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January 2026

Jan 28, 2026

Law Firm Leadership – Responsibility of the Partners

Question: 

Our firm is a 14 lawyer firm in St. Louis, Missouri that focuses on small businesses – both transactional and litigation matters. There are eight equity partners, two non-equity partners, and four associates in the firm. We are managed by a three member management committee and a firm administrator.

While we have been successful over the past fifteen years since the formation of the firm, we are experiencing numerous issues including:

  1. Defections of partners, associates, and others leaving the firm.
  2. Difficulty in finding, hiring, and retaining attorneys and staff.
  3. Dissatisfaction by lawyers in the firm concerning the way things are done.
  4. Partners and associates are expressing growing dissatisfaction with firm management and policy.
  5. Lack of faith in the management committee.
  6. Lack of open communication between the management committee and the rest of the firm.
  7. Dissatisfaction with the partner and associate compensation system and the belief that it is unfair. The management committee makes all compensation decisions and the factors that are considered are unknown as well as the performance expectations.
  8. There is a lack of adequate succession planning for the transfer of client responsibility from senior partners to younger partners.

We would appreciate any suggestions that you might be able to offer.

Response:

I understand your dilemma. You are at a difficult size. It sounds like you are facing many of the problems that firm leaders face at your stage of growth. Your leaders must be willing to:

  1. Invite active participation and input from all attorneys concerning matters of firm governance. For example, revitalize the management committee by rotating its membership and limiting tenure and consecutive terms or establish a compensation committee that represents attorneys from all levels of the partnership. Also, give the attorneys a voice in policy determination and other important administrative decisions.
  2. Implement a lawyer career advancement program that outlines a program for attorneys to advance from associate to non-equity partner and then to equity partner. A common complaint that we hear from our interviews of associates is lack of feedback on short term performance and what it takes to “make partner” and how they are progressing toward eventual partnership. During a recent interview an associate told me:
    1. I would like to know: What does it take to become a partner – consideration criteria?
    2. What do I have to do?
    3. What is the timeline for consideration?
    4. How am I doing – am I partnership material?
    5. What does partnership mean in this firm? Will I have a voice?
    6. What are the mechanics of admission? (Is there a buy-in)
    7. Is there a buyout for retiring equity partners?
  3. Set up a compensation system that attempts to be fair and consistent in rewarding all of the lawyers for their total contribution to the firm. Identity and share the specific factors that are considered if the system is a subjective-based or subjective-objective hybrid system. Develop an incentive system whereby attorneys get credit for client their working attorney fee collections, client origination, including enhancement of present client relationships, management of the firm and its practice areas, training of associates and paralegals, pro bono activities, and other nonbillable activities.
  4. Develop a formal evaluation program that will let the attorneys know where they stand and allow qualified associates to progress to partner status. Encourage active participation in pro bono activities, especially ones in which the attorneys have a particular skill or interest.
  5. Assign responsibility for client matters at an early stage in an attorney’s career. Introduce attorneys to the clients as early as is practical. This will enable the attorneys to step into the fray from the beginning and be more involved and informed on client matters.
  6. Establish an ongoing, organized training program for professional growth. This can be done by setting aside time for attorneys to attend CLE seminars or meetings sponsored by other professional groups. Regularly scheduling in-house training sessions, under the guidance of partners with specialized expertise, would develop the skills required to succeed in various practice areas, including business development and management techniques.
  7. Give the attorneys an opportunity to train and supervise other attorneys and paralegals to provide support on specific client projects or in the substantive areas in which the attorneys are involved.
  8. Assist attorneys in building their individual reputations through participation in programs sponsored by the bar association or by writing articles on substantive areas of practice for publication in bar association or professional journals. Encourage their participation in programs sponsored by the firm and other associations, such as accounting firms for clients and prospective clients.
  9. Provide an ongoing forum for the attorneys to participate in discussions with one another concerning client matters (i.e., strategies), research findings, and input on decisions that may affect matters they are working on. Circulate an agenda before each meeting, and include all partners and associates.
  10. Develop a strategic plan that enables partners and associates to determine the firm’s immediate and long-term objectives.
  11. Show care and concern for the professional and personal welfare of both partners and associates as well as staff.
  12. Encourage the opposing viewpoints and consider other opinions.

