Law Practice Management Asked and Answered Blog

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Apr 08, 2026

Law Firm Owner – Lawyer or Businessperson?

Question: 

I am the owner of a three attorney general practice firm in Chicago, Illinois. The other attorneys were recently hired associates right out of law school. We have two legal assistants, one paralegal, and a receptionist/bookkeeper. I manage the firm and practice law. I am finding it more and more difficult to do both and I am discovering that I enjoy managing and running the business more than I do practicing law. I would like to spend all of my time to running and managing the firm. Your thoughts are welcomed.

Response: 

You are not alone. This is a common problem in law and other professional service firms. I have similar problems in my own firm – it is very difficult to serve two masters – serving your clients and managing your firm. Eventually as you grow you have to pick one – client service (doing legal work) or managing and running your business – as the area that receives your primary focus. This is not to say that you should not do both – but you select the primary area that you are going to focus on and get help with the other area.

A question that I typically ask my new law firm clients – what do you want to be or do – be a business person or a lawyer. The answer to the question often provides a hint to how you should structure your firm. If you want to be more of a business person – hire legal talent to help with serving clients and performing legal work and spend more time working on your firm rather than in it. If you want to be more of a lawyer and do legal work and serve clients hire a legal administrator or business manager (this is more than an office manager) to manage and run your firm.

I have more and more owners of small law firms that are managing their law businesses and not practicing law. I believe the appropriate direction is what makes you happy and what type of work you enjoy doing. Your practice should support and fulfill your personal goals, what you want out of life and what makes you happy. If that is managing – then manage. If that is doing legal work – do legal work.

Two great books on this subject are – The E-Myth Revisited and The E-Myth Attorney – available on Amazon. The theme of both of these books is:

Small law firm owners often spend too much time being the technician (i.e. lawyering) and not enough time managing and innovating. In the long term this can have a negative effect upon value when the owner decides or retire of otherwise exit the practice.

Think about where you want place the priority of your focus – working on your firm (business) or in it.

I believe that at your current size and your limited number of revenue producers you can’t afford to be a full-time manager until the firm grows to at least five lawyers and or several serious revenue producing paralegals (not dabblers but producing $150,000 – $250,000 per year). I suggest that you take a phased approach toward this goal. In the short term you may have to work harder as a revenue producer and a manager and business developer. In the meantime you will have to wear both hats. Be patient.

As AI continues to reshape all walks of life as well as the practice of law, firm management and innovation will become even more important to remain competitive. This is a strategic management area that will require more of your management time. Small law firms that have implemented AI are reporting efficiency gains that have translated into higher profitability and improved well-being.

Good luck with your transition.

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

Apr 01, 2026

Law Firm Succession Planning – Client Transition in a Multi-Partner Firm

Question:

Our firm is a 24 attorney firm in Memphis, Tennessee.  We have 10 partners – five of which are in their early 60s. We represent small to mid-size business clients. Recently we have been discussing the eventual retirement of the senior partners and approaches to client transition. We would appreciate your thoughts.

Response:

Client transition involves different challenges that have to be overcome in order to successfully transition client relationships. Consider the following challenges and hurdles:

  1. Relationships take an investment of time and must be nurtured on behalf of the parties making the introductions and connections as well as the parties trying to form the  new relationship. Attorneys often want immediate gratification and the “quick fix” and are unwilling to invest time needed for longer term results. More than a “one-shot” simple introduction is required.
  2. Clients hire lawyers not law firms.
  3. Client transition requires trust on the part of all parties (introducers and new players). A high level of trust must exist within the law firm organization between the attorneys involved and within the client organization between the parties there as well.
  4. There is potential risk of embarrassment for all concerned. The transitioning attorney in the law firm could risk losing the client if the other attorney does poor work for the client. Another issue is the loss of control over the client. The individuals in the client organization could also risk criticism (or even their jobs) if the new relationship does not pan out.
  5. Many law firms are “lone ranger” rather than “firm first” or “team based” firms. As a result there is no inclination or incentive to invest the time and effort nor take the risk to refer work to others in the firm.
  6. Lack of knowledge regarding other partners’ practices.
  7. Fear of losing clients.
  8. Fear of losing client control.
  9. Compensation systems in many law firms encourage hoarding of work and discourage the referring of work to others.
  10. Communication systems in  some law firms do not facilitate relationship building among attorneys. Effective client transition is simply not possible without strong relationships and high levels of trust among attorneys in the law firm.

