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December 2015

Dec 29, 2015


Law Practice Management – Goals for 2016

Happy New Year and Best Wishes for a Personal and Professional 2016

As 2015 comes to an end we begin with a clean slate for 2016. As with anything new – the uncertain future can be scary and exciting at the same time. Year-end provides an opportune time for reflection on the past year and setting goals for the next year – both personal and professional. Goal setting can improve your personal life and your practice.

Setting and achieving goals is one of the best ways to measure your life's and practice's progress and to create unusual clarity. The alternative is drifting along aimlessly with hope and a prayer.

I am a strong believer in the power of goals. This year I finished writing my book, The Lawyers Guide to Succession Planning published by the ABA which is scheduled to be released in January. I never would have even started, alone completed, such a project without very specific goals and timelines.

I strongly suggest that you established a few SMART goals for both your personal life and your practice for 2015 where each goal is: 

S  = Specific
M = Measurable
A = Attainable
R = Realistic
T = Timely (on a timeline with a deadline)

A goal without a number is just a slogan – so it is critical that you develop a system for measuring. For example, if you goal is to improve client satisfaction and loyalty you might administer an end of matter client satisfaction survey with a rating scale from 1-5 for key performance indicators, enter completed surveys into a spreadsheet, and then generate a quarterly report reflecting actual performance scores. If your goal is to meet with ten clients or referral sources during a month – develop a tracking system and generate a monthly report.

While goals can help focus you and your practice in 2016 – too many goals can have the opposite effect. Start with baby steps and identify three to five goals for 2016 and then focus intensively on these goals and their accomplishment. 

Focusing on a few targeted strategic goals could take your practice to the next level.

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

 

 

 

 

Dec 22, 2015


Law Firm Financial Management – Protecting the Firm from Employee Embezzlement

Question:

I am a partner in a eight attorney firm in downtown Chicago. Last week you participated in a discussion at an Illinois State Bar Association meeting where you indicated that four out of ten of you law firm clients have had an employee embezzlement at some time or another. I would appreciate any thoughts you may have on how we can protect ourselves.

Response:

Even though a firm trusts their accounting staff segregation of duties is appropriate and should be implemented in firms of all sizes. Here is an overview of such a system that we generally suggest:     

Internal Control is the plan of organization and all of the coordinate methods and measures adopted within a business organization to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.

The four basic elements considered essential in a satisfactory system of internal control are:

  1. A plan of organization that provides appropriate segregation of functional responsibility and duties.
  2. A system of authorization and record procedures adequate to provide reasonable accounting control over assets, liabilities, revenues, and expenses.
  3. Sound practices to be followed in performance of duties and functions of each of the organizational areas.
  4. A degree of quality of personnel (competency) commensurate with responsibilities.

Here is a link to an article outlining specific steps:

The goal is not to catch an employee that is stealing but to have a system of checks and balances in place so they will not even consider stealing.

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

 

Dec 15, 2015


Law Firm Retreat – Suggestion for a Firm Having Their First Retreat

Question:

I am a senior partner in a fourteen attorney intellectual property firm in Memphis. We are planning on having a firm retreat in January 2016. We have never had a retreat before. Our plan is to have a one day retreat facilitated by a consultant with specific focus on competitive strategy and marketing. We have just decided this week that we would like to do this and are just beginning the planning process. I would like to hear your thoughts and suggestions.

Response:

Here are my thoughts:

  1. First of all it is now December and January is just around the corner and I believe that you need to have at least 60 days to properly prepare and plan for the retreat. Most management consultants that facilitate retreats, including myself, will want to get to know the firm and will want to conduct attorney interviews, (face to face or via telephone depending upon whether they are local), review financial reports and other documents, and prepare the retreat program. Participants (your people) may need time to prepare as well. Off-site facilities will need to be booked as well.
  2. Decide in advance the outcomes that you would like to achieve. Is it to entertain, inform, educate, or to develop specific solutions or action plans.
  3. Keep the retreat's focus narrow and concentrate on just a couple of topics – it sounds like you are doing this.
  4. Establish ground rules upfront – example – off agenda items, day to day operations issues, etc. are off limits.
  5. Building follow-up action plans into the program and identify who will be responsible for following up after the retreat is over.
Law firms frequently have what at the time seems to be a successful retreat but after the retreat is over and time passes it becomes apparent that no change has taken place, action items were not completed, and partners believe there was little return on the retreat investment.

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

 

 

Dec 08, 2015


Law Firm Merger – How Do Firms Handle Integration of Assets

Question:

I am the managing partner of our six attorney civil litigation firm in Lexington, Kentucky. We are in the early stages of merger discussions with a fourteen attorney firm in Lexington. My partners have asked me how other firms integrate their assets when the merger become effective.  We would appreciate your thoughts?

Response:

A variety of approaches are often taken in upstream mergers.

One approach is to transfer all of the assets and liabilities to the other firm and receive a credit to your capital accounts for the value of the contributed assets/liabilities with a check from the other firm if the value of the assets contributed exceed the required capital contribution based upon the ownership shares that you are being offered in the merged firm.

The more common approach that I see taken in upstream mergers is for the smaller firm to retain the firm cash accounts, accounts receivable, work in process, and sell the fixed assets (furniture and equipment) to the other firm for cash or receive a capital account credit for the value of the fixed assets contributed. If additional capital is required, each partner would write a check to the merged firm for their capital contributions. Your existing firm would be responsible billing out old work in process and collecting old receivables and when the income is received these funds would be deposited in your existing bank accounts and entered in your old books. You firm would also be responsible for accounts payable and other liabilities that exit prior to the merger.

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

 

 

Dec 01, 2015


Law Firm Partner Compensation – Arrangement When Buying a Senior Partner’s Interest

Question:

I am the owner of a solo practice family law firm in Jackson, Mississippi. I  have been in practice four years. I have been approached by a senior solo attorney that has a well established family law practice that generates $800,000 annually and is looking to sell his practice. We envision a merger where I would make an initial payment upon merging my firm with his and then buyout his interest over a five year period. We have agreed on a fixed price for his ownership interest. However, we are not sure how to handle compensation. He wants to continue to work for another five to seven years. We would appreciate your thoughts.

Response:

Your approach will depend upon how you are going to structure your initial ownership percentages and whether the other attorney plans on continuing to work fulltime or whether he plans on scaling back. Are you going in with a minority interest and then acquiring additional interest as you make the agreed payments?

Here are a few ideas:

  1. Base compensation totally on ownership interests. As you acquire additional interest your compensation would increase.
  2. Agree to a base salary for each of you and then allocate excess firm profits after your salaries based on ownership interest percentages.
  3. Create two profit pools. One pool would be 70% of total profit called performance profit pool and the other pool would be 30% of total profit. The 70% pool would be allocated to each partner based upon individual performance as determined by a weighted average of each partner's origination/working attorney collected fee receipts. The 30% pool would be allocated to each partner in accordance with ownership interest percentages.
  4. Create two profit centers (one for each partner) and allocate income and expenses to each profit center. Each partner's compensation would be based upon their individual profit center.
There are as many different approaches are there are law firms.
 
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John W. Olmstead, MBA, Ph.D, CMC

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