Law Practice Management Asked and Answered Blog

Category: Governance

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Aug 07, 2018


Firm Administrator vs Director of Administration or Chief Operating Officer

Question: 

Our firm is a fourteen-attorney firm in South Florida. I am the senior member of a three member executive committee. Our firm is in the second generation of partners. The founders retired five years ago. Upon their retirements we changed our governance from a managing partner to an executive committee model supplemented with a office administrator – some refer to the position as the office manager. Our executive committee model has worked relatively well. The administrator that we hired five years ago is still in place but we are not satisfied with his performance. We believe that this is in part due to the fact that our expectations have changed. When we hired him we thought that we needed an office administrator primarily to manage the office staff and the billing and bookkeeping function. So we hired an administrator that had worked, as his first job out of junior college, as an office manager in an eight-attorney firm for two years and had an associates degree in accounting. He has does a good job with managing the staff and the billing and bookkeeping. However, we have now discovered that we want more – we want executive level leadership. We want someone that is respected by all the attorneys and can:

  1. Provide overall leadership
  2. Help lead the executive committee
  3. Develop create solutions to problems
  4. Lead the associates
  5. Serve as marketing director, etc.
  6. Take the lead in strategic planning and implementation of a strategic plan

I welcome your thoughts and opinions.

Response: 

Yes your expectations have indeed changed. Your administrator has not been able to grow in the role expectations that you now have for the position and does not have the education or experience to meet your new demands.

My observations are as follows:

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

I believe that you would like an administrator to serve more in the role as a Director of Administrator or Chief Operating Officer and your present administrator simply does not have the education, experience, and maturity to function in this capacity. If you want someone to serve in this capacity you will have to hire someone with degree credentials – such as a MBA or CPA, that will facilitate 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. In addition, you need to hire someone that has ten years plus as a director of administration or chief operating officer position in a similar size firm or company – preferably a firm that provides professional services such as a law firm, accounting firm, engineering firm, etc. You will have to look beyond the titles that candidates have had and inquire into the specific duties and roles performed. You will need to back up this inquiry with solid reference inquiries.

A director of administrator or chief operating officer position is rare in a fourteen-attorney firm. Many firms your size have administrators or office managers similar to the office administrator that you currently have. The downside to establishing such a position in your firm will be the salary that you will have to pay – more than many of your attorneys and even some partners are being paid – and turnover in the position when an opportunity from a much larger firm comes along.

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

Jul 19, 2018


Law Firm Structure and Elevating Associates to Partnership

Question: 

I started my firm as a solo nine years ago in New Orleans. My practice focuses on maritime defense litigation. Over the years I have added associates and currently I have six associates working for me. I am overwhelmed with work – from the legal work that I am doing in addition to the business development and firm administration. My thought is that I should consider restructuring the firm by making some of my associates partners so I can offload and share some of the administrative responsibilities. I would like your thoughts. What are other firms in my situation doing.

Response: 

Years ago when I started in this business there were solo practitioners and there were multi-attorney firms that were partnerships. There were not many multi-attorney firms that were what I call sole owner firms – firms will many attorneys and just one owner. This has changed. More and more attorneys don’t want to be in partnerships with other attorneys. Sometimes this is a result of bad experiences in other partnerships. In other cases they simply want to go it alone. Also, more and more associates don’t want to take on the stress and financial obligations of partnership – they simply want a job that provides them with a decent income with work life balance. I have law firm clients with sole owners, fifteen to twenty attorneys, and fifty to seventy staff employees. These firm owners have hired firm administrators, marketing managers, and other such talent to offload the administration. While these firm owners have been enjoying the fruits of sole ownership eventually they will have to reevaluate their situation when they begin planning their succession and exit strategies.

I think you have to ask yourself the following questions:

  1. Is adding partners the best way to offload your administrative responsibilities? Should you hire a firm administrator?
  2. Are  you ready for partners?
  3. Do you have associates that meet your requirements for partner admission? Have you thought about these requirements?
  4. Do the associates that you would consider for partnership have an interest in being partners?

Give this some more thought – don’t just make partners to have partners or to have someone to handle administration.

