Law Practice Management Asked and Answered Blog

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Feb 04, 2026

Law Firm Associate Compensation and Bonuses – Salaries & Fee Production

Question:

I am a partner in a five lawyer firm in Columbus, Ohio. There are two partners in the firm and four associates. Our practice specializes in corporate business law and is one hundred percent transactional. We do not do any litigation work. Several of our associates started in BigLaw. All of our associates have been practicing for over ten years and some longer than that. None of our associates bring in – originate any client business. They are paid salaries and discretionary bonuses. While we have a billable hour requirement of 1600 hours none of our associates are even close – they are not even hitting 1200 hours. Their salaries are pushing $200,000 and their fee collections are no where they need to be. Any suggestions?

Response: 

Looks like you have some real challenges. The salaries that you are paying are what we are seeing for associates and non-equity partners in firm’s your size and that have been practicing for the number of years that your associates have. For years the guidepost has been that an associate’s fee collections should be three times salary/compensation – one third to cover an associates salary, one third to cover overhead, and one third for profit. That was back when overhead was running at thirty percent. Many firms today have much higher overhead than thirty percent. Using three times salary the fee collection bonus threshold would be fee collections of $600,000 for an associates being paid $200,000. The salaries you are paying are in the ballpark with what many other firms are paying. Your issue is not so much what you are paying your people as is their fee production and collections.

Obviously the billable hours are to low as well as the fee collections and this is eating into the profits of the partners. While 1600 annual billable hours is appropriate, based on where your associates are now it may be an unreachable goal and you may want to consider taking baby steps and setting a billable hour expectation of 1400 hours. For years the national average annual billable hours reported in surveys has been 1750 and this was the expectation for many firms for many years and still is for many firms. In the past few years, due to lack of work, work life balance, and other factors some firms have lowered the annual expectation minimum to 1600. Litigation firms, especially insurance defense firms, currently have minimal expectations ranging from 1800 to 2000 hours. Firms that represent individual clients such as general practice firms, family law firms, and estate planning/administration firms currently have minimal expectations ranging from 1400-1600.

I suggest that you look into your situation and determine the reasons for the low billable hours. It could be that they are not putting in the work because the firm does not have enough work for them to do. Look into the following possible causes of their low billable hours and take corrective action:

An approach that many firms are taking is to incorporate performance bonuses such as the following to motivate additional production. Usually these are on top of a base salary. Here are some examples:

  1. Base salary plus 5% of base salary if the billable hour expectation of 1600 is attained, discretionary bonus, and a 15% client origination bonus for bringing a client to the firm. The bonus is for the first year only.
  2. Base salary plus $50.00 per billable hour actually billed to clients that exceeds 1600 annual billable hours. 10% bonus on the collected revenue from other timekeepers that work is delegated to.
  3. Base salary plus 20% bonus for collected working attorney fees in excess of three times salary during the year. For example, an associate that is paid $200,000 would have an working attorney collection expectation of $600,000. If the associate had collections of $700,000 he or she would receive a bonus of $20,000. The associate also is entitled to receive a client origination bonus of 10% for business brought to the firm.
  4. Base salary, 1600 annual billable hour minimum expectation, quarterly production bonus of 40% of working attorney collected fees less salary paid for the quarter, and 20% client origination bonus for work done by others in the firm.
  5. Base salary plus 1/3 of hourly billing rate for hours billed to clients that exceed 1800 annual hours billed to clients.

Some firms have lowered base salaries when incorporating new performance bonus systems when the current expectation is far below expectation. Other firms are terminating under-performing associates.

Many firms are finding that many associates in small firms that have salaries of $200,000 or more are content and are not motivated by the bonuses available to put in the time to earn the bonuses. Work life balance is more important that earning additional income for some associates. The bonus systems works better for associates that are still hungry or have lower base salaries.

Firms that have had the most success in getting associates past the “entitlement mentality” are those that incorporate goal setting, accountability, and individual twice a month coaching meetings with associates in addition to the performance bonuses.

You might want to consider the following approach to associate compensation:

  1. Base Salary at current level or lower.
  2. Working attorney bonus of between 20-40 (one or the other) percent of fees collected in excess of a threshold of 3 times salary.
  3. Delegation bonus of ten percent for fee collection from others working on matters for which an associate is the responsible attorney.
  4. Professional and practice development bonus based on results rather than activity. (Maximum bonus of 10% of salary.) For example:
    1. Two speaking engagements during the year for attorneys or other professional groups with quality PowerPoint presentation approved by the managing partner. $1,500.
    2. Writing article in Bar Assoc. Section News Letter-ANNUAL. $500.
    3. Writing article in Bar Journal or other professional Journal (Ohio Bar Journal, American Bar Journal). $1,000.
    4. Writing Chapter in Legal Professional Book, i.e. 1,500 author – as a c0-author $750.
    5. Bar association or Non-Bar association (if prior approved) leadership position such as chair, etc.(not just membership). Maximum 1 leadership position through 1 year duration of the position. $2,000.

