Law Practice Management Asked and Answered Blog

Category: Culture

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Feb 17, 2015


Transitioning to a More Business-Like Law Firm

Question:

I am a partner in a 12 attorney general business firm located in St. Louis, Missouri. I was elected as managing partner earlier this year. I have been a lawyer and with this firm for eight years. I also have a MBA degree and managed a small business before becoming a lawyer. Frankly, I have been amazed at how law firms conduct business and I would like to change our thinking and our culture. Do you have any thoughts?

Response:

Here are five tips that you might find useful.

TIP #1: Work with the attorneys in the firm and help them develop more of a business mindset. Try to get them to become more entrepreneur and learn how to think like businesspersons. Encourage them to look at the world from their client’s perspective and consider their clients their business partners. 

TIP #2: Encourage all attorneys to select their clients carefully. Establish client acceptance criteria. Learn how to say no. Dump undesirable clients.

TIP #3: Encourage all attorneys to brand themselves. Ask them to look for was ways to differentiate themselves from their competitors and to become perceived as the only attorney that can do what they do. Ask them to make a decision – what do they want to be known and remembered for? Unique services, unique client groups, different service delivery strategy, personal style. Have the firm and each attorney create a five-year plan for goal accomplishment.

TIP #4: Encourage each attorney to become “solutions orientated” and become consultants – trusted advisors to their clients as opposed to simply their task and process attorneys. Solutions may involve activities and services other than legal services. Ask each attorney to think out-of-the-box and outside of typical frameworks in which they are comfortable.

TIP #5: Conduct a firm-wide management and leadership assessment and identify strengths and weaknesses. Enhance management and leadership skills through skill development training and personnel acquisitions.

Good luck!

https://www.olmsteadassoc.com/blog/category/strategy/

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

 

Apr 13, 2011


Balancing the Law Firm Trust Account

Question:

I am the managing partner with a 14 attorney firm in Chicago. We recently hired a new accounting manager/bookkeeper. While she has worked in a few other law firms these firms did not require her to manage a high volume trust account. Our firm has a high volume of transactions that flow through the firm's trust account. We have had problems in the past with prior bookkeepers and outside accountants that did not balance/manage our trust accounts properly. What suggestions do you have or resources do you suggest?

Response:

Failure to properly manage, balance, and reconcile the firm trust account can be a major problem for law firms - from professional responsibility, accounting, and tax aspects. From a bookkeeping standpoint – failure to maintain a trust account sub-ledger for each client that has money in the trust account and insuring that all of the sub-ledgers balance and reconcile back to the trust account bank statement in the biggest problem that I see. You must do more than simply maintaining a checkbook journal register – you must have a sub-ledger for each client. If the firm reflects the trust bank account on it's balance sheet there should be either a contra asset account or a liability account relecting the same amount reflected in the cash account. The total of all of the sub-ledgers should also equal the number in each of these two general ledger accounts. All should reconcile back to the trust account bank statement. If the firm does not reflect the trust account on the balance sheet – then the trust account bank statement should be reconciled to the sub-ledgers.

Many time and billing programs have trust accounting modules that fully automate the trust accounting management function, maintain the sub-ledgers, write trust account checks, and reconcile the bank statement against the client trust sub-ledgers.

There are a whole array of issues that you need to be aware of and stay on top of concerning retainers generally, firm trust accounts, and other matters. You, your bookkeeper, and your CPA need to get educated on all of the ramifications.

Here are a few additional suggestions:

  1. Get a copy of your local rules and read them. For Illinois lawyers – get a copy of the Illinois Rules of Professional Conduct of 2010 published by the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois. www.iardc.org.
  2. Insure that your bookkeeper and CPA read these rules and implement appropriate systems to ensure compliance.
  3. Get your hands on a copy of the book – ABA Guide to Lawyer Trust Accounts, by Jay Foonberg. Book can be obtained from the American Bar Association website. www.abanet.org
  4. Reconcile monthly.
  5. Use appropriate software to write checks, record deposits and transfers, renconcile bank statements, and maintain the client trust sub-ledger.
  6. Maintain a journal.
  7. Maintain a client trust sub-ledger.
  8. Insure that funds are transferred to the firm's operating account when fees are earned and appropriate accounting entries made at that time in the firm's books.
  9. Stay on top of the trust account.
  10. Insure that your bank and credit card company are following proper procedures. Insure that your bank takes services charges, charges for printing checks, etc. from your operating account rather than the trust account.

