Law Practice Management Asked and Answered Blog

Category: Human Resources

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Sep 07, 2011

Increasing Law Firm Profitability: Using Metrics and Measurements to Focus Performance

Question:

Our firm does mostly flat fee work. I am the sole owner of the firm and am considering hiring my first associate. Each of us work as a team and do a lot of cross-over work on all client/matters. I have two paralegals. We don't keep timesheets on our flat fee cases. Do you have any suggestions as to how to proceed with the hiring of this associate?

Response:

It sounds like your firm is relucantly approaching the next step in its growth. Adding your first associate will change the dynamics of your firm and will require you begin to implement more formal approaches to performance management for all members of your team – the new associate, your staff, and yourself. I would start by thinking through the exact tasks and roles that you would like the associate and other staff members to perform. In other words define the associate position. Do to expect the associate to bring in business? Are you willing to train a new associate without experience or are you looking for someone with experience. Can you structure work so there is less crossover of team members on files? If not, how are you going to measure their performance and production? (Time, their production fee dollars, file or case counts, etc.) Are you going to incorporate a variable pay or incentive bonus component into the compensation plan for the associate as well as the other staff members? (More firms are doing this) Define the position first and then decide on the "who".

I encourage you to begin establishing production (performance) goals for all employees and then measure performance against these goals. Tied at least a portion of compensation to accomplishment of these goals. More firms are starting to pay for performance and less for simply showing up.

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

Aug 09, 2011

Reducing Law Firm Employee Benefits

Question:

As the administrator of our 14 attorney firm I have been asked to present a plan to the partners for reducing employee benefits. We have had a difficult time during this recession. So far we have not had to reduce our employee headcount – but this could change in the future. It is our hope that if we can reduce the cost of benefits we won't have to layoff or terminate any employees. What is the best way to handle/manage this difficult discussion and process?

Response:

As an "at-will" employer you have the right to change benefits whenever you please. However, you must be careful as employees will perceive a reduction in benefits as a reduction to their overall compensation package.

If you do decide to cut benefits it is advisable to plan carefully and communicate as much in advance of the changes so that people know what is coming in time for them to allow for changes in their lives. It is also a good idea to be prepared to clearly and concisely share comprehendible reasons for making these changes. If implementing this type of change will save jobs, present it this way. If you believe that you may again provide benefits that have been cut once the economic environment is better, that knowledge will make it more palatable to employees.

A key point here – do an overall examination of your benefits and cut once and be done with it -don't keep reducing benefits every month or so.

You might want to examine your overall benefit costs – especially medical insurance – and strategically think about best approaches. It might make sense to cut here rather than a day of sick time or vacation.

Food for thought – According to a Society for Human Resource Management Poll taken in March of 2011 in the last six months 20% of employers reported that they had reduced benefits – the highest level since the fall of 2008. "Employees continue to scale back on health care coverage for employees (91%) and dependents (89%), and the amount of leave that an employee can accrue (54%).

So proceed with caution – but go for it if it makes strategic sense for your firm.

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

Mar 09, 2011

Optimal Time to Hire Additional Lawyers and Staff

Question:

We have 14 attorneys in our firm and we are located in Indianapolis. A couple of weeks ago in a partner meeting we discussed hiring an additional associate attorney or two. A couple of our partners are concerned whether we have ample work on day one to keep an associate busy. Is there an optimal time to hire additional lawyers?

Response:

I believe that it is important for firms to remember that they are competing in two markets – a market for clients and a market for talent. Firms must be competitive in both areas and sometimes there is not direct alignment. In other words – you may identify an excellent attorney or staff candidate sooner than you may have wanted to hire someone. What then? Will it pay for itself?

Many years ago when I worked in a law firm the managing partner came to me and said – “are you free for lunch today – I want us to interview a lawyer that is interested in a position with our firm.” I responded – “I didn’t know we were looking to hire anyone.” The managing partner responded “I am always looking for good talent and am willing to made an investment when I see quality talent – my motto is hire and retain quality talent – and market harder if we must to generate the revenue to pay the overhead – the money will come.”

Obviously cash flow and financial concerns must be taken into considerations. However, many law firms are sometimes too cautious and timid when it comes to make investments – and investment in top notch talent is one of the best investments that law firms can make.

Successful firms maintain surplus talent. When other firms are cutting attorneys and staff to cut costs, they go in the opposite direction. They cultivate serious talent with the capacity to grow new business. We will see this as law firms rebound from the recession.

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

Feb 02, 2011

Why Training Programs for Lawyers and Staff Fail to Produce Results

Question:

I am the managing partner for a 8 attorney firm located in San Diego. During the past several years we have invested significantly in continuing education – primarily conferences and seminars – for our lawyers and staff. We have just completed a review of our expenses in this area and we are concerned that we are not getting a satisfactory return on this investment. Please advise as to your thoughts.

Response:

Training and skill development is not easy. Studies reveal that 90 percent of the people who attend seminars and training sessions see no improvement because they don’t take the time to implement what they learn. Practices create habits and habits determine your future. Up to 90 percent of our normal behavior is based on habits. The key to skill learning is to get the new skill to become a habit. Once the new habit is well developed it becomes your new normal behavior. This requires practice. Unfortunately, law firms do not give employees time to practice and experiment.

