Law Practice Management Asked and Answered Blog

Category: Partnership

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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 28, 2010

Partner Compensation Metrics – What Is Important – What Matters

Question:

I am the managing partner of a 14 attorney law firm located in Nashville, Tennessee. We have 8 equity partners. The firm represents business and other institutional clients and handles transactional work as well as litigation. Each partner over the years has accumulated "partnership interest" percentages and these interests are used totally to determine annual compensation as well as ownership in the firm. The only numbers that matter in our firm are billable hours – not dollars and billable hour reports are all that we have ever looked at when reviewing associate performance or partner contribution. We are now beginning to question the wisdom of this approach and we should be considering more than hours?

Response:

Billable hours alone is a poor indicator of associate or partner performance and you should include more measures/metrics in the analysis. More and more law firms today realize that partner contribution and value goes beyond and involves much more than “billable hours” and their compensation systems incorporate other factors into the analysis. Billable hours is just one metric in the overall equation. Many law firms focus on various measures of revenue dollars – fees billed, fees collected, etc. The next question is what kind of fee dollars – working attorney, responsible (managing) attorney, or originating attorney. Fees collected by working attorney seems to be the primary focus of smaller law firms. Origination (attorney that brought in the client) attorney fees collected is often part of the mix as well. Very seldom do we see responsible attorney fees collected considered. We believe that more firms need to include this measure as well.

As attorneys evolve from associates to partners – roles and responsibilities changes and so must the scorecard. If you want partners to build teams, delegate, and leverage the work of others – working attorney fees collected used by itself no longer makes sense. A measure of matter and team management is needed as well as a measure of individual production.

A focus totally on billable hours or working attorney fee collections places little, if any, emphasis on client origination, responsibility for matter management, or any other factors such a mentoring, associate management and training, marketing, and firm management which are critical to the long-term success of the firm.

Click here for articles on other topics

Click here for our blog posts on compensation

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. 

Click here for articles on other topics

Click here for our blog postings on partnership and governance

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

 

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.

Click here for other articles

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

 

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