You are right in desiring to get a handle on this sooner than later. Sit down with your bookkeeper and CPA, get educated on the rules and procedures, and implement appropriate policies and systems now. It is always easier to prevent a mess than to clean up one.

 Click here for our financial management topic blog

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

Nov 02, 2010


Getting Law Firm Partners Onboard

Question:

I am the managing partner of a 90 attorney firm in Chicago. We have 45 equity partners, 20 non-equity partners, and 25 associates. We have a three member executive committee as well as other committees in place in addition to the managing partner. Five years ago we formulated a strategic plan and have been attempting to successfully implement it since that time. We have had limited success. We don't seem to be able to get our partners "on board" with the actual implementation. I will tell you – I am truly herding cats here. Any ideas on how to get these guys and gals on board?

Response:

Getting your partners on board is always a challenge. The obstacles are almost too numerous to outline. Yet if law firms want to be successful in this turbulent environment they must embrace change and get their partners not only behind new strategies but often they must also be the ones to implement these strategies as well.

Managing lawyers in general is like herding cats. But trying to manage "star partners" is a real challenge. They are the "hitters" upon which a firm's future often depends. True star partners are:

  1. Building enduring client relationships
  2. Consistently performing up to their full potential
  3. Putting the firm first and implementing strategic imperatives

Star and other partners in the firm must continually balance their roles as producer, manager, and owner. Often, these roles may be in conflict. Also there are personal strategies and agendas as well.

Actually, I don't think they can be managed – but they can be led. There is a difference. But in order to accomplish this the following need to be well designed, in alignment and balanced:

Strategy

The personalities, emotions and needs of your partners constrain a firm's ability to design and implement strategy. Keep in mind that firm leadership cannot order the troops forward; instead the troops (partners) must essentially vote with their feet to pursue a new strategic direction. Absent a crisis, partners tend to stay on track and support only modest adjustments to strategy.

Organizational (Structure, Governance, HR Systems)

When organizational characteristics – structure, governance, and HR systems (recruiting, training and mentoring, performance management, and compensation) are aligned with the needs of the partners and the strategy of the firm, they create the conditions under which strategy can be implemented effectively. Matrix and team structures are the norm.  Collegial partnerships, consensus based governance, and leadership at the pleasure of the partners, rules the day. The cats have the power and the leader serves to a large extent at their pleasure.

  1. Look for ways to build consensus and create buy-in
  2. Involve all partners in major decisions – more than input – but a say
  3. Implement a first-rate partner performance management/review/evaluation system
  4. Review and insure that your compensation system is fostering alignment
  5. Provide as much transparency as possible
  6. Review your organizational structure

Culture

The firm's culture deals with its underlying core of beliefs and values, which shape the behavior of the firm. Nothing can weave new strategic and organization choices together and hold them in alignment better than culture. A strong culture can also provide enormous help in attracting, retaining and motivating stars. A strong culture is the glue that helps a firm overcome major obstacles, it can help foster major changes in strategy and or organization, and it can be a strong force for unity and coherence. 

  1. Work at building and managing the firm's culture.
  2. Recruiting, compensation, training, mentoring, performance management – should also be deployed to reinforce the firm's culture.
  3. Guard the firm's culture and keep in mind the impact that laterals, mergers, etc. might have upon it. 

Leadership 

As the firm's leaders you and the other leaders in the firm are serving at the pleasure of your partners. You are probably elected by them. Your positional power is limited – sort of like the President of the United States and the Congress. As a result exceptional leadership skills are needed and each of you must master the skills of building consensus and facilitating decisions so your partners will agree with and support them.

