see how such an approach might make sense for a solo – but why would a 8 attorney firm with a brick and mortar office that has been in practice for 20 years consider such a delivery model?
  2. How would we go about it?

Response:

If your firm has a sufficient volume of work, does not have a need or desire to capture more commodity type legal work that it is either not doing at all now or is losing to lower priced competitors (law firms or content providers), or does not have a need or desire to extend its reach geographically a virtual delivery model make not make sense. However, if your strategic (business plan) requires you to extend your geographic reach or be competitive in a commodity practice area supplementing your brick and mortar practice with a virtual delivery model might warrant consideration.  Also consider that the younger generation that is growing up using the internet to shop, bank, and pay taxes may appreciate and or expect such an option. As we mentioned during the session certain practice areas are more appropriate than others. I have some firms your size that are supplementing their brick and mortar practices with on-line delivery models just to service one practice area that they could not effectively deliver in the traditional manner. Keep in mind the value curve that we discussed during the session.

During the session I illustrated a continuum and we discussed the difference between virtual practices (doing virtual things) and a total on-line virtual practice. Even if you decide that the firm is not ready for a total on-line virtual practice, you may want to consider doing some of the virtual practices (virtual things) that we discussed to offer your clients more delivery options and more flexibility to your attorneys and staff.

Start with your strategic plan and if you don’t have one begin developing your long range plan. If you want to move in this direction you can use my handout as a resource guide.

Click here for our blog on law firm strategy

Click here for my article on creating strategic (business) plans.

 

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

Feb 09, 2011


Surviving in an Insurance Defense Law Firm – Reinventing the Practice & Staying in the Game

Question: 

I am the founding partner of a 17 attorney firm in Missouri and I serve as the managing partner. We have 12 partners and 5 associates. Our practice is entirely defense – personal injury and workers compensation. The majority of our clients are insurance companies and third party administrators. We represent a handful of self insured companies. While we have had a successful past fifteen years are firm is now struggling. We have lost market share and our case counts are way down due to the economy and regulatory changes in Missouri. Our profitability has suffered as a result. We need to make some changes but are unsure where to start. Could you share your thoughts?

Response:

The present state of the insurance defense practice presents numerous challenges to the law firm. These challenges simply cannot be ignored – they will have to be faced head-on. The solutions are complex and will require time to sort through. While solutions can come in different varieties, they will take the form of one of two general strategic approaches.

  1. Reinvent the Practice – Stay in the Game
  2. Exit or Diversify the Practice

The remainder of this post will focus on reinventing the practice and staying in the game.

For some firms the appropriate strategy may be to stay in the game. These will be firms that have a well-established reputation in insurance defense, where insurance defense represents a major source of their revenue, and where adequate leverage and profitability and leverage exist. These firms will not be firms that dabble in insurance work. These firms will be committed to this practice area and will focus on it exclusively. Some of the following actions will be required to reinvent the practice and stay in the game:

  1. Get leverage back on track. Tough decisions will be required here. High priced senior associates will have to be let go. Unproductive partners will also have to leave. Paralegals should be hired. Ratios need to get back to 4 to 1.
  2. Partnership admission criteria will become more demanding. Time required to make partner will be lengthened.
  3. Compensation will be based upon performance.
  4. Billable hour quotas will be enforced.
  5. Expenses will be tightly controlled.
  6. Flat fees and other forms of alternative billing will be commonplace.
  7. Unique out-of-the-box solutions will be designed to provide tailored services to meet client needs and differentiate the firm from competitors. The firm will no longer wait for the insurance company to take the lead. The firm will take the lead and provide clients will a menu of service solutions.
  8. Technology will be employed to the fullest extent to reengineer work processes. It will not be used just for technology sake or to keep up with the corporate litigation law firms. When technology is employed old outdated practices and processes will be eliminated.
  9. Standardized practices and procedures will be developed and used throughout the firm wherever possible.
  10. Client focus groups, insurance company councils, and other forums will be formed to open up channels of communications with clients in order to mend the tarnished client relationship and reestablish a business partnership. Innovative insurance defense firms will take active leadership roles in this endeavor.
  11. Aggressive marketing and business development strategies and plans will be implemented in order to maintain appropriate growth rates and profitability. Relationships with unprofitable clients will be terminated. Marketing with be done as a team approach as opposed to being a function done at the individual lawyer level. Both firm and individual personal marketing plans will be commonplace.

Click here for my article – Trapped In an Insurance Defense Practice

Click here for our blog on law firm strategy

 

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

Feb 02, 2011


Why Training Programs for Lawyers and Staff Fail to Produce Results

Question:

I am the managing partner for a 8 attorney firm located in San Diego. During the past several years we have invested significantly in continuing education – primarily conferences and seminars – for our lawyers and staff. We have just completed a review of our expenses in this area and we are concerned that we are not getting a satisfactory return on this investment. Please advise as to your thoughts.

Response:

Training and skill development is not easy. Studies reveal that 90 percent of the people who attend seminars and training sessions see no improvement because they don’t take the time to implement what they learn. Practices create habits and habits determine your future. Up to 90 percent of our normal behavior is based on habits. The key to skill learning is to get the new skill to become a habit. Once the new habit is well developed it becomes your new normal behavior. This requires practice. Unfortunately, law firms do not give employees time to practice and experiment.

Research on memory and retention shows that upon completion of a training session, there is a precipitous drop in retention during the first few hours after exposure to the new information. We forget more than 60 percent of the information in less than nine hours. After seven days only 10 percent of the material is retained. Most memory loss occurs very rapidly after learning new information. Your employees can improve their memories:

Skills become automated through practice. The more we do a set of actions, the more likely we are to link those actions into a complete, fluid movement that we do not have to think about. With enough practice, employees can become fluent in many different physical and mental skills.

Skill development involves behavioral change and changing many habits and practices on the part of the employee. In some situations, beliefs, attitudes, values and the actual structure of an employee’s working environment are affected. Effective training and skill development cannot be achieved with one-shot training programs. Training programs should be considered by all involved to be a long-range effort.

In general, three elements drive human behavior and shape the habits we possess: antecedents, competencies and consequences.

Antecedents are those things that prompt us to take an action. In a law firm setting, these include policies, goals, directives, announcements, training programs, procedures, vision statements, organizational structures, accountabilities and so forth. They are very important because they provide each person with cues as to what to do in his or her job. They encourage certain actions, and they are intended to get people to start doing something by providing them with reasons, plans, skills or information to do it.

The second element – competencies – is the knowledge, skills and abilities that enable people to perform certain tasks. These abilities enable a behavior to occur. Employees develop competencies over time, a product of good antecedents and positive consequences and the focus for most selection and training strategies.

The third element is consequences. Consequences are those things that happen to a person when they perform certain actions. They always occur after a behavior. They may be positive or negative and, depending on their impact, will determine whether a person will repeat an activity. Rewards (compensation systems) are the typical consequences employed in law firms. However, a balanced mix of positive and negative consequences is often appropriate. Consequences drive human behavior.

Firm managers must address all three elements in any training program designed to produce lasting results.

Click here for our blog on human resources

Click here for my article on this topic

 

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

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