Good luck with the challenge.

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

Jan 28, 2026

Law Firm Leadership – Responsibility of the Partners

Question: 

Our firm is a 14 lawyer firm in St. Louis, Missouri that focuses on small businesses – both transactional and litigation matters. There are eight equity partners, two non-equity partners, and four associates in the firm. We are managed by a three member management committee and a firm administrator.

While we have been successful over the past fifteen years since the formation of the firm, we are experiencing numerous issues including:

  1. Defections of partners, associates, and others leaving the firm.
  2. Difficulty in finding, hiring, and retaining attorneys and staff.
  3. Dissatisfaction by lawyers in the firm concerning the way things are done.
  4. Partners and associates are expressing growing dissatisfaction with firm management and policy.
  5. Lack of faith in the management committee.
  6. Lack of open communication between the management committee and the rest of the firm.
  7. Dissatisfaction with the partner and associate compensation system and the belief that it is unfair. The management committee makes all compensation decisions and the factors that are considered are unknown as well as the performance expectations.
  8. There is a lack of adequate succession planning for the transfer of client responsibility from senior partners to younger partners.

We would appreciate any suggestions that you might be able to offer.

Response:

I understand your dilemma. You are at a difficult size. It sounds like you are facing many of the problems that firm leaders face at your stage of growth. Your leaders must be willing to:

  1. Invite active participation and input from all attorneys concerning matters of firm governance. For example, revitalize the management committee by rotating its membership and limiting tenure and consecutive terms or establish a compensation committee that represents attorneys from all levels of the partnership. Also, give the attorneys a voice in policy determination and other important administrative decisions.
  2. Implement a lawyer career advancement program that outlines a program for attorneys to advance from associate to non-equity partner and then to equity partner. A common complaint that we hear from our interviews of associates is lack of feedback on short term performance and what it takes to “make partner” and how they are progressing toward eventual partnership. During a recent interview an associate told me:
    1. I would like to know: What does it take to become a partner – consideration criteria?
    2. What do I have to do?
    3. What is the timeline for consideration?
    4. How am I doing – am I partnership material?
    5. What does partnership mean in this firm? Will I have a voice?
    6. What are the mechanics of admission? (Is there a buy-in)
    7. Is there a buyout for retiring equity partners?
  3. Set up a compensation system that attempts to be fair and consistent in rewarding all of the lawyers for their total contribution to the firm. Identity and share the specific factors that are considered if the system is a subjective-based or subjective-objective hybrid system. Develop an incentive system whereby attorneys get credit for client their working attorney fee collections, client origination, including enhancement of present client relationships, management of the firm and its practice areas, training of associates and paralegals, pro bono activities, and other nonbillable activities.
  4. Develop a formal evaluation program that will let the attorneys know where they stand and allow qualified associates to progress to partner status. Encourage active participation in pro bono activities, especially ones in which the attorneys have a particular skill or interest.
  5. Assign responsibility for client matters at an early stage in an attorney’s career. Introduce attorneys to the clients as early as is practical. This will enable the attorneys to step into the fray from the beginning and be more involved and informed on client matters.
  6. Establish an ongoing, organized training program for professional growth. This can be done by setting aside time for attorneys to attend CLE seminars or meetings sponsored by other professional groups. Regularly scheduling in-house training sessions, under the guidance of partners with specialized expertise, would develop the skills required to succeed in various practice areas, including business development and management techniques.
  7. Give the attorneys an opportunity to train and supervise other attorneys and paralegals to provide support on specific client projects or in the substantive areas in which the attorneys are involved.
  8. Assist attorneys in building their individual reputations through participation in programs sponsored by the bar association or by writing articles on substantive areas of practice for publication in bar association or professional journals. Encourage their participation in programs sponsored by the firm and other associations, such as accounting firms for clients and prospective clients.
  9. Provide an ongoing forum for the attorneys to participate in discussions with one another concerning client matters (i.e., strategies), research findings, and input on decisions that may affect matters they are working on. Circulate an agenda before each meeting, and include all partners and associates.
  10. Develop a strategic plan that enables partners and associates to determine the firm’s immediate and long-term objectives.
  11. Show care and concern for the professional and personal welfare of both partners and associates as well as staff.
  12. Encourage the opposing viewpoints and consider other opinions.