  1. Pick the right priorities
  2. Pick the right fights and fight the right battles
  3. Build support and coalitions through integrity and trust

For a good read on this subject – the book “Aligning the Stars” by Jay W. Lorsch and Thomas Tierney is an excellent resource.

Good luck! 

Click here for articles on other topics

Click here for our blog postings on partnership and governance

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

 

Sep 28, 2010


Dealing with Difficult – Maverick Partners

Question:

Our firm has been discussing how to handle one of our partners. We are are 25 attorney firm. One of mid-level partners who is one of our highest fee producers and best business getter's simply won't follow firm policy or play by the rules. He won't turn in time-sheets in a timely manner, he is argumentative with others in the office, and not a team player. He is "me first" while the rest of the partners in the firm are mostly "firm first". We are trying to build a team based practice and this one partner is holding up our progress. Do you have any thoughts or suggestions on how we should handle this?

Response:

Dealing with "maverick partners" is always a challenge. Of course they seem to always be the heavy hitters and this makes it that much more difficult as often there are major clients and large sums of money at stake – at least in the short term. This can also be major issues and large sums of money at stake in the long term if you don't deal with the maverick partner as well. In addition you won't be able to achieve the vision and goals the firm is trying to achieve.

Many firms have had to deal with the problem of a maverick "huge business generator" who just wouldn’t cooperate with firm policies and caused conflict and tension in the firm.  It is an unplesant task – but in the end – worth the investment. In the end he or she either conforms or leaves the firm. We have been advised by our clients that even though they may have struggled in the short term as the result of the loss of a major fee producer – in the long run the firm was better off and should have done it earlier.

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

 

Sep 14, 2010


Characteristics of Successful Law Firms – Basic Building Blocks – Block 4 – Partner Compensation

For the past three weeks I have been discussing the characteristics of successful law firms and introduced the following basic building blocks that successful firms typically have in place:

Partner relations, leadership building, and management blocks have been discussed. 

The fourth basic building block is partner compensation. Successful firms have a good partner compensation in place. Partners frequently advise us in confidential interviews that they are more dissatisfied with the method used to determine compensation than with the amount of compensation itself.

How much and how partners are paid are probably the two most challenging management issues that law firms face. Many law firms are struggling with compensation systems that no longer meet the needs of the firm and the individual partners. Failure to explore alternatives to failing systems often result in partner dissatisfaction leading to partner defections and disintegration of the firm.

In many law firms compensation systems have been counter-cultural and failed to align compensation systems with business strategies. As more law firms move toward teams many are incorporating new ways to compensate partners in order to develop a more motivated and productive workforce. Team goals are being linked to business plans and compensation is linked to achieving team goals. Such systems reinforce a culture that significantly advances the firm’s strategic goals.

People tend to behave the way they're measured and paid.

What gets measured and rewarded – is what gets done.

However, be advised that compensation does not drive behavior – it maintains status quo. Motivation requires leadership which can have a greater impact upon a firm than anything else.

Compensation systems should do more than simply allocate the pie – they should reinforce the behaviors and efforts that the firm seeks from its attorneys. Many firms are discovering that desired behaviors and results must go beyond short term fee production and must include contributions in areas such as marketing, mentoring, firm management, etc. to ensure the long term viability of the firm.

Click here to read my article on the topic

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

 

Sep 08, 2010


Characteristics of Successful Law Firms – Basic Building Blocks – Block 3 – Management

For the past two weeks I have been discussing the characteristics of successful law firms and introduced the following basic building blocks that successful firms typically have in place:

Partner relations and the leadership building blocks have been discussed. 

The third basic building block is management. Successful firms have a good governance and management structure in place and effectively manage the firm. A major problem facing many law firms is the lack of long range focus and the amount of partner time that is being spent on administrivia issues as opposed to higher level management issues. Time spent in firm governance and management, if properly controlled, is as valuable as, if not more valuable, than the same time recorded as a billable hour. (client production time)

There is a difference between management (governance) and administration.