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

 

Jan 20, 2026

Law Firm Partnership – Bringing in a Partner – Issues to Consider

Question: 

I am the founder and owner of a business law firm in San Diego, California. There are 9 associates, four paralegals, and three administrative staff members working in the firm. I founded the practice 20 years ago and I have never had a partner in this firm. I was involved in a partnership in another firm prior to forming this firm. There were partnership issues which is the reason why I left and started my own firm. I have enjoyed the freedom of sole ownership but I now believe that in order to get to the next level, retain quality attorneys, and have a succession plan for myself when I get closer to retirement I need to consider bringing in partners. However, based on my prior firm experience I am fearful. I would appreciate your thoughts and advice.

Response: 

Do You Really Want Partners

You may want to ask yourself whether you want employees or partners. What is the criteria for becoming an equity partner? Is client development part of that criteria? Should they contribute capital? If they are not adding value to the firm – growth – you may be diluting the earnings pool and reducing the size of the pie for yourself. Personally, I think in small firms criteria for becoming an equity partner should, among other things, include client development and a capital contribution. They should have some skin in the game, contribute capital, and signup for their share of the liabilities. I also believe they should then be included in the inner circle.

Then, depending upon whether you are considering equity and non-equity partner tiers,  you should develop non-equity and associate career progression plans – associate to non-equity partner and non-equity partner to equity partner – outlining timeline for consideration, the consideration process, the criteria, and the responsibilities and expectations for each. (What partnership means)

You may believe that you have identified the right person or persons whom you believe is the right person or persons for partnership. However, just because the associate has been a good associate does not mean that the associate will be a good partner – the relationship will be different. But at least the associate is somewhat of a known quantity since you know the associate and have worked with the associate for several years.

Here are a few ideas you might consider:

  1. Outline you goals and expectations for the relationship.
  2. Meet with your associate and identify his/her goals and expectations for the relationship.
  3. Determine how much control over the practice and decision-making are you willing to give up? Share?
  4. Determine how much and for how long you are willing to make less?
  5. Determine if the associate will be expected to bring in business? When/Timeline?
  6. Think about the firm you want to build – firm-first or lone ranger (team based or individual practices)?
  7. Decide on firm name – will it change? Should it? Impact on image, clients, etc.
  8. Decision as to capital contribution or buy-in? Yes or No? How much? Timeline for payment?
  9. Ownership percentages
  10. Voting
  11. Compensation
  12. Withdrawal arrangements

Hiring Associates That Can Be Effectively Groomed for Partnership

Years ago it seemed that all the associates working in law firms wanted to eventually become a partner in the law firm. This has changed as a result of the new mix of women and men graduating from law schools and entering the legal profession, changing attitudes toward work life balance, other opportunities outside law firms, and other variables. While partnership/ownership is still important to many – don’t assume that all the associates that you hire will even want to be equity partners – especially if it means a hefty capital contribution and signing personal guarantees for a large amount of firm debt.

A question that I would ask – have you really discussed with your associates their interests in equity ownership? As a group? Recently an associate, whom the firm had written off, advised me that while he was not interested now due to his present situation in life, he would be in maybe five years – especially if others also were brought in as well – in other words he did not want to have the responsibility alone and be an equity owner by himself.

I suggest that you talk with your people and see where they really stand. Help them to begin developing client development skills. Depending on your retirement timeline – and if you have “no takers” you may have to consider other options such as laterals or merging with another firm.

A key suggestion is to look for entrepreneurial associates when you hire. The desire for ownership of a business if often in a person’s blood. Don’t start the interview with a discussion from law school until the present. Dig deeper into hobbies, general interests, etc. that will provide clues as to whether you may be hiring someone that just wants a law job or someone that eventually wants to own or be a partner in a law firm.

Typically a buy-in or capital contribution is not required for non-equity partners nor do I recommend such. Typically non-equity partners are salaried and may participate in some form of an incentive bonus system tied to individual, team, or firm financial performance. They are also not required to assume any responsibility for any of the firm’s financial liabilities or debts.