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

 

Jan 20, 2026

Law Firm Partnership – Bringing in a Partner – Issues to Consider

Question: 

I am the founder and owner of a business law firm in San Diego, California. There are 9 associates, four paralegals, and three administrative staff members working in the firm. I founded the practice 20 years ago and I have never had a partner in this firm. I was involved in a partnership in another firm prior to forming this firm. There were partnership issues which is the reason why I left and started my own firm. I have enjoyed the freedom of sole ownership but I now believe that in order to get to the next level, retain quality attorneys, and have a succession plan for myself when I get closer to retirement I need to consider bringing in partners. However, based on my prior firm experience I am fearful. I would appreciate your thoughts and advice.

Response: 

Do You Really Want Partners

You may want to ask yourself whether you want employees or partners. What is the criteria for becoming an equity partner? Is client development part of that criteria? Should they contribute capital? If they are not adding value to the firm – growth – you may be diluting the earnings pool and reducing the size of the pie for yourself. Personally, I think in small firms criteria for becoming an equity partner should, among other things, include client development and a capital contribution. They should have some skin in the game, contribute capital, and signup for their share of the liabilities. I also believe they should then be included in the inner circle.

Then, depending upon whether you are considering equity and non-equity partner tiers,  you should develop non-equity and associate career progression plans – associate to non-equity partner and non-equity partner to equity partner – outlining timeline for consideration, the consideration process, the criteria, and the responsibilities and expectations for each. (What partnership means)

You may believe that you have identified the right person or persons whom you believe is the right person or persons for partnership. However, just because the associate has been a good associate does not mean that the associate will be a good partner – the relationship will be different. But at least the associate is somewhat of a known quantity since you know the associate and have worked with the associate for several years.

Here are a few ideas you might consider:

  1. Outline you goals and expectations for the relationship.
  2. Meet with your associate and identify his/her goals and expectations for the relationship.
  3. Determine how much control over the practice and decision-making are you willing to give up? Share?
  4. Determine how much and for how long you are willing to make less?
  5. Determine if the associate will be expected to bring in business? When/Timeline?
  6. Think about the firm you want to build – firm-first or lone ranger (team based or individual practices)?
  7. Decide on firm name – will it change? Should it? Impact on image, clients, etc.
  8. Decision as to capital contribution or buy-in? Yes or No? How much? Timeline for payment?
  9. Ownership percentages
  10. Voting
  11. Compensation
  12. Withdrawal arrangements

Hiring Associates That Can Be Effectively Groomed for Partnership

Years ago it seemed that all the associates working in law firms wanted to eventually become a partner in the law firm. This has changed as a result of the new mix of women and men graduating from law schools and entering the legal profession, changing attitudes toward work life balance, other opportunities outside law firms, and other variables. While partnership/ownership is still important to many – don’t assume that all the associates that you hire will even want to be equity partners – especially if it means a hefty capital contribution and signing personal guarantees for a large amount of firm debt.

A question that I would ask – have you really discussed with your associates their interests in equity ownership? As a group? Recently an associate, whom the firm had written off, advised me that while he was not interested now due to his present situation in life, he would be in maybe five years – especially if others also were brought in as well – in other words he did not want to have the responsibility alone and be an equity owner by himself.

I suggest that you talk with your people and see where they really stand. Help them to begin developing client development skills. Depending on your retirement timeline – and if you have “no takers” you may have to consider other options such as laterals or merging with another firm.

A key suggestion is to look for entrepreneurial associates when you hire. The desire for ownership of a business if often in a person’s blood. Don’t start the interview with a discussion from law school until the present. Dig deeper into hobbies, general interests, etc. that will provide clues as to whether you may be hiring someone that just wants a law job or someone that eventually wants to own or be a partner in a law firm.

Typically a buy-in or capital contribution is not required for non-equity partners nor do I recommend such. Typically non-equity partners are salaried and may participate in some form of an incentive bonus system tied to individual, team, or firm financial performance. They are also not required to assume any responsibility for any of the firm’s financial liabilities or debts.

If you intend on bringing in the associates as equity partners that is another matter. I believe that all new partners should be expected to contribute capital and have some “skin in the game.” Whenever a firm admits a new partner, the firm should require the new partner to contribute capital. Increasingly, a partner’s capital requirement should bear a relationship to the partner’s share of profits. You may want to allow new partners a reasonable period of time to fund their capital accounts – say five years or help them arrange favorable terms at your bank to finance their capital accounts.