Effective client transition is not a one-time lunch or introduction event – it most go deeper to bind the new relationship. This takes time. Start early and allow ample time for an effective partner winddown.

Successful client transition – moving clients from one generation to the next – is a major challenge for all law firms. Shifting clients is not an individual responsibility but a firm responsibility. To effectively transition clients the individual lawyer, with clients, must work together with the firm to insure the clients receive quality legal services throughout the transition process. Both the individual lawyer and the firm must be committed to keeping clients in the firm when the senior attorneys retire. Potential obstacles include:

Transitioning client relationships effectively can and where possible should take a number of years – preferably five years – typically not less than three years.

The following client transition plan might be an approach you could take to transition clients over a three to five year period:

  1. Review your Top Client List and develop and implement a detailed action and milestone plan for each significant client.
  2. In consultation with the Firm Executive Committee, designate one or more Co-Responsible Attorney(s) for each existing client, and each new client as to which you are the Responsible (Primary) Attorney. You, in consultation with the Firm Executive Committee, may for cause adjust or amend the Co-Responsible Attorney(s) designation as to any Transitioning Client. The stated goal in designating one or more Co-Responsible Attorneys for each client is to facilitate the transition and retention of your clients upon your retirement and phase-out from the practice of law. You will agree to introduce the Co-Responsible Attorney(s) to the client when you are reasonably available, and work with the Co-Responsible Attorney(s) to transition the client and client matters to the Co-Responsible Attorney(s). You and the Co-Responsible Attorney(s) shall meet to discuss and evaluate the timing for the transition of each client. However, notice to clients shall be solely at your discretion. The Co-Responsible Attorney(s) may, at your discretion, prepare all invoices for legal services rendered. You will review and approve all invoices unless you agree to the contrary in writing. The client’s wishes shall be paramount in the designation or selection of any Co-Responsible Attorney(s) and client satisfaction shall at any time allow for change of the designation of same.
  3. You will perform such duties as the Firm Executive Committee of the Firm may from time to time determine to be in the best interest of the Firm and which are agreeable to you. You will  agree that your professional procedures will be in accordance with the rules and regulations promulgated by the Firm Executive Committee. You will also maintain the records as reasonably required by the Firm Executive Committee.
  4. Of Counsel. After the conclusion of the final transition year, the firm may enter into an “Of Counsel” relationship with you. In that event, you would be listed as “Of Counsel”. The relationship would be subject to both parties agreeing on the terms and conditions of the “Of Counsel” relationship.

Effective client transition takes time so start early. Clients hire lawyers not law firms.

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

Mar 18, 2026

Law Firm Practice Sale to Another Firm or Merger v.s. Internal Sale to Associates

Question:

I am the owner of a small estate planning firm in Columbus, Ohio. Besides myself there are two associates working in the firm. I am 67 and the associates are in their early-fifties. I am planning on retiring in the next couple of years and moving to Florida. I would like the practice to continue after my retirement and I would like to (in order of priority):

What is my best option – sale or merger with another law firm or sale of the practice to the two associates working in the firm? Please share any thoughts that you may have.

Response: 

I always suggest in situations such as yours that internal sale/transfer be the default option – the option that you consider first. However, this assumes the following:

  1. That your associates want to own a law firm – either as partners with each other or individually. I am finding that many associate candidates do not want to take on the responsibilities and risk of law firm ownership.
  2. That your associates would be willing and able to be partners with each other.
  3. That your associates have the experience and legal skills to serve clients in your absence.
  4. That your associates will be able to retain your clients and referral sources.
  5. That your associates will be able to effectively run and manage your practice after you are no longer there.

If the above listed assumptions are not the case you may have no choice but to sell or merge your practice with another practitioner or law firm.

If you don’t wait too long you may have time to develop your associates if the interest is there.

Developmental and transitional work typically falls into three general categories:

  1. Legal (lawyering) skills
  2. Client and Referral Sources
  3. Firm Management

Legal Skills

Frequently this is a major issue that requires attention in small sole owner/founder firms. There are no other lawyers in the firm with the legal skills that the owner has and will be required for the firm to be successful in the future. For example, I have worked with some litigation firms where the other attorneys in the firm (associates and non-equity partners) have not ever tried a case. In such situations several years of training and development in this area will be required and seasoned laterals may have to be hired or the firm sold or merged with another firm. In your case since you have two associates on board I assume that they are seasoned lawyers and this is not an issue at your firm. If this is the case there be no to little transitional time needed in this area. If not, you have work to do.

