Law Practice Management Asked and Answered Blog

« November 2011 | Main | January 2012 »

December 2011

Dec 28, 2011


Goals and Plans For Focusing the Law Firm in 2012 and Beyond

Question:

Our firm, a 12 attorney firm in Detroit, needs to find a way to improve fee revenues and financial performance in 2012. We do not have a business or strategic plan, have never had a retreat, and we don't even have a budget. We believe that we must do something for 2012 and yet we are out of time since 2012 begins next week. Any suggestions?

Response:

Generating adequate fee revenue is the primary challenge for most law firms and this is where I would start for 2012.

I am a strong believer in the power of focused goals and objectives when integrated with a system of accountability. I have clients that have improved fee revenue by 20% (over a two-three year period) with existing headcount simply by establishing production goals for each attorney and paralegal in the firm – reporting, measuring and reporting goal v.s. performance monthly using simple reports, and follow-up with individuals behind on their goal attainment. Solo practitioners can use the same system and use a staff member, spouse, or coach to serve as an accountability partner. You might want to consider the following:

  1. Ask each attorney and paralegal to provide SMART (specific, measurable, attainable, realistic, and on a timeline – i.e 2012) goals for fee generation, fee origination, billable hours, etc.
  2. Review and discuss these goals with each member and engineer an agreement (commitment). Insure that there is adequate stretch – but that the goals are attainable.
  3. Setup a monthly report, spreadsheet if necessary, listing each individual and including their monthly goal number(s), actual performance, variance, year to date goal number(s), actual performance and variance.
  4. Review and discuss monthly at firm meeting, management committee meeting, or whatever forum is appropriate for your firm.
  5. Follow-up and meet with individuals that are falling behind. Devise strategies for improving performance or revise goals if unrealistic.
  6. If the firm has insufficient client work use this as a tool to bring out into the open and create specific business development initiatives to deal with such issues.
  7. Find ways to tie attainment of goals to compensation.

Try to get this in place by January 1, 2012 and see how this works for you and consider this your first baby step. Down the road you might want to consider a firm budget and eventually a strategic plan. See Helen Gunnarsson's article on strategic planning in the November issue of the Illinois Bar Journal.

Click here for our financial management topic blog

Click here for articles on other topics

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

Dec 20, 2011


Conducting Meaningful Heart to Heart Discussions With Law Firm Attorneys and Staff.

Question: 

I am the sole owner of a 12 attorney firm in downtown Chicago. With staff we have a total of 23 people in the firm. Managing people is my toughest challenge. I am having problems with people not following firm policy and doing what they should not be doing. It is driving me crazy. What should I do? I am interested in your thoughts?

Response:

Tell them to stop. Seriously. As owner of your firm you can't beat around the bush and be sheepish concerning your expectations concerning desired performance and behavior in the office. Confront the performance or behavioral problem immediately. Manage such problems in real time. Don't wait for the annual performance review and don't treat serious problem as a "self-improvement" effort. Tell them how you feel about the performance or behavioral issue, the consequences for failure to resolve the issue, your timeline for resolving the issue, and the follow-up schedule that you will be using to follow-up and monitor the issue. If they must resolve the performance or behavioral issue in order to keep their job tell them so. They may need this level of confrontation they need in order to give them the strength to be able to deal with their issues.

Being a wimp does not help you or them. Tell them like it is and conduct a heart-to-heart discussion. You will be glad you did.

P.S. It gets easier with practice!

Click here for our blog on HR ideas

Click here for articles on other topics

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

Dec 13, 2011


Why Lawyers Have Problems With Client Development and Marketing

Question:

Our firm has in place a strategic plan as well as a firm client development plan and individual lawyer client development plans as well.  While we have great ideas and good intentions – we seem to be falling short of the mark and not accomplishing much. What are you thoughts regarding our dismal success with our client development efforts?

Response:

Obstacles to Marketing

Based upon our observations drawn from working with client law firms over the past eighteen years we have concluded that marketing is poorly understood and ineffectively implemented in many small law firms. In addition, the following obstacles are at play:

Time

There is no time for marketing or any firm developmental activities. Production is king and non-billable activities such as marketing are discouraged.

Uneasiness With Marketing

Attorneys are uncomfortable with marketing. This is primarily due to lack of understanding, training, and experience with the process.