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

 

Apr 25, 2018


Law Firm Management Committee vs Full Partnership

Question: 

I am a partner in a fourteen attorney firm in San Antonio, Texas. We have eight partners and six associates working in the firm. The firm was founded twenty years ago, so we are a first-generation firm. Two of the partners were the founders of the firm and the other six were made partners in later years. Currently our method of governing the firm is handled by the full partnership. While each partner has one vote, we try to manage by consensus. We do not have a managing partner or any committees. We have an office manager that primarily handles the accounting and the staff oversight. The partners meet weekly to discuss issues and make decisions. We are beginning to have issues with our management structure. Partners are not showing up for the weekly meetings and complaining about the amount of time it is taking away from servicing their clients. Should we consider a different approach? We would appreciate your thoughts.

Response: 

You are at a difficult size, still a small partnership but big enough that management by all may no longer be working for you. I believe that you should consider either a managing partner or a management committee of three partners elected by the partnership. For this to work all of the partners must agree to surrender some degree of independence to a managing partner or a management committee. I would start with putting together a list, or job description, for the managing partner or management committee. Partnership agreements often outline management decisions (powers) reserved for the partnership with all decisions handled by the managing partner or management committee. If your partners are unwilling to  surrender some degree of independence then changing to a managing partner or management committee may prove to be wasted effort.

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

Apr 11, 2018


Law Firm Practice Groups

Question: 

I am a partner and a member of our three-member executive committee. Our firm is a twenty-five attorney litigation defense firm in Kansas City, Missouri. We handle matters such as personal injury, medical malpractice, professional malpractice, products liability, and health care law. Each attorney handles and manages his or her own cases and operates in isolation of the other partners in the firm. Other than attending a quarterly partnership meeting there is little interaction among the partners. We have been discussing whether we should form practice groups. We would appreciate your thoughts.

Response: 

Practice groups can be excellent vehicles for enhancing communications, attorney and staff skill development and training, practice management, and marketing. Practice groups should share the mission and vision of the firm as well as goals of enhancing services to clients by developing the skills of the members of the group in a particular legal specialty or industry niche and developing business for that particular group. Practice groups should not operate as isolated islands but should be structured and integrated with the firm. Specifically, functional practice groups should:

Practice groups can be structured around legal specialties such as personal injury, product liability, and professional malpractice. Other practice groups can be structured around industry niches such as energy, health care, etc. In cases where a firm has a very large client a practice group can established for that specific client.

While practice groups can have their advantages, I have found that in many firms they are dysfunctional. They do not meet on a consistent basis, have no goals, or direction, poor leadership, and seem to accomplish little. To be effective  practice groups must:

  1. Be setup by the executive committee with specific goals and have a written charter developed by the executive committee.
  2. Effective leaders should be appointed by the executive committee to serve as chair of the practice group assigned. Specific roles should be identified as well as expectations.
  3. Practice group chair leadership effectiveness should be a factor in the compensation system.
  4. Practice groups should have written strategic plans that integrate with the firm’s strategic plan.
  5. Practice groups should meet monthly.

I believe a practice group would be a logical direction for your firm. You might want to start slow and try a “pilot” test group where there appears to be significant interest and see how it develops.

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

 

 

Jan 31, 2018


Law Firm Leadership – Profile for a Legal Administrator for an Eight Attorney Firm

Question: 

Our firm is an eight attorney estate planning firm in the Chicago area. Our firm has grown from two attorneys to our present size in four years. We have five partners and three associates. Currently management is handled by a managing partner. The partners have been discussing hiring a legal administrator. We were thinking of hiring someone with experience in managing law firms and a solid background in human resources and bookkeeping/accounting. One of our clients suggested that we hire someone with a strong academic background, MBA, CPA type that has served as the CEO of a mid-size corporation. What are your thoughts?