Client and Referral Sources

This is an area of concern for most firms. Typically, the firm owner/founder has brought in most, if not all, of the client business into the firm and he or she controls the clients and the relationships with clients and referral sources. In these firms if the owner/founder were to leave the firm abruptly it is questionable whether the firm could survive after the owner/founder is no longer there. If this is your situation you will need to begin a focused and planned transition with specific clients and referral sources, tasks, timelines, and assigned lawyers. How long this will take will be dependent upon the number of clients, number of relationships that you have within the client organization for institutional clients, and the number of referral sources that you have that send the firm business.

Law Firm Management

Law schools do not train lawyers in management. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. It has been my  experience that lawyers who are “loners” have traditionally been poor managers. You are going to have to decide who will be a good manager, or managers, and begin training and transitioning appropriate functions over to them.

The following are recommended areas in which the management skills should be developed:

  1. Client relations, including origination, development and retention.
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties.
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination.
  4. Administrative staff organization, relationships and utilization.
  5. Financial management including budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information to manage and run the firm.
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists.
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills that will be required.

I suggest that your develop a transition project plan in Excel with a breakout of tasks, responsibility for accomplishment, start date, and end date under the following broad categories:

Legal skills
Client and Referral Source
Firm Management

Under the client and referral source category each client/referral source contact should be listed.

You should also begin bringing other lawyers into your matters in order the your clients can experience working with them. Assign them as co-responsible attorneys on cases and gradually have them be responsible for billing and communications with your clients.

I have recently completed engagements with two estate planning firms where two associates bought out the equity interest of the founders. In both firms, the results turned out exceptionally well.

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

Mar 11, 2026

Non-Lawyer Ownership and Investment in Personal Injury Plaintiff Law Firms

Question:

I am a partner in a six-lawyer plaintiff personal injury firm in Indianapolis, Indiana. There are three equity partners and three associates in the firm. We are in our 20th year of practice. The equity partners are in their mid fifties and our associates are in their late 30s and early 40s. The firm started out as a general practice firms and ten years ago we began focusing one hundred percent on personal injury plaintiff work. Our cases range from typical auto accident and slip and fall cases to medical malpractice, product liability, and complex catastrophic injury cases. While we receive much of our work from the internet and other forms of advertising, referrals from other law firms is where we receive the lion’s share of our cases.

Over the years we have been approached by other law firms interested in merging with us our firm and we have declined. However, we are beginning to have second thoughts. The large national personal injury are having an impact on our practice and we are losing some business to them. We also have concerns about the impact that venture capital and private equity investment is going to have on the future of personal injury firms. Arizona now allows non lawyer ownership and other states may follow. We would appreciate your thoughts concerning this trend.

Response: 

Most U.S. states follow rules derived from the American Bar Association Model Rule 5.4, which generally prohibits non-lawyers from owning law firms or sharing legal fees. However, some jurisdictions are experimenting with new models:

Venture capital firms are pushing for similar reforms in other states where restrictions block traditional venture investment.

Private equity and venture capital firms are increasingly investing in:

These models blur the line between law firm, consulting firm, and tech company.

While full venture capital ownership of traditional U.S. law firms remains limited due to ethical rules against nonlawyer ownership. The Management Services Model is the primary workaround approach being used. This model separate the practice of law from the business operations. Two separate legal entities are created.

The law firm signs a long-term management agreement with the management services organization.

The management services organization typically handles all non-legal operations, including:

In large consumer-facing practices (like personal injury firms), the management services organization may also run:

Instead of owning the law firm directly, investors earn revenue through service fees.

The management services organization model is most widely used in high-volume consumer legal sectors, such as:

While we Arizona, Utah, and Management Services Organization workaround models are in play these models are raising concerns among regulators and bar associations.

The key worry is that investors may indirectly influence legal judgment, potentially violating rules established by the bar associations that require lawyers to maintain independent professional judgment.

It is imperative that strong ethical walls be put in place between the law firm and the management service organization.

Since a majority of your business is referral based I don’t believe you need to be concerned in the short-term. If the trend continues there will a competitive impact and an impact on your internet and other marketing investments. Non-lawyer ownership of law firms has been in full force in the United Kingdom and Australia for several years and a trend likely to continue in the United States. Several other status are exploring now-lawyer ownership.