Some firms have a buy-in tied to either the cash-based book value of the firm or the accrual-based book value (includes accounts receivable and work in process). This is not the typical practice although I do run into it. Usually capital accounts are tied to working capital needed to operate the firm and the percentage of ownership/income that each partner will have.

There are only three ways to increase a firm’s working capital to cover cash flow requirements and fund growth:

1. Have partners put more money in
2. Have partners take less money out
3. Borrow

Many firms use bank credit lines instead of capital contributions to pay routine firm expenses and partner draws during periods when cash flow is tight. It has been my experience that firms that follow this practice have ongoing financial challenges and problems.

The reality is that many firms are under-capitalized – don’t become one of them!

Make the criteria tough and resist the temptation to make everyone a partner.

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

Jan 14, 2026

Law Firm Administrator and Firm Size

Question: 

I am the owner of a three attorney law firm in Rockford, Illinois. While we do a lot of business litigation we are primary a general practice firm that serves individual clients. There are two associates in the firm in addition to myself, two paralegals, and a receptionist. We outsource the bookkeeping work to an accounting firm. We have been having issues with the accounting firm and I am considering bringing the accounting in house and hiring a bookkeeper that can also handle office management responsibilities as well that I currently have to perform. I know that many law firms now days have law firm administrators. Should I consider hiring a professional firm administrator?

Response:

Generally a firm your size would have a office manager/bookkeeper as opposed to a firm administrator. A firm administrator is generally a higher level position with responsibilities and expectations such as the following:

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

A firm administrator usually has a strong financial background, higher level of education than a office manager/bookkeeper, and often a CPA or MBA in larger firms that facilitates 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.

A firm administrator is rare in a firm your size and for firms under 10-15 attorneys. Many firms your size have  office managers/bookkeepers. The downside to establishing an administrator such a position in your firm will be the salary that you will have to pay – more than some of your attorneys – and turnover in the position when an opportunity from a much larger firm comes along.

I have a few client firms your size that do have firm administrators. Sometimes for the first year or two there is a lot of administrative work  – employees handbooks and procedural manuals to be written, new billing systems to implement, office space renovations and relocations, etc. But after major projects are completed there is not enough work to keep them busy. These firms have made the position work by adding client billable functions to their role. For example:

There is no magic size. We just completed an engagement recruiting an administrator for a seven attorney firm. We also have law firm clients with over 40 attorneys that don’t have an administrator. I believe that an administrator, or office manager, is appropriate in firms of all sizes. It is a matter of attitude and commitment on the part of the partners and whether they are willing to delegate responsibility and authority to an administrator to run the day-to-day operations of the firm. The firm should start with a job description and then decide whether the firm is willing to delegate responsibility and authority. If not, the firm should not hire an administrator.

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

Jan 07, 2026

Law Firm Succession Planning and Retirement – Coming to Terms with Aging

Question:

I am a partner in a seven lawyer firm in Mesa, Arizona. There are five partners in the firm. We are a boutique business litigation firm that was formed seven years ago.  I am 64 and the others partners are 62, 60, 55, and 53 respectively. I would like to retire in the next few years and our firm has never really discussed or planned for partner retirements. We don’t even have a partnership agreement. I would appreciate you thoughts.

Response:

At a personal level, you should admit to yourself that, regardless of your current age, you are getting older and you will eventually retire – one way or another. The sooner you begin thinking about this the better prepared you will be. I have many clients that have started their succession/transition planning in their mid-forties and early fifties. Unfortunately, many have waited until their mid-sixties and early seventies. For these folks there has been little time to make adequate preparation and often adverse consequences have resulted. At an absolute minimum, you should start your succession/transition planning five years before you plan to begin your transition. It simply takes this long to put your house in order, to locate or groom succession/transition candidates, find a candidate law firm interested in your practice, and transition clients and management responsibilities. Here are a few ideas that I suggest to multi-partner firms and sole owner/solo firms:

Multi-Owner Firms

  1. Stop giving succession and transition lip service – if you are serious – put in place organizational systems that will facilitate the process.
  2. Put in place a firm strategic plan that incorporates a succession plan.
  3. Host a partner brainstorming retreat to address key questions surrounding your firm’s plan and identify a course of action that will be supported by all.
  4. Make long-term plans for the firm.
  5. Insure partner accountability.
  6. Implement funded retirement plan for partners and other employees in the firm.
  7. Consider Key-Personal life insurance to fund buy-out of ownership interests of partners that die or are disabled.
  8. Execute partnership/operating/shareholder and buy-sell agreements.
  9. Consider buy-out plans that are not funded out of future earnings (post retirement) and are paid by the end of the wind-down or transition period.
  10. Urge partners to think about and plan for retirement. They should start early and start on a wind-down program at least five years before they are ready to retire or exit. Each partner should decide when they want to exit the practice and begin a disciplined phase-down (wind-down) in which legal skills; leadership and management, and client relationships are transitioned to the next generation of attorneys in the firm.
  11. Provide financial incentives for partners to transition clients.

