Law Practice Management Asked and Answered Blog

Category: Governance

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Oct 02, 2012


Law Firm Governance and Structure – Impact Upon Competitiveness

Question:

Our firm is in Nashville TN and we currently have 12 attorneys – 7 partners and 5 associates. We are an eat-what-you kill law firm. In essence we operate as separate profit centers and operate in our own silos. We all have to come together and agree on any and all management decisions. Our management team consists of "all partners". We do not have a office administrator, office manager or even a managing partner. We all have the freedom to do as we please and there is very little accountability to each other. Recently we have been discussing the pros and cons of why we might want to change our governance and overall structure. I would be interested in your thoughts.

Response:

I believe that law firms that are "firm first" team based firms and organized along these lines have (or will have) a competitive advantage with respect to clients, legal talent, and merger partners. As law firms grow the "lone ranger" confederation approach no longer works. Decision-making is too time consuming, partner time is wasted, and opportunities are missed. Synergy (where one plus one equals three or four) is not achieved and the firm achieves little more than any one of the attorneys could achieve in solo practice.

Recently I was working with a similar size firm in Chicago that was looking for a merger partner. When the other firm learned that my client was a "lone ranger" firm they discontinued discussions. Larger firms that are "team-based" are not interested in merging with "long ranger" firms – they tend to cherry pick key talent from these firms rather than pursuing mergers or combinations.

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

 

Jul 24, 2012


Focused Effort in Law FIrms – Effective Problem Solving and Implementation

Question:

Recently our firm of 14 attorneys decided to transition from all partners weighing in on every management decision to a managing partner form of management. I was elected to the new managing partner position and have been in the position for four months and I have accomplished very little during this period of time. I am not sure where to start. I would be interested in your ideas.

Response:

You might want to read last week's blog/posting on governance. Structuring and Running Your Firm Like a Business

Lack of focus and accountability is one of the major problems facing law firms. Many times, the problem is having too many ideas, alternatives and options. The result, often, is no decision or action at all. Ideas, recommendations, suggestions, etc., are of no value unless implemented.

Look for ways to insure that your, and your partners, time spent on management is spent wisely. At first identify a few (maybe three) management initiatives that you can move forward fairly quickly and get implemented. Then build upon these successes.

Don’t hide behind strategy, planning, and endless debate. Attorneys love to postpone implementation. Find ways to focus the firm and foster accountability from all.

Don't attempt to initially, in the short term, take on management projects that the firm is unwilling or unable to implement.

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

 

 

Jul 17, 2012


Structuring and Running Your Law Firm Like a Business

Question:

Our firm is a 34 lawyer litigation boutique based in San Antonio, Texas. We have 20 partners and 14 associates. I serve as managing partner at the will of the partnership and spend 35% of my time on firm management matters and the remainder of my time practicing law. A legal administrator and accounting manager assist me with managing the firm. While I have the general support of the partnership, maybe because no one else wants the job, I serve more as a filter and still find that I have to run most of the firm's management decisions before the full partnership. Often I feel that my staff and I are second guessed, management decisions take too long to make and are diluted and watered down, and the firm has missed out on opportunities due to our structure or lack of structure. Other law firms that we have competed against for years have passed us by and have grown while we have stagnated. Do you have any suggestions concerning our approach to managing the firm?

Response:

You firms has reached a size where more structure is usually required. The democratic system of all partners being involved in virtually every management decision might have worked when you were five or six attorneys but has now outgrown this structure. Think about how some of your business clients are organized and structured. Ask around and talk with other law firms and accounting firms your size. I think that you will find that they have put in place more structure to support their business models.

I suggest that you:

  1. Put in place a structure consisting of the full partnership that weighs in on matters pertaining to firm policy/strategic direction, size of firm, partner admission/termination, merger, dissolution, etc.
  2. Appoint a three to five member executive committee that serves as a board of directors that is charged with planning the firm's future and submitting plans to the partnership, budget approval, general oversight of the CEO or managing partner.
  3. CEO or managing partner that implements firm plans, oversees the budget, oversees practice group chairs, and supervises the firm administrator. CEO or managing partner reports to the board of directors.
  4. Firm adminstrator and practice group chairs.
  5. Put in writing a management or governance plan. Start by adopting a list of decisions
    which require a vote of the partners. Charters and job descriptions should be established
    to clarify roles, authority and expectations for the partners, board of directors or executive committee, managing partner(s), the firm administrator, and practice groups heads. Mechanisms should be put in place to insure conformity and accountability.
  6. The partners should delegate full authority for decision making to the board of directors, except for those decisions specifically reserved to the partners, the board should delegate
    appropriate authority to the CEO/Managing Partner and he/she should delegate appropriate authority to the firm administrator.
  7. Partnership, board of director, staff, and practice group meetings should be chaired by the appropriate officials. Agendas should be prepared in advance and permanent minutes should be
    typed up and maintained. Unfinished business should be reviewed at each meeting. Follow-up and implementation mechanisms should be developed.