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

 

 

Mar 04, 2026

Law Firm Management Structure for a Small Insurance Defense Law Firm

Question:

I am a partner in a eighteen – lawyer insurance defense firm in Houston, Texas. There are ten equity partners and eight associates in the firm as well as an office manager/bookkeeper and six other paralegals/legal assistants. We started the practice nine years ago. Other than administrative matters handled by our office manager, the management of the firm is handled by involvement of all the partners. Currently, we are getting more and more frustrated with this method of governance and management. It takes forever to make decisions and the quality of our decision-making leaves a lot to be desired. It recently took us nine months of discussions to agree to get the carpet cleaned. There has to be a better way. What are you finding that similar law firms are doing?

Response: 

Your experience and current frustration is what we see in law firms using the “democracy approach.” While it made have been a good approach when you started the firm and were smaller, you have outgrown this approach.

Most smaller to medium sized law firms choose one of the following approaches to governance and management.

  1. Democracy
  2. Managing Partner
  3. Executive or Management committee.

Democracy

This is the method your firm is currently using. Under this method each member of the firm has an equal voice in management or in some cases a voice based upon the number of equity shares held. Any decision must be agreed by all partners, and various administrative tasks may be assigned or rotated among partners or delegated to an office administrator or office manager. While benefits to the partners by participating in firm management is influence and control over their own practices, law firms that utilize this method of governance progress more slowly and at a less profitable rate than firms governed under one of the other approaches to governance and management.

Managing Partner

This approach is probably the most efficient form of managing a law firm.  Authority and accountability for all firm matters is controlled by one partner or a tightly knit group of dominant partners. The managing partner is often responsible for originating and retaining the firm’s major clients. The managing partner may  receive all work assignments from clients and assign work out to other partners and associates. The managing partner typically determines the partners’ and associates’ compensation and perquisites.

While the other partners may be able to focus entirely on billable/productive legal work, this type of structure is not the best approach for many firms. A major fundamental problem involves partners being “left out” totally of the management of the firm. The managing partner becomes overloaded with firm decisions. Furthermore, as an active attorney, this partner may not be able to devote the time or follow-through on management and operational matters. Since no other partner may be trained in managing the firm, this partner may not feel comfortable in relinquishing power to anyone else. This is a problem which may be especially troublesome if the managing partner dies, becomes ill or disabled.

Some attorneys may be dismayed at the prospect of having their firm dominated by an individual or group of partners. However, if properly handled, this form of structure can be productive, and economically and professionally rewarding. To be effective, the managing partner should maintain communication with other partners. The managing partner should seek advice from other partners (and associates) on matters that will affect them. The managing partner should obtain other partners’ input on decisions, appoint individuals or committees of partners to perform particular functions and require a report of their achievements.

Executive or Management Committee 

The executive or management committee is an approach typified by a committee of partners having defined authority, accountability and responsibility. In most smaller firms this committee, frequently consisting of three partners, may be responsible for recommending and implementing policy for the firm, planning for the future, appraising results and recommending corrective action, as required.

A three partner-executive or management committee is the most common configuration used to avoid deadlocks or inaction and to spread the burden of administration among appropriate partners. One of the partners should be designated to chair the committee. Each of the other members may be assigned authority, responsibility and accountability for coordinating and/or performing specific functions. For example, one partner may serve as the financial partner. This would involve responsibility for ensuring the preparation and analysis of income and expense budgets and financial reporting. This partner would oversee attorney production, fees, collections, etc. A second partner may be responsible for the personnel functions including associate career development, i.e., employment, training, evaluation, etc., and implementation of policy for the administrative staff. A third partner may serve as the general administrative partner, and oversee the implementation of administrative policy, systems, information technology (IT), etc. These partners may be assisted by an office administrator, office manager, bookkeeper, etc.

To preserve continuity on a management/executive committee, it is generally recommended that tenure of partners on the executive or management committee be staggered over a two-or-three year period. The executive committee should communicate with the partners regularly or as issues arise. The executive committee should meet weekly, or if that isn’t convenient, as frequently as required.

Meetings with all of the partners and associates should be scheduled monthly or quarterly.  Following the departure of the associates, the partners can discuss matters relating to financial and policy issues.

I believe that based on your present situation and past history you should consider a three-member management committee with a governance plan that outlines that responsibilities and authority of the committee and the full partnership. Identify and outline the restrictive decision areas that the require full partnership to weight in on and vote.

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

Feb 25, 2026

Law Firm Owner’s Transition and Exit Strategies – Clients and Management Roles

Question:

I am the sole owner of a 20 lawyer litigation firm in Chicago. There are five seasoned non-equity partners and fourteen associates in the firm. I am 63 and trying to figure out what to do with the practice. While I am not ready to retire in the next several years I do want to slow down and be retired in five to seven years. How should I approach my transition and exit from the firm? You feedback would be appreciated.