If you intend on bringing in the associates as equity partners that is another matter. I believe that all new partners should be expected to contribute capital and have some “skin in the game.” Whenever a firm admits a new partner, the firm should require the new partner to contribute capital. Increasingly, a partner’s capital requirement should bear a relationship to the partner’s share of profits. You may want to allow new partners a reasonable period of time to fund their capital accounts – say five years or help them arrange favorable terms at your bank to finance their capital accounts.

Some firms have a buy-in tied to either the cash-based book value of the firm or the accrual-based book value (includes accounts receivable and work in process). This is not the typical practice although I do run into it. Usually capital accounts are tied to working capital needed to operate the firm and the percentage of ownership/income that each partner will have.

There are only three ways to increase a firm’s working capital to cover cash flow requirements and fund growth:

1. Have partners put more money in
2. Have partners take less money out
3. Borrow

Many firms use bank credit lines instead of capital contributions to pay routine firm expenses and partner draws during periods when cash flow is tight. It has been my experience that firms that follow this practice have ongoing financial challenges and problems.

The reality is that many firms are under-capitalized – don’t become one of them!

Make the criteria tough and resist the temptation to make everyone a partner.

Click here for our blog on partnership

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

Jan 14, 2026

Law Firm Administrator and Firm Size

Question: 

I am the owner of a three attorney law firm in Rockford, Illinois. While we do a lot of business litigation we are primary a general practice firm that serves individual clients. There are two associates in the firm in addition to myself, two paralegals, and a receptionist. We outsource the bookkeeping work to an accounting firm. We have been having issues with the accounting firm and I am considering bringing the accounting in house and hiring a bookkeeper that can also handle office management responsibilities as well that I currently have to perform. I know that many law firms now days have law firm administrators. Should I consider hiring a professional firm administrator?

Response:

Generally a firm your size would have a office manager/bookkeeper as opposed to a firm administrator. A firm administrator is generally a higher level position with responsibilities and expectations such as the following:

  1. Expected to act and think like an owner/partner.
  2. A quick learner.
  3. Expected to provide a higher level of management insight and bring business training and experience to the table.
  4. Accepted as a peer professional by all the attorneys in the firm.
  5. Expected to innovate and be willing to question the status quo.
  6. Expected to provide recommendations concerning new methods for  improving the firm’s operations and profitability.
  7. Expected to be able to resolve most administrative issues with minimal guidance from the managing partner or executive committee.

A firm administrator usually has a strong financial background, higher level of education than a office manager/bookkeeper, and often a CPA or MBA in larger firms that facilitates the candidate’s acceptance by other attorneys in the firm as a peer professional as well as provide the candidate with the academic tools needed to carry out the expectations of the position.

A firm administrator is rare in a firm your size and for firms under 10-15 attorneys. Many firms your size have  office managers/bookkeepers. The downside to establishing an administrator such a position in your firm will be the salary that you will have to pay – more than some of your attorneys – and turnover in the position when an opportunity from a much larger firm comes along.

I have a few client firms your size that do have firm administrators. Sometimes for the first year or two there is a lot of administrative work  – employees handbooks and procedural manuals to be written, new billing systems to implement, office space renovations and relocations, etc. But after major projects are completed there is not enough work to keep them busy. These firms have made the position work by adding client billable functions to their role. For example:

There is no magic size. We just completed an engagement recruiting an administrator for a seven attorney firm. We also have law firm clients with over 40 attorneys that don’t have an administrator. I believe that an administrator, or office manager, is appropriate in firms of all sizes. It is a matter of attitude and commitment on the part of the partners and whether they are willing to delegate responsibility and authority to an administrator to run the day-to-day operations of the firm. The firm should start with a job description and then decide whether the firm is willing to delegate responsibility and authority. If not, the firm should not hire an administrator.