Partners and law firm owners should be focusing their time on the management issues rather than administration.

Management includes:

  – Productive activities, including those of individual lawyers and the firm as a whole.
  – Quantity, quality, and economic soundness of the work.
  – Development of lawyers and future leaders of the firm.
  – Formulation of policies that will determine the firm’s character
  – Financial planning, both short-term and long-range.
  – Marketing and business development.
  – Partner compensation and profit distribution systems

  – Other decisions requiring partner approval

Almost everything else is administration.

Hire an office administrator, manager or assistant for the administrivia matters so the partners can focus on the management concerns of the firm.

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

 

 

 

 

 

Almost everything else is administration.

Hire an office administrator,office manager or assistant for the administrivia matters so the partners can focus on the management concerns of the firm

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

 

 

 

 

  

 

 

Aug 31, 2010


Characteristics of Successful Law Firms: Basic Building Blocks – Block Two – Leadership

Last week I discussed the characteristics of successful law firms and introduced the basic building blocks that successful firms typically have in place. These are:

Last week we focused on partner relations as a core foundational building block.

The second basic building block is leadership. Successful firms have good leadership in place. This may be a single individual or a core group of individuals. Leadership does not always come from the formalized management structure of the firm.

Leadership is one of the major problems facing law firms. Leaders are needed for managing partner posts, executive committee chairs, and practice group heads.  

Leadership behaviors include:

Leadership skills will need to be included in compensation systems.

Seven traits of effective leaders include:

  1. Make others feel important
  2. Promote a vision
  3. Follow the golden rule and establish trust
  4. Admit mistakes
  5. Criticize others only in private
  6. Stay close to the action
  7. Walk the talk.

Leadership is what makes things happen and propels the firm forward, facilitates new directions and attainment of strategic goals, and provides the firms the resiliency needed in today's challenging competitive climate.

Law firms without leadership are easy to spot. They are the firms that are "stuck-in-a-rut", unable to reach agreement or concensus on new ideas, stagnating profitability, partner defections.

Firm must pay attention to this key area and develop leaders for all roles mentioned above.

Click here to read my article on leadership

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

 


 

 

Aug 23, 2010


Characteristics of Successful Law Firms: Basic Building Blocks – Block One

Question:

My partner and I just started our firm two years ago. We have one associate attorney and one staff member. As we grow our firm what should we keep in mind so we don't repeat some of the mistakes that I have seen in other firms that have not been successful?

Response:

I often refer to what I call the Basic Building Blocks of Successful Law Firms which are:

Lets take the first one – Partner Relations. This is the foundation (bedrock) of a successful firm. A successful firm has a healthy partner culture – a good marriage. In such a culture partners share common vision and purpose, respect one another, shoot straight with each other, and have difficult conversations and discussions when needed and deal with issues and problems. In many firms this is not the case and these firms often are characterized by the following:

Such firms are often doomed from the start. Firms that don't get this foundational building block right will build a firm on a shaky foundation. Before forming a partnership – go slow and get to know the other lawyer or lawyers and insure that the marriage makes sense, that you share similar goals and values, that you will be compatible, and you will be good partners. Once you have made the commitment – communicate, communicate, communicate and deal with issues in real time.

I will address each of the other building blocks in upcoming postings.

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

 

Nov 28, 2006


Firm Culture

The following questions was recently submitted for comment:

Question: I often hear the term firm culture used. What does this term mean and what impact does it have upon management of a law firm?

Response:

Firm culture is the part of the firm’s internal environment that incorporates a set of assumptions, beliefs, and values that organizational members share and use to guide their functioning. Is a pattern of shared values and beliefs giving members of a firm meaning and providing them with rules for behavior. These values are inherent in the ways organizations and their members view themselves, define opportunities, and plan strategies.