Response:

You have a valid concern that is shared by many.

The pending retirement of the baby boomer generation and the unrelenting challenge of finding and keeping talented staff can have grave consequences for law firms that fail to develop a succession strategy. Steps that you take or do not take five years or earlier prior to your actual retirement will determine whether your practice, clients, employees, and your legacy transitions to another generation. For a small or solo practice, these steps may determine whether your practice has any terminal value at all.

Many are asking, “What do I do with this Practice?” “Is there value or goodwill? “Where and how should I start?

Early planning will pay dividends. Many firms are in “reactionary mode” and are not adequately prepared to transition firm leadership and client relationships.  A firm’s very survival may very well depend upon the steps you begin taking in the next few years.

How well you transition clients and managerial roles will determine the ultimate success of any succession/exit plan. Transition of clients and managerial roles are the two critical components of any succession/exit plan.

Bring Deserving and Qualified Non-Equity Partners into Equity 

Personally, I believe your best strategy will be to bring some of your non-equity partners into equity sooner than later – either with initial buy-ins or no buy-ins for initial ownership minority shares but agreed to buyouts for your remaining equity upon your requirement. We are finding a lot of non-takers today when it comes to equity and you need to find out sooner than later if you have anyone interested in equity. This will determine whether your strategy will be an internal exit strategy or external strategy.

Client Transition

Transitioning client relationships is difficult, it takes time, and it takes more than one simple introduction. It is a lot like cross selling that attorneys talk about but often fail to put into practice.

In a recent BTI Consulting Group report on Benchmarking Law Firm Marketing and Business Development Strategies, the section on cross-selling was titled, “Achilles Heel for Law Firms.” When BTI interviewed 120 Chief Marketing Officers and Directors of Business Development at leading law firms, they found that only 4 percent of law firms rated themselves as highly effective in cross-selling, and 77 percent thought they were ineffective.

My experience and our surveys of our clients and their clients have shown similar results. Cross-selling is talked about a lot and seldom implemented.

Cross-selling can be an effective strategy – but it is not easy and it requires trust, commitment, communication, hard work, dedication, and organizational alignment.

Challenges and Hurdles

Transitioning clients to another responsible attorney(s) within your law firm or to another attorney in another law firm involves numerous challenges that have to be overcome.  Consider the following challenges and hurdles:

  1. Relationships take an investment of time and must be nurtured on behalf of the parties making the introductions and connections as well as the parties trying to form the new relationship. Attorneys often want immediate gratification and the “quick fix” and are unwilling to invest time needed for longer-term results. More than a “one-shot” simple introduction is required.
  2. Clients hire lawyers not law firms.
  3. Client transition requires trust on the part the client, the relationship attorney, and the future responsible attorney. A high level of trust must exist between the attorneys involved and with the client.
  4. There is potential risk of embarrassment for all concerned. The relationship attorney could risk losing the client if the other attorney does poor work for the client. Another issue is the loss of control over the client. The individuals in the client organization could also risk criticism (or even their jobs) if the new relationship does not pan out.
  5. Many law firms are “lone ranger” rather than “firm first” or “team based” firms. As a result, there is no inclination or incentive to either invest the time and effort or take the risk to refer work to others in the firm.
  6. Lack of knowledge regarding other partners’ practices.
  7. Fear of losing clients.
  8. Fear of losing client control.
  9. Compensation systems in many law firms encourage hoarding of work and discourage the referring of work to others.
  10. Communication systems in some law firms do not facilitate relationship building among attorneys. Effective client transition is simply not possible without strong relationships and high levels of trust among attorneys in the law firm.

Client Transition

Successful client transition – moving clients from one generation to the next – is a major challenge for all law firms. Shifting clients is not an individual responsibility but a firm responsibility. To effectively transition clients the individual lawyer, with clients, must work together with the firm to insure the clients receive quality legal services throughout the transition process. Both the individual lawyer and the firm must be committed to keeping clients in the firm when the senior attorneys retire. Potential obstacles include:

Transitioning institutional client relationships effectively can and where possible should take a number of years – preferably five years – typically not less than three years.