Sole Owner & Solo Practices

  1. Decide when you want to retire and leave your firm.
  2. Determine how much cash or annual cash flow you need when you exit the firm.
  3. Fund a retirement plan in the early years of your practice and project how much income it will generate at various exit points.
  4. Determine who you would like to transfer the practice. (Family members in law school, other attorneys in the firm, another firm, etc.)
  5. Based on future cash flow, ascertain how much the firm is worth today. Value the practice.
  6. Begin implementing management strategies that will maximize the future value of the firm – before you exit and afterward.
  7. Institutionalize the firm so that it is not uniquely you.
  8. Determine if the firm is even saleable.
  9. Draft and implement a succession/exit plan. Insure that it incorporates safeguards for your clients, employees, and family if the unexpected happens to you.
  10. Take steps to protect your family’s wealth.
  11. To retire and exit successfully you need:

A plan – a roadmap that outlines the process and helps you decide on where you want to
go and how you will get there.

Timeline – a disciplined implementation timetable keyed to your
Succession/Transition/Exit Plan.

Start Early – Getting ready for exit takes time. Start early – 5- 8 years before you are
ready to retire or exit.

Decide – When do you want to leave the practice?

Decide – How much cash you will need when you exit.

Decide – To whom you want to transfer your clients or practice.

At a firm level, especially if you are a member of a multi-partner firm, start sharing your ideas and plans with your partners. Have an ongoing dialog with you partners. Review the firm’s partnership/operating/shareholder agreement. If the firm has a succession/transition plan review the plan. After reviewing these documents, determine how the firm’s policy regarding retirement will affect your retirement timeline, compensation, and payout. Does the policy require mandatory retirement at a certain age? Ascertain whether the policy provides for phasedown. How does the phasedown handle management and client transition? Is there an “Of Counsel” provision after retirement? Reach an agreement with your partners concerning your retirement timeline, client and management transition, and retirement payout or return on invested capital.

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

Dec 31, 2025

Law Firm Succession Planning – Retire or Continue Working?

Question:

I am a 64 year old lawyer that owns a small general practice law firm in Springfield, Illinois. There are two associates in the firm and two staff members. I have been thinking about retirement and how I should begin planning for it which I have not done. I love the work that I do for clients and have very few other interests. I get satisfaction and fulfillment from my work. I really want to work for ever. I would appreciate you thoughts.

Response:

You are not along. I have many lawyer clients that are in the 80’s and still working and going strong. I had a personal injury plaintiff attorney in his mid 80’s that tried a large medical malpractice case last year and obtained a very large jury verdict in the case.

Many lawyers, more so than many other professionals, are high achievers that are married and addicted to their law practices.  They believe that their self-worth is reduced if they are not accomplishing something important. Psychologists refer to this as “achievement addiction.” In his book, The Psychology of Retirement, Derek Milne advises that surveys in the United States suggest that over sixty percent of retirees “un-retire” and continue to work in some form of paid work, then “re-retire” or semi-retire” later on in their retirement (Milne 2012, 11-05). A major challenge for lawyers that have an achievement-focused personality will be to find ways to replace the sense of achievement that they have experienced from the practice of law after they retire. While playing golf may be a worthwhile recreational activity for those that enjoy it, it will not be enough to fulfil the needs of those with an achievement-focused personality. These individuals will need activities where they can contribute and make a difference and continue to fulfil their self-actualization and self-esteem needs. Activities such as mediation, teaching, consulting, volunteer work and community leadership often fulfil these needs.

Identifying Other Interests

Many of us have heard some of the stories of unhappy retirees ranging from poor health, depression, and premature death. Years ago when my mother passed away my father’s boss asked my father what he could do and how he could help. My father told him, “keep me working.” My father’s boss kept my dad working and he worked every day of his life until he passed away at 84. Dad used to tell me that when you enjoy your work and your work is your hobby, it is not work. For some people the best way to retire may be to continue working.