Response: 

I think you are too small to justify hiring a person with this background that is currently employed in such a role. Such a person would be unaffordable and if you could locate such a person your firm would probably be a stepping stone until they find a position elsewhere. If you were able to find someone that is retired and willing to work in a small firm setting that could be a possibility. Another option would be to hire someone that has served as CEO, COO, or CFO of a smaller company – with or without MBA, CPA designation. You could also look for an experienced legal administrator that has worked in a larger firm – possibly with a CPA or MBA. Again affordability will be an issue as well as long term retention. Personally, at your current size I think you should look for someone with BA or MBA degree in business, with a strong background in accounting and human resources, and experience as an administrator in a law or other professional services firm such as an accounting firm, consulting firm, engineering firm. Look for someone that has worked in a firm with 15-35 attorneys/professionals. Be careful of applicants that have worked in very large firms – i.e. 50+ attorney firm for example, as they may only stay a short while in a firm your size and move on to a larger firm when a position becomes available. They may also not be the “hands on jack of all trades” administrator that you need in a firm your size.

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

Dec 13, 2017


Law Firm Owners Use of a Leadership Team

Question: 

I am the owner of a fourteen-attorney law firm in South Bend, Indiana. The firm is a health care firm that represents various medical facilities in the area. All of the other attorneys in the firm are associates. Currently I function as the managing attorney and make all of the management decisions. I also bring in the bulk of the clients into the firm. I am wanting to retire in the next five years and I would like to sell my interests to three associates in the firm. However, I am not sure that they would be good partners with each other, whether they have the management skills and client development skills to lead the firm, or whether they would even want to be partners. My other option would be to merge with another firm. However, I would prefer to sell my interests to the three associates rather than merge if at all possible. What are your thoughts?

Response: 

I appreciate your situation. I think you need to sort of “pilot test” the three associates. If you had other equity partners I would suggest that you form a three member management committee to begin transferring some of your management responsibilities and client relationships. Since you don’t have any equity partners I would not create or label a management committee which is usually a decision-making body with each member having a vote. You might consider forming a committee that you call the Leadership Team with the three associates and yourself serving as members on the team. This would be an advisory group with you retaining control. You would try to run the group by consensus but you would still be the ultimate decision-maker. I would start by starting the team with limited areas of management, responsibility, and authority. Teach them how to work as a group and gradually increase the team’s responsibility and authority. See how it goes and observe the interpersonal dynamics. After a year you should have a good idea whether they can work together as partners and whether an internal succession strategy will work for you. You might want to create a different category for these associates – senior associate or non-equity partner at the time that you do this as well.

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

May 31, 2017


Law Firm Governance – Partner Participation in Management

Question: 

I am the founder, majority partner (80%), and managing partner of a twenty two attorney firm in Phoenix, Arizona. The firm practice is focused in the area of health care. There are twelve equity partners, five non-equity partners, and five associates. I manage the firm as a benevolent dictator. I am becoming overwhelmed trying to manage the firm and practice law and I believe the firm is now at a size where others must become involved in managing the firm. I have been considering forming a committee of all the equity partners to manage the firm. Your thoughts are welcomed.

Response: 

While I believe that you are of a size that warrants broader participation in the governance and management of the firm you can go too far. Broad participation in decision making and consensus building slows things down. It can also make it difficult to reach a definitive conclusion. Getting all the partners to agree takes time. Broad participation can also diffuse responsibility. If everyone is in charge no one is in charge. In law firms whose partners are overly deferential to their partners’ views, the decision-making process often seizes up. Unless firm partners who, when necessary, will assert themselves and use their influence to press for action, the only decisions it’s likely to make are decisions not to decide.

I believe that you should stop short of broad participation by all the equity partners. Consider a three member executive committee elected by the equity partners on three-year staggered terms. This committee would have responsibility for the general management of the firm not delegated to your firm administrator if you have such a position in your firm. Committee responsibilities would include financial management, human resource management/oversight, client development, IT systems oversight, procedures and policies, etc. Establish proper structure for the committee with a chair, identified roles and duties for each member, defined meeting schedule, and agenda and meeting minutes. Define in your partnership agreement those powers that are restricted to a vote by the full partnership and the rules for voting – one partner one vote or vote by percentage interest. Other than those powers restricted to the full partnership partners should let the executive committee manage the firm and not second guess.