The following client transition plan might be an approach you could take to transition clients over a three to five year period:

  1. Review your Top Client List and develop and implement a detailed action and milestone plan for each significant client.
  2. Designate one or more Co-Responsible Attorney(s) for each existing client, and each new client as to which you are the Responsible (Primary) Attorney.  The stated goal in designating one or more Co-Responsible Attorneys for each client is to facilitate the transition and retention of your clients upon your retirement and phase-out from the practice of law. You will agree to introduce the Co-Responsible Attorney(s) to the client when you are reasonably available, and work with the Co-Responsible Attorney(s) to transition the client and client matters to the Co-Responsible Attorney(s). You and the Co-Responsible Attorney(s) shall meet to discuss and evaluate the timing for the transition of each client. However, notice to clients shall be solely at your discretion. The Co-Responsible Attorney(s) may, at your discretion, prepare all invoices for legal services rendered. You will review and approve all invoices unless you agree to the contrary in writing. The client’s wishes shall be paramount in the designation or selection of any Co-Responsible Attorney(s) and client satisfaction shall allow for change of the designation.
  3. You will perform such duties from time to time that you determine are in the best interest of the Firm and which are agreeable to you.
  4. Of Counsel. After the conclusion of the final transition year, the firm may enter into an “Of Counsel” relationship with you. In that event, you would be listed as “Of Counsel”. The relationship would be subject to both parties agreeing on the terms and conditions of the “Of Counsel” relationship.

Effective client transition takes time so start early. Clients hire lawyers not law firms.

Management Transition

Successful management transition – moving management and leadership from one generation to the next – can also be a major challenge.

Consider undertaking the following, as well as other, management and leadership activities, which may assist you and the firm transition management and leadership roles over the next three to five years.

  1. Invite new equity partners to serve as members on a executive committee, Chair of the Executive Committee, other committees, or assigned direct responsibility and oversight for a specific management function such as:
    1. Client development/marketing
    2. Human resources/personnel
    3. Financial management
    4. A specific project
  2. Allow new equity partners to participate in the development of the firm annual budget and financial plan.
  3. Allow new equity partners to participate in performance reviews of non-equity partners, associates, and staff.
  4. Provide new equity partners with access to all firm financial records and reports.
  5. Allow new equity partners to attend all partner meetings.
  6. Invite new equity partners to meetings with the firm’s accountants and other advisors.
  7. Have new equity partners participate in the recruitment and hiring of attorneys and staff.
  8. Rotate new equity partners in a variety of management and leadership roles over the three-five year transition period.

An effective succession and transition strategy involves coming to terms with aging and retirement, developing a timeline, and identifying transition candidates either internally or externally. An old saying at IBM when I was a business partner with IBM – what gets planned and what get measured is what gets done. You have worked hard to build your practice. Your practice may or may not have value depending upon the steps you take and when you take them. Start early.

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

Feb 18, 2026

Law Firm Leadership – Midsize & Smaller Firms

Question: 

I am a partner in a 30 lawyers insurance defense firm in Phoenix, Arizona. We have 7 equity partners, 10 non-equity partners, and 13 associates. We represent insureds through insurance companies that are our clients and pay our bills. We also represent self-insured companies as well. Our firm is in second generation. The original founding partners have all retired and they are the ones that brought in all of the clients and managed and ran the firm. The firm was primarily run by a strong managing partner. Since the founding partners retired we have been struggling in managing the firm, getting new clients, and finding and retaining lawyers and staff. Now all seven partners are involved in managing the firm and while we are all good lawyers we are not good managers or leaders. The firm has lost clients and lost lawyers and we are struggling. All our partners want is to work in their own silos and work on their files and cases. They consider firm management “non-billable” and not deserving of their time. Do you have any thoughts?

Response: 

Law firms are finding that developing effective leadership skills can be a very difficult task. Dealing with leadership is a very emotional issue for most law firms due to the independent nature of most lawyers and the general unwillingness of firm lawyers to put aside their personal interests for the good of the firm. In fact, in many cases existing law firm partnership structures and compensation systems reinforce this tendency. What is needed is a balance between partner autonomy and partner accountability. Leaders will either have to be recruited externally (i.e. lateral partners) or skills will need to be developed internally.

The firm can begin by conducting a self-assessment using the following 10 point checklist:

  1. Only the best should lead and be placed in key leadership positions. Does the firm have its most capable people in leadership positions?
  2. Does the firm have partners or other lawyers with leadership skills or potential leadership skills? How many?
  3. How many lawyer leader positions are there in the firm that require leadership skills? How many lawyers have these skills?
  4. Does the firm’s compensation system reward management and leadership activities?
  5. Does the firm’s compensation system have a team reward component and are non-billable firm investment activities respected and rewarded?
  6. Does the firm’s culture support a team orientated practice or an individual type practice?
  7. Does the firm’s governance structure provide for administrative, management, and leadership roles and responsibilities?
  8. Does the firm have an in-house leadership training and development program?
  9. Does the firm invest and budget funds for leadership development?
  10. Is the firm willing to make the commitment?