Much as personality shapes an individual, organizational culture shapes its members responses and defines what an organization can or is willing to do. Click here for link to full article

Nov 13, 2001


The Organizational Lifeblood for Law Firm Profitability – Active Coordinated Communication

The Organizational Life Blood for Law Firm Profitability:
Active Coordinated Communication
By Dr. Thomas J. Venardos

A Viable Way to Address Profits in Your Law Firm

A new generation of law firm lawyers need new tools to maximize profitability. These tools combine the marketing of the law firm services, reinventing the law practice, promoting business to business practices, having improved public relations, creating a new law firm structure, and developing goals that can be very powerful and profitable. The tool that can accomplish this is active coordinated communication.

The Problems That Exist for Law Firms What kind of information should be shared with internal and external clients? Who should receive different levels of information? Should you provide both negative and positive information to clients? Should you tell clients what they want to hear, or should you tell them what they need to hear? These are the basic questions facing management leadership in today’s law firms. This is why there is a need for consistent, up and down the chain of command, simple, active coordinated communication that can help improve profitability.
Basically all communication is “human communication.” This means communication speaks not only to the political structure of the law firm but to the personal and professional side as well. Listen to any conversation between two coworkers or two senior partners and you will hear comments that relate to law firm morale problems, fairness issues, exclusion from decision making, loyalty to the company, profit margins, as well as problems in using current technology.
Minimal communication, miscommunication, and no communication are the main factors that can cause law firms to stagnate. When these factors prevail, effective communication loses its influence. Communication is unable to be coordinated across and between practice group lines or to the clients outside the law firm. This essentially means effective communication is muffled and distorted at all levels. The best solution is to make communication a major priority so that it can be managed effectively and coordinated internally and externally. This takes leadership that is objective and not involved with rumors, willing to grow from mistakes made, and uses personal and professional incentives rather than threats or innuendo attempts to obtain desirable workplace results.

Reinventing the Law Firm Culture Positive change occurs when small steps are taken even though the big goal of reinventing the law firm culture is at stake. It begins with small successes that can be observed and measured and proceeds to a larger feeling of oneness, filled with accomplishments. It builds on itself and becomes important to everyone.
Below is the sequence for positive change:

  1. Sharing all information, data, and goals with everyone-both internally and externally.
  2. Being available to answer any questions asked by others.
  3. Informing others, in a totally honest way, that your answers and possible solutions to problems are based on facts and not biases.
  4. Building human trust using your reputation by making ethical decisions.
  5. Using face to face communication as your primary communication method.
  6. Correcting mistaken assumptions quickly.
  7. Overriding mistakes with positive solutions.
  8. Creating a legitimate and visible position for a communicator role at the highest level with total support from senior partners and staff.

The Case for Coordinated Internal/External Communication
In reality, lack of communication or confusing communication is a basic problem faced by most staff and professionals. It is the major issue to overcome. Therefore, it would seem natural to assume that the way to correct this is by having the communication enhanced by a member or team of members of the staff while giving it the highest priority in the firm.
Those responsible for communication would in turn be expected to assume the powerful role of sharing all the important and critical information that flows through and out the law firm. In essence they need to have:

Professional Traits Necessary for Enhancing This Kind of Role
In the eyes of those in the law firm a communication department of this stature must have many of the following professional traits: be credible with the public, be believable, have accurate information to share, be timely, have good professional judgment and wisdom, be sensitive to everyone they come in contact with, be accessible, And promote confidentiality. This is a tall order for any one person or group of people. But the result that it yields is greater than the sum of its parts.
The point is this, whenever you communicate law firm information, it concerns human elements. So it is important to represent the issues fairly with people in mind. There needs to be a separation of issues from personalities. Both positive and negative feelings should be taken into account. Finally there should be the realization that there are supporting and opposing opinions and perceptions that create innate conflict and must be dealt with by overcoming any potential human conflict.
Further, when coordinating sensitive information it becomes necessary to speak with one voice, simplify the message, and use a variety of communication tools. Every aspect of human relations should prevail.

