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May 2011

May 25, 2011

Improving Law Firm Profitability Through Cost Reduction


As the managing partner of a 12 attorney I have been asked to see what the firm can do to improve profitability by reducing costs. Do you have ideas or recommendations in this area?


In most law firms the real problem is insufficient gross income and lack of sufficient investment (spending and time) on marketing and initiatives designed to stimulate client and revenue growth. For most firms increasing revenues is the most effective way of impacting the bottom line. However, we do find that there is waste and unnecessary overhead that eats away at profits and a cost control program is also recommended and implemented. During recessionary times such as we are currently facing – drastic cost control are often the only option. Reducing overhead can immediately and effectively improve a firm’s bottom line.

The first step in an expense control program is to identify those areas where potential savings exist. Review your profit and loss statement. Resist the temptation to arbitrarily cutting costs which could cut the muscle with the fat and result in revenue loss as well. You have to spend money to make money – so if cost cutting is the appropriate strategy – cut the right costs. Think strategically about cost reduction.

After you have identified areas where savings can be made prioritize and develop specific strategies and implement action plans to achieve the savings.

 Here are a few ideas:

STRATEGY #1:  Reduce Headcount

This is the largest area for potential savings. Downsizing is a strategy that has been used by many firms this past year. However, it can have long term negative consequences for revenue and talent management. Consider all levels – non-productive partners, associates, paralegals, and staff. Be prudent and sensitive in implementation.

STRATEGY #2:  Reduce Compensation

Obviously one way is to cut salaries – a strategy to be used as a last resort. A better approach is to reduce fixed salary (paying people for showing up) and add a variable pay component which will allow employees to earn additional compensation in the form of bonus for results achieved. Another approach is to freeze salary increases.

 STRATEGY #3:  Benefits

A major area for cost savings – especially health insurance. Determine which programs are most important to employees. Do your best to protect those and reduce or eliminate programs that are less important. Consider offering more than one health insurance plan. Pay the premium for the lowest cost plan and provide options for employees to “opt up” to the better plans by paying the additional premiums. Consider increasing deductibles and requiring employees to pay a portion of the base premiums.

 STRATEGY #4:  Outsource

 Examine potential for outsourcing – from copy services – IT management – to your legal team.

 STRATEGY #5:  Occupancy

Review your lease invoices and question increases and escalators for which you have been charged. Consider renegotiating your lease and ask for a lower rate. Reduce excess space either through a renegotiated lease or through sub-leasing. 

 STRATEGY #6:  Telephone Service

Scrutinize your bills and examine rate tariffs as well as items that have been tagged to your bill by third parties. Negotiate and ask refunds for any discrepancies or abuse found. We have seen firms receive thousands of dollars in refunds.

STRATEGY #7:  Virtual Office

Do you need an office at all. Many solos are working out of virtual and home offices or a combination of same. Some larger firms are reducing the size of their primary expensive downtown offices by having some attorneys work from home offices or other locations.

STRATEGY #8:  Marketing

Many firms actually need to spend more money on marketing. However, this does not mean that it should be wasted on sacred cows. Review marketing investments, eliminate feel good items, and insure that they are producing results. Reallocate funds.

 STRATEGY #9:  Supplies and Other Purchases

Eliminate waste and unnecessary expenses. Consolidate with fewer vendors and solicit discounts for exclusive relationships.

STRATEGY #10:  Develop a Budget and Financial Plan

If you don’t have one – develop a budget and financial plan and work the plan.

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



May 17, 2011

Law Firm Strategic Plan vs Business Plan


I am the firm administrator in our firm. We have 24 attorneys and are just transitioning to the 2nd generaton of partners. I have been charged with obtaining information on strategic/business planning. Currently the firm does not have a strategic or business plan. What is the difference between a strategic plan vs a business plan? Do you have a recommendation as to whether we should consider implementing a business plan or a strategic plan?


Often the term strategic plan and business plan are used to mean the same thing. The general planning process is similar. However, I believe there is a difference.

I consider a business plan to be the primary tool of choice when starting a new business or venture. Typically the audience is external – bankers, investors, prospective partners, etc. Due to the external nature of the audience the business plan document needs to be detailed with supporting narrative, company history, market analysis, marketing strategies, personnel plan, management biographies, and pro-forma financial statements.