While professional non-lawyer executive directors, administrators, and office managers can provide some relief, the equity partners must still develop appropriate leadership skills and perform upper-level leadership roles. In some firms these skills are simply latent and need to be identified and appropriately reinforced. In other firms such skills are nowhere to be found. Such firms will have to either recruit partners with requisite skills from the outside or develop leadership skills internally. This will take time and will require dedication, focus, patience, and hard work.

This author believes that improvements in law firm leadership will only come about as a result of improved leadership selection and action orientated leadership development programs. Attorneys must begin to shift their attention from a transaction orientation to a firm-first client orientation. Attorneys must begin to make investments in non-billable time and consider such as investments for the future. Attorneys must begin to formulate a balance between accountability and autonomy and begin to embrace change. Only then will an environment be created that supports leadership development that fosters an organization that can facilitate ongoing new client acquisition and retention in the future.

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

Feb 11, 2026

Law Firm Succession and Exit Planning – Merger Option for Small Firms

Question:

Our firm is a two partner general practice firm in Akron, Ohio. I am 70 and my partner is 68 and contemplating retirement in the next few years. There are no other lawyers in the firm. We have two paralegals, one bookkeeper, and a receptionist. We have tried associates in the past but after we train them up they leave and go to larger firms. Our main concern is that we want a future home for our employees and our clients. We have been discussing whether a merger would be a good option for us. It seems that we either have to hook up with another firm or close our doors. Can you share any thoughts that you have?

Response: 

Merger, lateral non-equity partner, and “Of Counsel” arrangements are approaches that many firms in your situation are taking. But don’t wait too long as many candidate firms want a two or three year transition period.

It has been our experience that most of these type of arrangements have been very successful. Failures have been the result of poor cultural fit. The candidate firms – after they have moved past conflict checks and excitement about new client potential – jump immediately to an examination of practice economics and the financials. They fail to perform proper due diligence on the people. It is critical that firms insure that cultural due diligence is a key component of the merger, or other form of arrangement, assessment process. Philosophies, personalities, and life styles should be generally compatible. The parties should like each other and the deal should make sense.

The question is not the what (merge or other form of arrangement) but the who (people)

You should do all the due diligence that you can with whatever arrangement your are examining – start with the people – then move through the rest of the process.

Start by thinking about the reasons that your firm wants to join another firm and your objectives. Ask yourself the following questions?

Getting Started Preparing for a Merger or Other Arrangement

Start with determining your objectives. Why do you want to merger or join another firm? What do you hope to achieve? Is merger or other arrangement compatible with your succession exit plan? What size of firm are you considering?

Once you are sure that merger or other arrangement exploration – in general – makes sense – you should insure that your house is in order. In other words – can anything be done to enhance the value and/or marketability of your firm? For example:

Next, develop a merger marketing plan and begin working the plan. Try to generate enough leads that you can explore merger with several firms rather than engaging in “random merger talks” which often result in isolated merger offers with you having no framework for comparison.

Use an outside consulting firm if you need help organizing, identifying candidates, and managing the process.

Once you have merger candidates identified – the real work begins. Here is a general outline of the process:

Merger Assessment (Due Diligence)

People

Philosophies, personalities, life styles, do the partners like each other, why does the deal make sense.

Merger Implementation

If the two firms decide to proceed with a merger or other arrangement – then the process of implementation begins. A merger, lateral, or counsel agreement is executed, and a implementation plan is put in place. Then you begin working the plan. If the two firms are of similar size (as opposed to a large firm acquiring a smaller firm) a lot of infrastructure work will need to be done – ranging from IT systems, management structure, space, etc. to accommodate the larger entity.

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

Feb 04, 2026

Law Firm Associate Compensation and Bonuses – Salaries & Fee Production

Question:

I am a partner in a five lawyer firm in Columbus, Ohio. There are two partners in the firm and four associates. Our practice specializes in corporate business law and is one hundred percent transactional. We do not do any litigation work. Several of our associates started in BigLaw. All of our associates have been practicing for over ten years and some longer than that. None of our associates bring in – originate any client business. They are paid salaries and discretionary bonuses. While we have a billable hour requirement of 1600 hours none of our associates are even close – they are not even hitting 1200 hours. Their salaries are pushing $200,000 and their fee collections are no where they need to be. Any suggestions?