For others, rather than being a time of easing back and retiring into old age or continuing to work in one’s old job or career, it can be a time of personal growth and an opportunity to explore other interests, callings, and vocations. It can be a time of freedom to do what you always wanted to do but could not because you had to earn money and the pressure of work prevented you from pursuing you dreams and interests that were in tune with you values and beliefs. Here is a list of a few areas that you might want to explore:

  1. Teaching courses at a local law school or university
  2. Mediation
  3. Pro-bono work
  4. Writing
  5. Photography, gardening, travel, or other hobbies
  6. Serving as a director on a profit or non-profit board
  7. Counseling
  8. Volunteering

Planning Your Retirement

One way to begin to visualize getting older, your mortality, and retirement is to think about the amount of time that you have left on this earth. If you are sixty-five you may live to be eighty. Thus, you have fifteen years left and this is your planning horizon. Retirement planning is deciding on how to use this time. It is about the process of deciding what you will do in your retirement and putting a plan into practice. As the amount of time left to you decreases, its value increases to the point where it will be more valuable to monetary assets.  It will be more valuable that a new house, a new car, a new boat, or a chest full of cash. Time enjoying life, being with your family, and spiritual renewal will become more important than earning money. The greatest change when you retire is how you will use your time.

Retirement planning begins with taking the time to think about how you will use you time. If you live fifteen years beyond your retirement your will have 28,800 hours that will have to be filled with retirement activities. (five days a week, eight hours a day, 48 weeks, for fifteen years)  Start by creating an interest activity list, a time plan, and then DECIDE, PLAN, and ACT.

Options include:

  1. Continue working in your present situation;
  2. Continue to work for compensation but in another occupation; or
  3. Retire and pursue recreational and other retirement activities without compensation.

If you decide to keep working you need to begin thinking about your succession plan when and if something happens to you. It may be time to consider bring lawyers in the firm into equity ownership or at least have in place an arrangement or agreement with them in event that something would happen to you – a practice continuation agreement. 

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

 

Dec 24, 2025

Law Firm Talent Management – Acquiring, Training and Retaining Paralegal Staff

Question: 

Our firm is a four attorney estate planning firm in Orlando, Florida. I am the owner of the firm and the other three attorneys are associates. We have three paralegals, a bookkeeper, and two administrative assistants. Approximately sixty percent of our practice is estate planning, thirty percent probate and trust administration, and ten percent elder law and special needs planning.

Our major challenge is finding and retaining paralegals. Over the years it has been our practice to hire experienced paralegals with three to five years experience. While this worked for us in the past we are currently experiencing high turnover, poor quality of work and performance, and high compensation cost resulting in our overhead getting totally out of control. What are other firms doing? Any suggestions and recommendation that you may have will be most appreciated.

Response: 

These are tough times for finding, attracting and retaining paralegal and lawyer talent. Law firms are having difficulty hiring experienced paralegals at an affordable salary and then retaining them. You may want to consider growing your own and begin hiring recent graduates from paralegal programs at colleges, junior colleges, and paralegal schools. These schools offer bachelor degrees in legal/paralegal studies, two year associate degrees, and post bachelor graduate programs.

Small law firms generally do not have effective training programs and the training resources needed to do effective on the job training. This is the primary reason that small law firms hire experienced paralegals rather than growing their own. Larger firms have training resources such as paralegal supervisors, trainers, written procedural manuals, and other training tools. While a small firm such as yours can’t have all of these resources maybe it is time to begin to develop some of the following tools so you can grow your own.

  1. Write a procedure/training manual for each practice area:
    1. Estate Planning
    2. Probate and Trust Administration
    3. Elder Law
    4. Special Needs Planning
  2. Identify a paralegal in your firm to onboard and train new paralegals.
  3. Develop relationships with paralegal schools to help you identify the best graduates and candidates.
    1. Form relationships with school paralegal program and career center directors.
    2. Serve as a guest lecturer and make presentations to law clubs, classes, etc.
    3. Conduct on campus recruiting.
    4. Solicit referrals from program and career center directors.
    5. Implement a paralegal intern program.

Homegrown employees often prove to not only be less costly but in the long more committed to your culture and processes, more dedicated and loyal, and more likely to stay with your firm for many years.

Many of my law firm clients are telling me that finding clients is no longer their primary concern – their top strategic concern is now finding, hiring, and retaining lawyer and staff talent. During these times it is imperative that law firms get creative and think outside of the box. Flexibility is key. Here are a few things that some of my small law firm clients have done that has resulted in successful experienced paralegal and attorney hires:

  1. Paid for sponsoring with Indeed ad placements.
  2. LinkedIn ad.
  3. Took out a paid ad with their state bar association.
  4. Used a recruiter.
  5. Increased starting salary/bonuses.
  6. Added medical insurance as a benefit.
  7. Paid a signing bonus.
  8. Provided reimbursement for moving/relocation costs.
  9. Implemented a permanent remote work policy allowing all personnel to work at home a certain number of days per week.
  10. Increased number of vacation/personal time off days.
  11. Added 401k plan.
  12. Hiring offshore lawyers and paralegals.