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

Jan 07, 2026

Law Firm Succession Planning and Retirement – Coming to Terms with Aging

Question:

I am a partner in a seven lawyer firm in Mesa, Arizona. There are five partners in the firm. We are a boutique business litigation firm that was formed seven years ago.  I am 64 and the others partners are 62, 60, 55, and 53 respectively. I would like to retire in the next few years and our firm has never really discussed or planned for partner retirements. We don’t even have a partnership agreement. I would appreciate you thoughts.

Response:

At a personal level, you should admit to yourself that, regardless of your current age, you are getting older and you will eventually retire – one way or another. The sooner you begin thinking about this the better prepared you will be. I have many clients that have started their succession/transition planning in their mid-forties and early fifties. Unfortunately, many have waited until their mid-sixties and early seventies. For these folks there has been little time to make adequate preparation and often adverse consequences have resulted. At an absolute minimum, you should start your succession/transition planning five years before you plan to begin your transition. It simply takes this long to put your house in order, to locate or groom succession/transition candidates, find a candidate law firm interested in your practice, and transition clients and management responsibilities. Here are a few ideas that I suggest to multi-partner firms and sole owner/solo firms:

Multi-Owner Firms

  1. Stop giving succession and transition lip service – if you are serious – put in place organizational systems that will facilitate the process.
  2. Put in place a firm strategic plan that incorporates a succession plan.
  3. Host a partner brainstorming retreat to address key questions surrounding your firm’s plan and identify a course of action that will be supported by all.
  4. Make long-term plans for the firm.
  5. Insure partner accountability.
  6. Implement funded retirement plan for partners and other employees in the firm.
  7. Consider Key-Personal life insurance to fund buy-out of ownership interests of partners that die or are disabled.
  8. Execute partnership/operating/shareholder and buy-sell agreements.
  9. Consider buy-out plans that are not funded out of future earnings (post retirement) and are paid by the end of the wind-down or transition period.
  10. Urge partners to think about and plan for retirement. They should start early and start on a wind-down program at least five years before they are ready to retire or exit. Each partner should decide when they want to exit the practice and begin a disciplined phase-down (wind-down) in which legal skills; leadership and management, and client relationships are transitioned to the next generation of attorneys in the firm.
  11. Provide financial incentives for partners to transition clients.

Sole Owner & Solo Practices

  1. Decide when you want to retire and leave your firm.
  2. Determine how much cash or annual cash flow you need when you exit the firm.
  3. Fund a retirement plan in the early years of your practice and project how much income it will generate at various exit points.
  4. Determine who you would like to transfer the practice. (Family members in law school, other attorneys in the firm, another firm, etc.)
  5. Based on future cash flow, ascertain how much the firm is worth today. Value the practice.
  6. Begin implementing management strategies that will maximize the future value of the firm – before you exit and afterward.
  7. Institutionalize the firm so that it is not uniquely you.
  8. Determine if the firm is even saleable.
  9. Draft and implement a succession/exit plan. Insure that it incorporates safeguards for your clients, employees, and family if the unexpected happens to you.
  10. Take steps to protect your family’s wealth.
  11. To retire and exit successfully you need:

A plan – a roadmap that outlines the process and helps you decide on where you want to
go and how you will get there.

Timeline – a disciplined implementation timetable keyed to your
Succession/Transition/Exit Plan.

Start Early – Getting ready for exit takes time. Start early – 5- 8 years before you are
ready to retire or exit.

Decide – When do you want to leave the practice?

Decide – How much cash you will need when you exit.

Decide – To whom you want to transfer your clients or practice.

At a firm level, especially if you are a member of a multi-partner firm, start sharing your ideas and plans with your partners. Have an ongoing dialog with you partners. Review the firm’s partnership/operating/shareholder agreement. If the firm has a succession/transition plan review the plan. After reviewing these documents, determine how the firm’s policy regarding retirement will affect your retirement timeline, compensation, and payout. Does the policy require mandatory retirement at a certain age? Ascertain whether the policy provides for phasedown. How does the phasedown handle management and client transition? Is there an “Of Counsel” provision after retirement? Reach an agreement with your partners concerning your retirement timeline, client and management transition, and retirement payout or return on invested capital.

Click here for our blog on succession/exit strategies

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

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