You should start with general partnership discussion on how the members would like to work together and the kind of firm they want going forward. Are the partners willing to be managed and willing to be accountable to each other and to what extent? Then go from there.

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

 

May 28, 2012


Improving Law Firm Management Team Performance

Question:

Our firm has 24 attorneys. We are managed by a management team consisting of a managing partner (25% of his time), a full-time office administrator, controller, and marketing director. I am currently serving as the managing partner. Recently we have been having conflict between various members of the management team. Our team meetings are stressful and I fear that our effectiveness is being compromised. Do you any suggestions?

Response:

I suggest you start by identifying some of the causes. Poor communications often can be the root cause of such problems. Interview each of your team members individually and probe. What do they think? Is communications a problem? Are roles, duties, and responsibilities clarified? Lack of clarity can in these areas can lead to turf wars. You may want to design a team charter as well as job descriptions for each employee and clarify roles, duties, and responsibilities for each team member. Conduct short weekly team meetings to enhance communications. Use agendas. Take minutes of the meetings. Advise each team member of your expectations including all members working together as team members. Let them know that working together as a team is a performance factor that will be considered in performance evaluations and reviews. Conduct periodic performance reviews. Counsel and take action against problem team members.

Take stock of your performance as well. Are you micro managing the team or second guessing team members? Have you honed your leadership skills? If not – work on your management and leadership skills as well and consider coaching and leadership training if necessary.

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

Feb 07, 2012


Law Firm Compensation Committee

Question:

For years our14 attorney firm has operated under a formula based eat-what-you kill system. We are moving toward a more subjective-based system. We have been advised that we will need a compensation committee. What are your thoughts regarding compensation committees?

Response:

The components of your compensation plan and partner buy-in will be important to the success of your program. However, how you setup and constitute your compensation committee will be crucial. In a subjective system trust is paramount. How the members are selected, who serves on the committee, how the committee operates, and other matters must be spelled out and communicated to all partners. Here are a few ideas:

  1. Consider a three member compensation committee.
  2. Elect members to staggered three year terms. On the initial election elect the individual with the most votes to a three year term, the individual with the second most votes to a two year term, and the individual with the least votes to a one year term.
  3. Hold elections annually to fill vacancies for the upcoming year.
  4. Consider adopting a policy of requiring a partner whose term has expired to remain off the committee for one year before being able to run for another term.
  5. Incorporate procedures for removal of members by majority vote of the partners. Specify the voting requirements.
  6. Outline the general flow of the compensation review process, how it will work, specifically what performance factors will be considered, etc.
  7. Outline the approval procedure of the partnership. Suggested that the partnership only be able to disapprove the recommendation in total – not pick apart and change. If the proposal is disapproved by a majority vote – the compensation committee starts all over.
  8. Specify appeal rights and procedures.

The key ingredient of a successful subjective compensation system is that partners perceive the system as fair and have faith and trust in the compensation committee. The process is as important as the outcome.

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

Nov 22, 2011


Governance Plan for a Law Firm

Question:

Our firm has 25 attorneys. We are located in the greater Washington D.C. area. I am one of three members on the Executive Committee. While we try hard to effectively manage the firm too many people are trying to make decisions on behalf of the firm, therefore nothing is getting done. All of the partners continually second guess everything that our committee tries to do. I have been told that we need a governance plan. What is a governance plan?

Response:

Sounds like your practicing attorneys are spending too much time on administrivia and there is not a definitive outline of roles and responsibilities in the firm. Everyone is dabbling in the day-to-day maintenance and administration of the office, leading to decreased profitability and billable hours. Not only are each of you practicing law, you are also involved in the everyday management of the firm as it relates to finance, staff and systems. Clearly these are roles within the office that could be delegated to a trained and professional administrator. It just takes a little push of encouragement and trust on behalf of the partners to let go of the day to day details of running the firm.