Communication Tools for the Twenty First Century
Like newspaper, radio and television were communication tools for the Twentieth Century, so it is that computer technology is the newest tool for the Twenty First Century. Herein lies the potential success of the communicator.
Computer technology can be used for both internal and external communication. It is an efficient tool that has multiple uses: word processing, verbal, visual and auditory e-mail, information gathering and disseminating capabilities, monetary transaction ability, global influence and positioning, business to business relationships, record keeping materials production, creative materials development, distance education and career enhancement potential.
In turn this technology can be used as a mobile office which works best for those professionals on the go and who need to keep in contact with their office and clients. Therefore, active coordinated communication can be implemented nearly all of the time.

The Powerful Effects of Active Coordinated Communications The list below reflects how active coordinated communications can create more profits for law firms provided it is established in a professionally sound manner. It will take creative risks, planned directives, monetary support, time investments, a high learning curve, and innovative adopted business practices.
Creating a New Law Firm Structure: By creating this new active communications structure that oversees both internal and external activities, your law firm should generate a more consistent, meaningful and effective means of generating greater business. This kind of structure could in turn create the loyalty, security and growth your employees are looking for. Law Firm Objectives: These need to be established by all employees of the law firm, and should attempt to promote personal productivity, monetary aspirations, profit sharing, compensation issues, cost cutting measures, marketing strategies, and business practice skills. These shared objectives can then be communicated by everyone. Marketing Law Firm Services: This is a distinct plan for everyone to be involved in because marketing is such an important priority today. Active coordinated communications can enhance this practice via different activities: speaking engagements, newsletters, advertisements, a web site, television appearances, brochures, newspaper and magazine articles and, Internet business to business practices.
Reinventing the Law Firm and Law Practice: There needs to be a focus actively changing the way the law firm does business by establishing flat fees, using non-billable hours to work productively, offering ways to help clients keep costs down and, expanding practices by having other professionals make referrals.
Business to Business Practices: Begin to use legal resources on the Internet that deal with business to business issues like finding your law firm clients, putting out bids, allowing them to bill and collect for your firm, and marketing your firm on the Internet.
Improved Public Relations: Your active communications can lead to better public relations if you control what is said and how it is delivered to others. Your image can become valuable if you work on making it positive and more acceptable to others in the community.
Document, Document, Document: There is a critical need to measure what you are doing so that you can see any progress. This can be done by counting the number of activities each person performs in the law firm, counting increased client contacts and inquiries, reviewing accounts receivable and collections and, identifying cost cutting measures.
Can You Answer These Eight Questions in the Affirmative?

Unless you can answer at least six of these eight questions in the affirmative, there is room for improvement of law firm operations. Positive change begins with admission of the problems and proceeds with workable solutions that are openly discussed among everyone.

Where to Begin:

  1. Find someone in the firm, or hire someone, who is very comfortable with expressing themselves in written and spoken fashion.
  2. They should demonstrate clear, effective writing skills.
  3. They should be competent on the computer and with the Internet.
  4. Your clients and others in the firm should think highly of them.
  5. Involve a person who is very familiar with new technology and who is good at learning and using it, because they will have a different way of thinking that can benefit your law firm.
  6. They must be assertive and speak up when they are challenged.
  7. They need to be able to measure all the results of active communication in the law firm.

Active Coordinated Communication and Profitability Increase
The relationship between active coordinated communication and increased profits becomes clearer when hard data is gathered and analyzed. Examples where you may want to gather data are listed below:

The lifeblood of a law firm is how it effectively communicates from within. The sooner this is realized and made a reality, the quicker you will start to generate the results you want.

Dr. Thomas J. Venardos is an adjunct management consultant with Olmstead & Associates, Legal Management Consultants, St. Louis, MO, and President of Venardos Management Group, Organizational Performance Consultants, located in Las Vegas, Nevada. Dr. Venardos may be contacted by e-mail at tvenardos@olmsteadassoc.com.

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