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

Jan 31, 2017


Law Firm Administrator Competencies – Searching for a First-Time Legal Administrator

Question:

Our firm is a twelve attorney business litigation firm in Springfield, Illinois. I am a member of our three member management committee and I have been charged with helping the firm find and hire our first legal administrator. This will be our first experience. While we have a bookkeeper that handles our billing and accounting the rest of the firm’s management matters are handled by the management committee. We believe that we have reached a size where we need help with managing the day-to-day operations of the firm. What sort of skill set and type of person should we be looking for?

Response:

The starting point is to have some heart to heart discussions internally to make sure all the partners are on the same page regarding the role the firm is looking for an administrator to play? Is the firm willing to delegate authority with responsibility and let the administrator really manage the business side of the practice (a true administrator) or is the firm looking for more of a lower level office manager? This will dictate the skill set and type of person that you should be looking for. I suggest that you develop a job description for the position listing not only the duties but the authority levels as well and have every partner in the firm sign off on it.

An excellent resource in the Association of Legal Administrators (ALA) which is the professional trade association for legal administrators. They have published a document listing 56 competencies in the following five categories:

Click here to download the above document.

ALA also has some helpful areas on their website for a law firm looking for an administrator including articles on evaluating your firm’s needs, the candidate search process, and defining the role of the administrator.

Many firms burn through their first administrator quickly and end up having to try again with another person or two. First time failure if often the result of not determining up front and having the partners agree regarding the role, expectations, and authority level of the administrator.

Do your homework and you will increase the change of success with your first administrator.

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

Oct 25, 2016


Law Firm Management – Excessive Collaboration

Question:

I am a partner in a twelve attorney general practice firm in Upstate New York. There are eight partners and four associates in the firm. Our firm was formed five years ago when we broke off from another firm in the area. That firm was led and managed by a dictatorial founder and other attorneys in the firm including partners had no say in management matters whatsoever. When we formed this firm we decided that all attorneys including associates would be included in the decision-making process. All management decisions must be passed by all attorneys in the firm. When we were smaller this worked okay but not that we are larger we are having problems. I would appreciate your thoughts on the matter.

Response:

I concur that a collaborative culture should be a desirable goal. However, your approach takes too much time, wastes attorney time, takes too long for routine decisions to be made, and can lead to less than optimal results. I suggest that you separate management decisions into the following three categories:

All partners will still have control of the major issues and be spared from the day-to-day management and administrative decisions. A managing partner or three member management committee can be elected to handle the management decisions and an office manager/administrator can be hired or promoted from within to handle the day-to-day administrative decisions. Associates can attend periodic firm meetings, service on ad hoc committees, etc.

An approach such as this can still preserve the collaborative culture and you have strived to develop and improve overall management of the firm.

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

Oct 19, 2016


Law Firm Governance – Executive Committee – Non-Equity Member and Procedures

Question:

Our firm is a fourteen attorney firm in Orlando, Florida. We have Two equity members, five non-equity members, and seven associates. We are currently managed by the managing member. In order to be more inclusive we are thinking about eliminating the managing member position and moving to a three member executive committee with one of the three members being a non-equity member. I would appreciate your thoughts?

Response:

I have several client law firms that have taken this approach. Here are a few suggestions:

  1. Draft a charter (position descriptions) for the equity membership and the executive committee outlining the specific responsibility and authority for each.
  2. If the firm has a firm administrator draft a job description for that position outlining his/her responsibilities and authority.
  3. Since there are only two equity members there will be no election for those members on the executive committee until such time in the future when there are more equity members. At that time the two equity members should stand for election by the equity membership for staggered three year terms.
  4. Have the non-equity members elect a representative non-equity member annually for a one-year term on the executive committee. 
  5. Suggest that each member have one vote including the non-equity member. The goal of the executive committee should be to manage by consensus but when they can't a vote should be taken.
  6. Have the non-equity member sign a non-disclosure agreement and advise him/her as to the content that can be shared with the non-equity members and content that cannot be shared.
  7. Elect a chair of the executive committee.
  8. Have regularly scheduled meetings.
  9. Use agendas and prepare minutes or notes after each meeting.

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

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