You might want to develop a three tiered governance plan to help draw a line in the sand regarding responsibilities. In the law firm setting, it is appropriate to distinguish between administration, management, and leadership. Administration is concerned with the day-to-day business and practice support activities of the firm that should be the responsibility of a firm administrator, office manager or other assigned staff member. Specific functional areas of responsibility include supervision of staff personnel, accounting and billing, collections of accounts receivable, financial management and profitability analysis, budgeting, information systems, purchasing, and facilities management.

Management is concerned with the production and delivery of professional services to clients. Specific areas of responsibility include committee management, planning and oversight of information systems, development and enhancement of client relationships and communications and development and maintenance of practice support system. These functional areas are often the responsibility of the managing partner, executive committee or chairpersons of firm practice groups.

Leadership is concerned with the executive functions of the firm. These functions involve the long-term policy activities of the firm and are often performed by a board of directors, the partnership at large, or committee. Specific areas of responsibility include long-range strategic planning, practice development, marketing, lawyer recruiting and development, lawyer performance management, mergers and acquisitions, service quality management, and partner compensation.

In essence a governance plan are job descriptions specific to management, administration and leadership and spells out roles, responsbilities, and accountabilities for each. Once established these establish the boundaries and help prevent backsliding.

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

 

Oct 18, 2011


Law Firm Leadership: How do We Get Started

Question:

I am the managing partner of a 24 attorney firm in San Francisco. We are becoming frustrated at our inability to achieve a consensus and make timely decisions on matters of firm policy, strategy, marketing, and management. We are missing out on opportunities. We have no management scheme and no one to lead the charge – no team effort. The attorneys can't decide anything and firm management is a free for all. Things don't get done because no one is responsible. Conflict exists because anyone may be in charge. We are strong on ideas but weak on implementation. We lack leadership and focus. What are your ideas regarding leadership? Where should we start?

Response:

This is a common in firms of all sizes. In general, the foundation of leadership is built upon exhibited behaviors illustrating a proven track record of trust, respect, and accountability. These are the building blocks required for the development of leadership practices. Without these building blocks leadership cannot exist or be developed. The law firm culture must be nourished in such a way as to support these behaviors. These behaviors must become a part of everyday practice in dealing with clients as well as partners and others within and outside of the law firm. Law firm leaders must develop and practice the following behaviors:

The organizational structures, practices and procedures that exist in many law firms also discourage the development of leadership behaviors and practices. Many firms have a short-term production orientation focused upon individual lawyer productivity and production based upon billable hours and dollars billed and collected. A "me first" attitude rather than "firm first" "client first" attitude is frequently prevalent. Many lawyers hoard clients and consider them their clients as opposed to firm clients. These lawyers use individualistic approaches to client problems as opposed to team approaches. Compensation and other reward systems are not well suited to fostering leadership and developing teamwork in law firms. Firm governance, practice management, and performance management systems in law firms are also ill-suited to foster a climate encouraging and supporting leadership.

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 reinforce this tendency. What is needed is a balance between partner autonomy and partner accountability. Leaders will either have to be recruited externally (ie 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?

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

 

Mar 01, 2011


What Makes an Effective Law Firm Managing Partner or Administrator?

Question:

I was just elected as our firm’s managing partner. I will still maintain a full client practice as well. We have a total of 14 attorneys, nine of which are partners. I will be the firm’s first managing partner. Previously we all weighed in on every single decision. While I have been a practicing attorney for twenty years I have no prior management experience in law firms or elsewhere. What skills will I need to develope to be effective in this job?

Response:

Congratulations on your new role! Effective law firm managing partners:

  1. Ask – what needs to be done.
  2. Ask – what is right for the firm.
  3. Develop and implement action plans.
  4. Take responsibility for their decisions.
  5. Take responsibility to communicating.
  6. Focus on opportunities rather than problems.
  7. Run productive meetings.
  8. Think and say we rather than I.
  9. Are “Firm First” focused rather than Lone Rangers “Me First” focused.
  10. Know that you have to spend money to make money and encourges the firm to invest in the firm’s future.

The first two practices will provide you with the knowledge and insight about the firm that you will need. The next four will help you convert knoweldge into action. The next four will ensure that the whole firm is responsible and accountable.

Early on, as you transition into your managing partner role, you and the firm should formulate a constitution (governance plan) for the firm which outlines roles and decision-making rules for the partnership, your position, and other management or administrative positions in the firm. In order for this new structure to be successful you and the firm must:

  1. Stop talking about the firm’s future destination, and start thinking about the rules that all firm members will have to live by in order to get there; and
  2. Confirm that firm members are, in fact, prepared to be held accountable and live by these rules.

Rome was not build in a day. Your new structure and role will take take time. Be patient and it will all come together.