Research on memory and retention shows that upon completion of a training session, there is a precipitous drop in retention during the first few hours after exposure to the new information. We forget more than 60 percent of the information in less than nine hours. After seven days only 10 percent of the material is retained. Most memory loss occurs very rapidly after learning new information. Your employees can improve their memories:

Skills become automated through practice. The more we do a set of actions, the more likely we are to link those actions into a complete, fluid movement that we do not have to think about. With enough practice, employees can become fluent in many different physical and mental skills.

Skill development involves behavioral change and changing many habits and practices on the part of the employee. In some situations, beliefs, attitudes, values and the actual structure of an employee’s working environment are affected. Effective training and skill development cannot be achieved with one-shot training programs. Training programs should be considered by all involved to be a long-range effort.

In general, three elements drive human behavior and shape the habits we possess: antecedents, competencies and consequences.

Antecedents are those things that prompt us to take an action. In a law firm setting, these include policies, goals, directives, announcements, training programs, procedures, vision statements, organizational structures, accountabilities and so forth. They are very important because they provide each person with cues as to what to do in his or her job. They encourage certain actions, and they are intended to get people to start doing something by providing them with reasons, plans, skills or information to do it.

The second element – competencies – is the knowledge, skills and abilities that enable people to perform certain tasks. These abilities enable a behavior to occur. Employees develop competencies over time, a product of good antecedents and positive consequences and the focus for most selection and training strategies.

The third element is consequences. Consequences are those things that happen to a person when they perform certain actions. They always occur after a behavior. They may be positive or negative and, depending on their impact, will determine whether a person will repeat an activity. Rewards (compensation systems) are the typical consequences employed in law firms. However, a balanced mix of positive and negative consequences is often appropriate. Consequences drive human behavior.

Firm managers must address all three elements in any training program designed to produce lasting results.

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

Dec 22, 2010

Year End Staff Bonuses and Raises

Question:

Our firm is meeting later this month to discuss year end bonuses and raises for our staff personnel. Due to the economy we did not give raises and bonuses last year. While we have been holding our own with the present economy we have been trying to watch our overhead very closely. However, we want to be fair to our staff and we don't want to lose key employees to our competitors. We are a five attorney firm and have four staff members that have been with us for many years. Do you have any ideas for us?

Response:

Your situation sounds quite familiar. Many law firms deferred raises and bonuses last year and are wondering what to do this year. Here is what we are seeing:

We are recommending to many of our clients that they use 2010 raises and bonuses to launch new performance base systems for 2011. They are awarding traditional raises and holiday bonuses for 2010 to clear-the-deck – and advising staff of new programs going into effect January 1, 2011 consisting of goal achievement bonuses where specific firm and personal goals are established at the beginning of the year for each staff member and annual performance reviews.

Click here for our blog archive on compensation

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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

Oct 27, 2010

Hiring Lawyers that are Children of Firm Owners or Partners

Question:

I am an owner of a 5 attorney law firm in the upper midwest. There are 4 associates in the firm and I hope to eventually make them partners. I have two children that will be finishing law school in the next year or two and they have expressed an interest in joining the firm. Is this a good idea? I have heard horror stories about such arrangements? What are your thoughts?

Response:

I have seen it go both ways. Many firms have brought children and other family members into the firm and have had excellent results. Others have not. In general I believe that law firms do a better job at this than do other business firms. Your situation is more complicated since you have associates in place that may feel threatened and uncertain as to their futures when you bring in family members. I believe that if you lay the proper foundation and go about it correctly you can successfully bring your children into the firm. Here are a few ideas:

  1. Recognize that for the family members there will be a family system, the family law firm, and an overlapping of these systems. This can be fertile ground for conflict if clear boundaries between the family role and the firm (business) role are not clear. Establish clear boundaries. Family dynamics and business dynamics seldom mix. Your objective should be to draw the clearest possible distinction between the two and make sure that everyone understands that the firm (business) is the firm and the family is the family.
  2. Children should not be brought into the firm unless they want to be involved and satisfy your standard hiring criteria for lawyers. I believe that before your children join the family law firm it is a good idea for them to work for another firm or organization. When they do join the family firm they can bring with them that experience, a supply of new ideas, a network of contacts, and a number of other benefits acquired.
  3. Make it clear to your children that they must "earn their stripes" and come up through the ranks in the same fashion as other associates in the firm. No special privileges. Make it clear that they must earn the respect of other attorneys and staff in the firm.
  4. Put your associates and staff at ease. Make it clear that your children are expected to "earn their stripes" and they will not be promoted to partner over other associates on family status alone. (Unless this is your intent)
  5. Clearly define the role of all parties.
  6. Monitor your own behavior. Don't take sides – either between your children if both join the firm or between your children and other employees in the firm.
  7. Be careful with compensation and other rewards. Compensation should be based up performance and results and consistent and competitive with other law firms of similar size and type.
  8. Put in place a succession plan sooner than later with a workable buy-sell agreement.
  9. Communicate, communicate, communicate – your intentions, roles, etc. before and after your children join the firm.

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Click here for my blog postings on succession

Good luck! 

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

 

 

 

 

  

 

 

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