Lack of Marketing Understanding

Many attorneys confuse marketing with advertising. Marketing is not advertising. Marketing activities can exist without any promotional components such as television advertisements, radio spots, tombstone magazine advertisements, or direct mail. Marketing is the broader process concerned with the development and delivery of legal services and is part of the firm's long range planning process. It provides answers to the questions what are we selling and to whom are we selling. It involves maintaining relationships with existing clients as well as creating new relationships with prospective clients. In fact, a major objective of many successful marketing plans is obtain additional business from existing clients.

Focus and Accountability Problems

Frequently law firms experiment with marketing and engage in isolated promotional activities not integrated with the firm's business plan with the expectation of immediate results after the one-shot activity. The firm engages in fits-and-start activities that are completely unfocused, unrelated to an overall plan, unmeasured, inconsistent and often inappropriate.

Cultural Issues

The typical culture of many law firms discourages investment in long-term developmental activities. The focus is on billable hours and production. Everything else is of secondary concern. The consensus governance model typical in law firms hinders change and timely decision-making at the firm level. In addition, effective marketing in law firms requires marketing at the firm, practice group, and individual attorney levels. This requires effective training, mentoring, follow-up, and accountability at each of these levels.

Reward and Compensation Systems

Most reward and compensation systems focus on short-term production and discourage participation in longer term (non-billable) firm investment activities or projects.

Tackle some of the above issues and you will be on your way to improving your client development and marketing efforts.

Click here for our blog on marketing

Click here for our published articles

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

 

Dec 07, 2011


Client Origination Credit and Importance in Law Firm Partner Compensation Systems

Question:

Our firm is a 18 attorney insurance defense firm located in Chicago. We are in our second generation and none of the original founders are still working in the firm. The majority of our insurance company clients have been with the firm for decades and were inherited. Our current crop of partners are primarily "worker bees" and have not developed "rainmaking" skills. We have not added a new client to our client roster in years. In the past two years we have lost several clients due to mergers, consolidations, and partner defections. This concerns us. Currently partners are rewarded and compensated totally on "working attorney" fee collections. We are considering changing our compensation system to including a credit for origination of new business. What are your thoughts regarding client origination credit?

Response:

All law firms need a mix of finders, minders, and grinders. Finders (client originators) are needed to provide sufficient work to keep the workers busy. Minders (responsible matter attorneys) are needed to manage the portfolio of client work. Grinders (working attorneys) are needed to service and produce client services. While there are exceptions, in most firms partners must hit on all three of these cylinders. In other words, most of the partners must do well at finding, minding, and grinding. Partners may perform some of these roles better than others, however overall they should be competently performing each of the roles. Very few firms can afford the luxury of having several senior partners only bringing in business without being required to maintain personal production levels as well. Partner compensation research concludes that the most a law firm can afford to pay a rainmaker – over and above his or her own billable hours (fee collections) is the marginal profit derived from the associates the rainmaker can keep busy, regardless of how many partners he or she occupies. The most valuable partners are those who offer a balance of skills: worker, delegator, supervisor, and rainmaker.

Since origination of new clients is the lifeblood of any firm it is a key factor that should be recognized in any compensation system. The exact weight that it is given will depend upon the firm and how dependent it is upon constant client replacement, only a few institutional clients, turnover of clients, leverage ratio, etc. A firm that has a well diversified base of institutional long time clients will typically weigh client origination much lower than a firm that has to constantly replace individual clients.

Actual approaches to implementation will depend upon whether your system is a subjective or a objective (formula system). However, the pitfalls are the same. Actual assignments of origination credits to partners can be difficult to initially determine. When and how should origination credits be shared between partners? Who determines and monitors such determinations? How long should the credit be awarded?

Origination credit becomes counter productive when it encourages senior partners to become comforable on the income received from origination credits from clients they brought in 20 years ago to the extent that they no longer develop new sources of business nor generate working attorney fees.

For this reason we believe origination credit should have a sunset expiration provision and that a firm should set time limits on origination credits – say five years on a reducing schedule – and have partners share origination credit with other members of the firm who develop business by cross-selling the firm's services to clients whose accounts were originated by another partner. In addition, offer "maintenance credit" as long as the originating partner continues to perform tasks that reinforce the relationship between the client and the firm.

Click here for our blog on compensation

Click here for our published articles

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

    Subscribe to our Blog
    Email *