Click here for our blog on governance

Click here for my article on leadership

 

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

Nov 17, 2010


Frustrations of a Law Firm Administrator

Question:

I am a law firm administrator with a 27 attorney firm in the southwest. This is my first law firm experience. I have been in my position for 8 months and am frustrated. Could you share your thoughts:

Response:

During the past decade the roles of legal administrators have expanded dramatically. Today legal administrators can be found in firms with less than ten attorneys. In larger firms, as well as many smaller firms, roles have shifted from day-to-day administration to firm wide leadership. A few large firm administrators are functioning as true CEOs. Large firm administrators are devoting more of their time and attention to strategic vs. administrative matters. Recent studies suggest that, in firms with more than 50 attorneys,there is an an uplifting of the role of principal administrators. Roles that have grown dramatically in recent years are strategic planning and practice management. Administrator’s roles in large law firms are no longer restricted to administrative matters. They are expanding and they include partner compensation, associate management, client and matter intake, lateral recruiting, and change management.

While administrators have made great strides in terms of role and acceptance during the past decade, administrators in firms of all sizes still remain frustrated with:

– Poor, slow, and ineffective decision making
– Ineffective firm leadership and governance
– Internal politics and infighting
– Micromanaging
– Management by committee
– Lack of influence and ability to effect change

Few things are as important to an administrator’s future as that person’s ability to influence the decision-making process and effect change.  Skills and competencies are important but so are results. In order to transcend to the next level and enhance their value to their law firms, administrators must help their firms actually effect positive changes and improvements and improve performance. This requires selling ideas to partners in the firm and having them accept and actually implemented. To succeed administrators must achieve three outcomes:

- Provide new solutions or methods
– The firm must achieve measurable improvement in its results by adopting the solutions
– The firm must be able to sustain the improvements over time.

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

Nov 10, 2010


Forming a Law Firm Management Committee and Other Committees

Question:

I am a partner in a 14 attorney firm. We have 9 partners and 5 associates. Currently, the firm is governed by all of the partners voting, usually just consensus, on all management decisions. We are thinking about going to a management committee. What suggestions do you have?

Response:

You have reached a size where it is counterproductive for all of the partners to be involved in every management decision. In a recent posting I discussed the difference between management and administration. Click here for the postThere should be a role for all partners in the management affairs of the firm (the partnership) but they do not need to be immersed in the day-to-day administrative concerns. Also, to what extent should a management committee be involved in administrivia.

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.

A management committee may be the right direction if properly integrated with a governance/management plan for the firm. There is no "best approach" for structuring a law firm. However, keep in mind that there is still a role for the partnership at large and for your office manager or administrator as well. Here are a few ideas to get you started:

  1. Consider developing a governance plan. You should start by adopting a list of decisions which require a vote of the partners. Boundaries and roles should be established for the partners, the management committee, and the administrator or office manager. 
  2. Develop a charter (job description) for the partnership, the management committee, and the administrator or office manager.
  3. While partnership consenses should rule the day in most situations for matters for which are on the partnership's charter (job description), there will be times when a formal vote is required. Determine how voting rights will be handled. Each partner one vote or vote by partnership  interests? Different decisions – different voting requirements? Incorporate the list of decisions requiring a vote of the partners into your governance plan and into your firm agreements. Decisions on all other items can be made by the management committee and administrator/office manager.
  4. What constitutes a majority vote? Simple majority, two-thirds, three-fourths, unanimous vote, etc. Some firms have different requirements for different types of decisions.
  5. Who are the partners that get to vote – equity only or non-equity as well? Non-equity partners voting on certain decisions and not others?
  6. Once you create the charter for the management committee determine how many members will be on the committee, length of time, how members will be selected (elected or appointed), etc. I suggest that the firm elect a three member Management Committee for one-year terms initially and allow partners to serve successive terms. After the firm has been able to evaluate the success of the new structure, it may want to elect partners to the committee for staggered terms.
  7. 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. 
  8. The management committee should meet weekly, or if that isn't convenient, as frequently as required. To keep all of the partners apprised of issues before the management committee meeting is held, it is recommended that the meeting agenda be distributed to all partners within 48 hours prior to the scheduled meeting. Partners should be encouraged to discuss, with members of the executive committee, any items listed on the agenda or recommend subjects for discussion. Following this meeting, minutes should be prepared and distributed to all of the partners for information purposes.
  9. To keep all partners in the loop suggest quarterly partner meetings. 

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Click here for our blog postings on partnership and governance

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

 

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