Successful law firms must attract both clients and talent in order to be successful. All law firms are suffering and having a hard time attracting and retaining attorneys and staff. This also means that other law firms are desperate and may try to steal you lawyers and staff with better pay or other incentives. You need to review all of your benefits and policies as well as compensation to make sure that you are more that just competitive – you need to be on the cutting edge and ahead of the pack. Employees now expect more flexibility, remote work, etc. than ever before.

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

Dec 17, 2025

Law Firm Management Structure and Governance

Question:

Our firm is a twelve lawyer business law firm in San Antonio, Texas. We handle business transactions as well as ligation. Three of us partners started the firm seven years ago and the firm has grown since then. Currently there are seven equity partners and five associates in the firm as well as six legal assistants/paralegals and a bookkeeper. One partner serves as managing partner. The managing partner handles all of the administration except for the basic bookkeeping. Many management decisions require the approval of all of the partners. We are beginning to feel that we have outgrown our management structure. Excessive time is spent by the managing partner. He is spending 40 percent of his time on firm administration. His practice is suffering as well as revenues. An inordinate amount of time is spent by the rest of the partners on administrative and management decisions. We have monthly firm meetings and virtually all of the time is spent on administrative matters. It takes us forever to reach consensus. Recently it took us six months to reach a decision on getting the carpet cleaned.

We would appreciate any thoughts or suggestions that you might have.

Response: 

While the firm’s management structure worked for the firm in the past when the firm was smaller, more structure will be required if the firm hopes to grow and be more profitable in the future. Growth will require structure at the partnership and administrative level. The managing partner is spending way too much time on administration as well as the other partners.

The partners should consider hiring a firm administrator to handle all administrative matters and the managing partner or a three partner management committee should focus on higher level management matters. The full partnership should weight in only on matters reserved for their vote and approval. As the firm grows the partners should involve others in management without micro-managing.

A problem facing most firms is lack of long-range focus and the amount of partner time that is being spent on administrative matters as opposed to higher level management issues.

Partners in many law firms spend more time on administrative management matters rather than higher level management/leadership concerns such as lawyer management, attorney compensation, process, business development, mentoring, and long-range planning.

Management deals with those issues that relate to overall control of the firm, including those decisions that should be made by equity partners and the selection of an individual or individuals who will manage and administer the firm. The clear trend today is for centralized management, with substantial authority being delegated to whoever is selected for management and administration.

Specific policy matters that might be reserved for full equity partner vote include:

Specific policy matters that might be the domain of managing partner or management committee might include:

A firm administrator appointed by the managing member or co-managing members would direct the business/operational affairs of the firm and would report directly to the managing member/partner or co-managing members/partners.

Administration 

When we discuss administration, we are referring to the everyday management of the firm as it relates to finance, staff, and systems. Clearly, today’s trend in administration is to hire competent professionals at the level that suits the firm. Administration is the execution of management policies established by the equity-members and the managing member/partner, co-managing members/partners, or executive/management committee.

At your size I believe that you are ready for a firm administrator. The firm revenues presently being lost will more than pay the salary of an administrator and still leave additional profit to pay additional compensation to the partners.

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

 

Dec 10, 2025

Law Firm Succession – Encouraging Partners to Transition Clients

Question: 

I am one of eight partners in a fourteen lawyer insurance defense firm located in Indianapolis, Indiana. Besides the partners there are six associates working in the firm all of which are newbies. The partners ages are 70, 68, 65, 62, 60, 58, 54, and 51 respectively. We have several partners at retirement age and we are looking for ideas on succession planning and how to encourage retiring partners to properly transition clients. We have had partners retire in the past and we did a poor job of client transition and the firm lost clients as a result. We appreciate any thoughts that you might share with us.

Response: 

There needs to be a process established for retiring partners with specific agreed to activities on the part of the retiring partner with firm management. Steps should be taken to allow and assist other designated partners (transition partners) within the firm to develop a direct relationship and have responsibility for managing these clients. Such a process should include:

  1. Notification by retiring partners of intended retirement date – three to five years before actual retirement. At this time client transition should begin.
  2. Identify clients that will be transitioned and to whom. Specify specific transitioning tasks that are to be performed by the retiring partner and transition partner, or partners and timelines.
  3. Consider assigning Co-Responsible Attorneys to each client matter that will be transitioned. Have the attorney to which the clients are to be transitioned begin approving client invoices for services performed.
  4. Ongoing follow-up and evaluation on at least an annual basis by firm management as to the status and level of success of agreed to client transition activities.