A strategic plan is typically the tool of choice for a going concern business or firm – such as an existing law firm such as yours. The intended audience is internal and its primary purpose is to focus the efforts of firm members and employees. Much less narrative and supporting detail is required. A strategic plan uses more of an outline format with bullet points and much less narrative and supporting detail. A strategic plan in small firms is often ten pages or less and consists of the following sections"

The key is to keep it simple and develop a plan that will actually get used, focus the firm's efforts, and hold specific people accountable.

I believe that what gets planned – what gets measured – is what gets done.

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

May 11, 2011

Using Legal Project Management to Improve Law Firm Profitability


I am the managing partner of our firm of 17 attorneys. Our practice is concentrated in insurance defense litigation. In an effort to provide the best services possible and differentiate ourselves we have been discussing whether we should implement a project management system. I have been reading more lately about legal project management and hearing more about it. Do you have any thoughts along this line?


Legal project management has become the hot topic of late and we are seeing articles, workshops, and seminars on the topic. Over the years project management has evolved into its own discipline with its own jargon, tools,  methodologies, software, etc. Project management as a discipline can become quite technical and complex. Many of the techniques such as PERT and CPM came from the department of defense and were initially utilized to manage projects such as the Polaris Submarine and space projects. The construction industry makes extensive use of project management techniques.

Considering that a legal matter is a project, particularly a large litigation matter, with many moving parts there has been a push by clients and an effort by law firms to look for ways to improve the management of matters and related resources, costs, timelines, etc. and to improve and streamline the overall process. Legal Project Management is a customized approach to matter management borrowing and applying some of the principles of project management and incorporating into a simpler and leaner model. Numerous workshops, training seminars, and publications are being offered on the topic.

The Hildebrandt Instute if offering a workshop in Chicago on June 21-22, 2011. Here is a link to more information on the workshop.  Here is a link to more information on the workshop. Ark Group also has a new publication out called – Project Management for Lawyers as well. Another good book, which can be ordered from Amazon, is Legal Project Management: Control Costs, Meet Schedules, Manage Risks, and Maintain Sanity, by Steven Levy.

As more clients push for improved processes and outcomes in the area of matter management and force various forms of fixed-pricing – law firms will find they need to utilize more sophisticated tools to ascertain matter risks, price services, and manage matters.

So I suggest you at least begin to evaluate some of the tools and approaches being used and get educated on them. However, be careful of getting into overly complex approaches and methods that are simply trying to push generic project management for it's own sake.

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

May 03, 2011

Law Firm Strategy: Where to Start

Question:  I am the Executive Director of a 75 attorney firm in Miami. We are meeting in a few months to revise our strategic plan. Some of our partners have suggested that as a result of the current business and economic climate that we start with a clean sheet of paper. Where should we start? What do you see as the key questions that we should be addressing?


Strategic planning is essentially a five step process. The first step begins be asking questions. Start by asking the following questions:

  1. What substantive issues does the firm face today?
  2. What issues will the firm face tomorrow?
  3. How has technology impacted (or will impact) how the firm conducts business and delivers services to clients?
  4. What are we doing and doing well?
  5. What are we not doing well?
  6. What do we need to improve or enhance?
  7. What metrics will tell us how we are doing?
  8. What should be eliminated?
  9. What are we not doing that we should be doing?
  10. What kind of training will we need to plan for?
  11. What demands are clients likely to make?
  12. What opportunities are we missing?
  13. What mistakes have been made recently by other law firms? Failed firms? Dissolved firms?
  14. What resources are we wasting by defending the past?
  15. What wheels have already been invented?
  16. How would we define our existing culture?
  17. What might our culture become?
  18. What makes us unique?
  19. What potential profitable areas (practice areas) are we overlooking?
  20. What are we doing to encourage creativity?
  21. What kind of uniqueness will we need in the future?
  22. What can we do to shape future outcomes?
  23. What do we want to be known for?
  24. What will future clients want?
  25. What is our existing vision?
  26. What form will future competitors take?
  27. What market trends should be we be paying attention to?
  28. What is our competitive edge?
  29. How can we expand our markets?
  30. What are our priorities?
  31. What are our values?

So take your time – remember strategic planning is a process – not a one-time event. The process is as important as the final plan itself. Don't try to get it done in a day or over a weekend. Rome was not built in a day. 

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

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