Response: 

Looks like you have some real challenges. The salaries that you are paying are what we are seeing for associates and non-equity partners in firm’s your size and that have been practicing for the number of years that your associates have. For years the guidepost has been that an associate’s fee collections should be three times salary/compensation – one third to cover an associates salary, one third to cover overhead, and one third for profit. That was back when overhead was running at thirty percent. Many firms today have much higher overhead than thirty percent. Using three times salary the fee collection bonus threshold would be fee collections of $600,000 for an associates being paid $200,000. The salaries you are paying are in the ballpark with what many other firms are paying. Your issue is not so much what you are paying your people as is their fee production and collections.

Obviously the billable hours are to low as well as the fee collections and this is eating into the profits of the partners. While 1600 annual billable hours is appropriate, based on where your associates are now it may be an unreachable goal and you may want to consider taking baby steps and setting a billable hour expectation of 1400 hours. For years the national average annual billable hours reported in surveys has been 1750 and this was the expectation for many firms for many years and still is for many firms. In the past few years, due to lack of work, work life balance, and other factors some firms have lowered the annual expectation minimum to 1600. Litigation firms, especially insurance defense firms, currently have minimal expectations ranging from 1800 to 2000 hours. Firms that represent individual clients such as general practice firms, family law firms, and estate planning/administration firms currently have minimal expectations ranging from 1400-1600.

I suggest that you look into your situation and determine the reasons for the low billable hours. It could be that they are not putting in the work because the firm does not have enough work for them to do. Look into the following possible causes of their low billable hours and take corrective action:

An approach that many firms are taking is to incorporate performance bonuses such as the following to motivate additional production. Usually these are on top of a base salary. Here are some examples:

  1. Base salary plus 5% of base salary if the billable hour expectation of 1600 is attained, discretionary bonus, and a 15% client origination bonus for bringing a client to the firm. The bonus is for the first year only.
  2. Base salary plus $50.00 per billable hour actually billed to clients that exceeds 1600 annual billable hours. 10% bonus on the collected revenue from other timekeepers that work is delegated to.
  3. Base salary plus 20% bonus for collected working attorney fees in excess of three times salary during the year. For example, an associate that is paid $200,000 would have an working attorney collection expectation of $600,000. If the associate had collections of $700,000 he or she would receive a bonus of $20,000. The associate also is entitled to receive a client origination bonus of 10% for business brought to the firm.
  4. Base salary, 1600 annual billable hour minimum expectation, quarterly production bonus of 40% of working attorney collected fees less salary paid for the quarter, and 20% client origination bonus for work done by others in the firm.
  5. Base salary plus 1/3 of hourly billing rate for hours billed to clients that exceed 1800 annual hours billed to clients.

Some firms have lowered base salaries when incorporating new performance bonus systems when the current expectation is far below expectation. Other firms are terminating under-performing associates.

Many firms are finding that many associates in small firms that have salaries of $200,000 or more are content and are not motivated by the bonuses available to put in the time to earn the bonuses. Work life balance is more important that earning additional income for some associates. The bonus systems works better for associates that are still hungry or have lower base salaries.

Firms that have had the most success in getting associates past the “entitlement mentality” are those that incorporate goal setting, accountability, and individual twice a month coaching meetings with associates in addition to the performance bonuses.

You might want to consider the following approach to associate compensation:

  1. Base Salary at current level or lower.
  2. Working attorney bonus of between 20-40 (one or the other) percent of fees collected in excess of a threshold of 3 times salary.
  3. Delegation bonus of ten percent for fee collection from others working on matters for which an associate is the responsible attorney.
  4. Professional and practice development bonus based on results rather than activity. (Maximum bonus of 10% of salary.) For example:
    1. Two speaking engagements during the year for attorneys or other professional groups with quality PowerPoint presentation approved by the managing partner. $1,500.
    2. Writing article in Bar Assoc. Section News Letter-ANNUAL. $500.
    3. Writing article in Bar Journal or other professional Journal (Ohio Bar Journal, American Bar Journal). $1,000.
    4. Writing Chapter in Legal Professional Book, i.e. 1,500 author – as a c0-author $750.
    5. Bar association or Non-Bar association (if prior approved) leadership position such as chair, etc.(not just membership). Maximum 1 leadership position through 1 year duration of the position. $2,000.

Good luck with the challenge.

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

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

 

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