Don’t Forget the Money – Financial Incentives To Transition Clients 
Generally, the compensation of those partners who are transitioning towards retirement will be determined in the same manner as compensation for all other partners, taking into account partner origination collections, client liaison collections, matter origination collections and working attorney collections, together with other factors that the managing partner and members of the management/compensation committee may consider relevant. However, with respect to the retiring partner, the managing partner and members of the management/compensation committee will pay particular attention to the former’s performance of the transitioning duties assigned. If it is determined that the retiring partner is satisfactorily performing the transitioning activities, the retiring partner will continue to receive full credit for those fee collections from clients being transitioned, in the various categories considered by the managing partner and members of the management/compensation committee in setting compensation. However if it is determined that the retiring partner is not satisfactorily performing the transitioning activities, or if the fees generated from these clients increase or decline, those factors will also be considered by the managing partner and the management/compensation committee in setting the retiring partner’s compensation, and the compensation may be increased or reduced appropriately.

Consider Dual Credit for Client Collections
In order to provide incentive to those partners to whom clients are being transitioned, and to insure that those attorneys are fairly compensated for their efforts in transitioning and maintaining these client relationships, the partners designated to be the transitioning partners for the client to be transitioned will also receive credit under the categories as may be applicable, for the fees generated by these clients during the transition period, provided that the managing partner and the members of the management/compensation committee determines that the transitioning partners are making satisfactory efforts to  accomplish the transitioning of clients.

Assignment of credit to the transitioning partner should not reduce the amount of credit allocated to the retiring partner, unless the retiring partner is not satisfactorily performing the agreed to transition activities.

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

Dec 03, 2025

Law Firm Succession Planning – Spouse Having to Windup a Husband’s Practice

Question:

My husband’s ( Robert) practice is located in Alexandria, Virginia. The practice is a general practice with a focus on estate planning, family law, and real estate. He is now sixty and suffering from Alzheimer’s.  He has three legal assistants and two associate attorneys. The associates are newbies each out of law school less than three years, are risk adverse, have no client book of business, and have no desire to own a law firm.  As my husband’s physical health has declined his mental acuity has declined as well. However, rather than examining possible succession alternatives he has continued to practice and the quality of his services to clients has declined. Clients have taken notice and many have taken their business to other law firms. Recently I, who serves as the firm’s office manager,  approached several law firms regarding possible sale of the practice. All of the law firms that I approached have rejected my proposals advising me that since the firm is “uniquely my husband” and without a lengthy transition, they do not believe that there is sufficient value to warrant a practice acquisition. Four weeks ago, I approached both of the associates and both advised me that they did not wish to acquire this or any other law practice. Last week both associates gave their notice and advised that they were joining other law firms in the area. Based upon the medical advice of my husband’s  doctor he has decide to close the practice and has asked me to handle the logistics of closing down the practice.

Response:

Unfortunately Robert’s failure to plan for his succession and transition has resulted in:

  1. Loss of compensation for the goodwill of his practice and the sweat equity that he invested because of the need for a hasty practice sale;
  2. A one generation law firm;
  3. Loss of peace of mind for Richard’s family and employees;
  4. Failure to provide continuity for clients and employees; and
  5. Failure to continue the legacy of the firm that Robert built.

Had Robert reconsidered his attitude of having partners, hired and groomed entrepreneurial associates with a desire to own a law firm, institutionalized the firm’s brand to be less uniquely Robert, and put in place both a short-term practice continuation plan and a long-term succession plan, the story may have ended differently.

You may not have much choice but to close the doors and windup the practice. You should check with your state bar association regarding your state court’s rules for the proper procedures for doing this. In many states a court may step in when a solo attorney:

Because clients’ cases, funds, and confidential information must be protected, the court ensures there is a responsible lawyer to manage the transition. Typically the court-appointed attorney (sometimes called a practice administrator, trustee, or receiver) is authorized to:

  1. Secure and inventory client files
  2. Notify clients of the situation and their options
  3. Return client files and property
  4. Manage trust accounts and distribute funds properly
  5. Seek continuances or withdraw from cases appropriately
  6. Close the office, handle billing, and deal with vendors
  7. Ensure ethical obligations are honored

They do not usually take over the cases themselves unless the clients choose to hire them separately.

The goals are to:

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

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