Law Practice Management Asked and Answered Blog

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August 2015

Aug 30, 2015


Law Firm Associates – Evaluation of Performance

Question:

We are a six partner litigation firm in Des Moines, Iowa. This year we hired two associates and they are our first. We have not provided them with the best mentoring or guidance – it has sort of baptism by fire. I would appreciate your thoughts on what we should be doing concerning performance management.

Response:

Baptism by fire is not the best approach for managing associate performance. It may work in the long term but in the short term it will result in excessive "spin time" and lost revenue and profits for the firm. Here are a few thoughts:

  1. To be effective, evaluation of associates must be meaningful. 
  2. Evaluation for associates right out of school should be done every six months for two years and annually thereafter.
  3. Written criteria must be developed and communicated to everyone as the basis for evaluation.
  4. The associate should be evaluated by every lawyer with whom the associate works.
  5. The evaluation process should be developmental. Weaknesses must be openly discussed, with a plan devised to eliminate the weaknesses. Professional goals should be set each year.
  6. Personal plans should be completed each year and be part of the evaluation process.
  7. The evaluations must be done timely.

Good luck with your program.

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

 

 

Aug 25, 2015


Law Firm Associate Compensation – Incentives

Question:  

I am the owner of a seven attorney litigation boutique firm in New York City. I am the only equity owner and the other six attorneys are associates. Currently all of the associates are paid a straight salary with raises given every year. I am considering freezing their salaries at current levels and putting in place an incentive bonus for individual revenue generation above a certain number. I am concerned that this approach might create an eat-what-you-kill mentality and destroy teamwork in the firm. Do you have any thoughts?

Response: 

I concur with an approach that ties compensation to individual performance such as working attorney collected fee generation up to a point. You are right that this could create more of an individualistic attitude and may spur internal competition which may not be all bad. However, since there are other aspects of firm contribution other than working attorney collections you might want to add a goal bonus component that outlines specific goals that are important to the firm and specifies specific dollars or percentage of salary for each goal with a maximum attainable per year. These goals must be specific, measurable, attainable, realistic, and on an agreed timeline. 

A goal bonus component will reward other non-financial contributions and serve as the glue that will minimize the potential for creating an eat-what-you-kill environment.  

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

Aug 18, 2015


Law Firm Financial Management – Concern With Income Statement Showing Operating at a Loss

Question:

I am a new partner in our law firm of 6 attorneys. I was an associate for seven years and was just made an equity partner and just received a copy of this month's income statement. The income statement shows the firm operating at a loss. I was startled and took a look at past years' statements as well. All are showing a small loss. Am I looking at these correctly? How can a firm operate at a loss for seven years in a row and still be in business. I would appreciate your comments.

Response:

My guess is that the firm is running all or a portion of equity partner compensation though as expense on the income statement. Other personal items may also be run through the firm as well. Check with the firm's bookkeeper or outside accountant to see if this is the case. If this is the case add the total paid to equity partners back to the net income or loss on the income statement. This will give a better picture of the actual "pie" .

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

Aug 11, 2015


Law Firm Administrator – Performance and Expectations

Question:

I am the managing partner in an 8 attorney general practice firm in Tulsa, Oklahoma. A year and a half ago we hired our first legal administrator to run all business aspects of our practice. We decided that we wanted more than an office manager – we wanted an administrator to serve in the capacity of a COO. We hired an experienced administrator at a good salary, developed a well-conceived job description, and the work began. My partners and I are frustrated. We have to follow-up on projects and task assignments, do not see the leadership that we had hoped for, and have concerns that our administrator may not be up to the tasks. We just realized that we have not have a performance review since he started. I would appreciate your suggestions.

Response:

Sounds like you did a good job clarifying the role and initially laying out your expectations. However, you cannot stop there. You have not conducted a performance review and I suspect that he has received little feedback regarding his performance. During the first year feedback needs to be ongoing with a mini review every ninety days and ongoing coaching and follow-up. You need to conduct a review with him ASAP, layout expectations and compare to actual performance, discuss gaps, and reach an agreement as to a plan with milestones and dates to resolve performance gaps. They you will have a better picture as to whether your administrator was the right hire or not.

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

 

Aug 04, 2015


Law Firm Associate Attorney Performance

Question:

I am the managing partner of a 8 attorney general practice firm in Chicago western suburbs. We have 5 partners and three associates. For years it was just the five partners all who started the firm together. In the last three years we added our associates. We are not making money from our associates and wondering what we need to be doing differently. One associates is logging 925 billable hours, one is logging 1200 billable hours, and the other 1400 billable hours. You thoughts are welcomed.

Response:

If these are full time associate positions and they have been with your firm a couple of years you should be getting 1600 – 1700 billable hours per year. If your firm does litigation – 1800+ billable hours. Some practice areas such as estate planning/elder law – range in the 1500-1600 hour area.

The starting place is setting expectations. During interviews with associate attorneys at client law firms I ask – what is your billable hour goal/expectation, etc. Frequently I am told that they have no idea or they tell me that they think that the expectation is such and such. Other times they advise me that the firm simply does not have a billable hour expectation. Of course the partners tell a different story and can't believe that their associates are not clear on billable hour expectations. 

Some firms put in place auto pilot type incentive bonuses based upon hours or dollars and believe that these bonuses in themselves will motivate performance and as a result billable hour expectations are not needed. Often this is simply not the case.

I believe that baseline expectations should be spelled out and measured monthly. These baseline expectations are the minimal requirement to remain employed and justify the base salary that the associate is being paid. If these baseline expectations are not been met, you must had some heart-to -heart discussions in real time. Outline the problem and consequences for non-compliance. 

The billable hours your associates are logging just won't cut it. If the work is there they simply must get their hours up to desirable levels. You might look into the reasons for the low hours – work ethic, time management issues, or problems with timekeeping. If there is not enough work – long term – you may have to consider reducing the work hours that you are paying for.

It sounds like you may not be adequately mentoring or training your associates. Consider performance reviews and active mentoring and coaching. Insure that you are providing adequate feedback to your associates. Your time investment in the short term will pay dividends in the long term. 

 

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

 

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