Law Practice Management Asked and Answered Blog

« Earlier | Later »

Nov 26, 2025

Law Firm Succession Planning and Transitional Work

Question:

I am the owner of a 16 lawyer litigation firm in San Diego, California. There are 6 non-equity partners and 9 associates. I am 65 and hoping to retire in the next five years. I am planning on offering equity to two non-equity partners next year and possibly offering equity to other non-equity partners in the next few years. In addition to working out the financial arrangements and partnership structure issues that are typically documented in a partnership agreement, what sort of transitional issues should I be concerned about and plan for. Your advice is appreciated.

Response: 

Transitional work typically falls into three general categories:

  1. Legal (lawyering) skills
  2. Client and Referral Sources
  3. Firm Management

Legal Skills

Frequently this is a major issue that requires attention in small sole owner/founder firms. There are no other lawyers in the firm with the legal skills that the owner has and will be required for the firm to be successful in the future. For example, I have worked with some litigation firms where the other attorneys in the firm (associates and non-equity partners) have not ever tried a case. In such situations several years of training and development in this area will be required and seasoned laterals may have to be hired or the firm sold or merged with another firm. In your case since you have several non-equity partners on board I assume that they are seasoned lawyers and this is not an issue at your firm. If this is the case there be no to little transitional time needed in this area.

Client and Referral Sources

This is an area of concern for most firms. Typically, the firm owner/founder has brought in most, if not all, of the client business into the firm and he or she controls the clients and the relationships with clients and referral sources. In these firms if the owner/founder were to leave the firm abruptly it is questionable whether the firm could survive after the owner/founder is no longer there. If this is your situation you will need to begin a focused and planned transition with specific clients and referral sources, tasks, timelines, and assigned lawyers. How long this will take will be dependent upon the number of clients, number of relationships that you have within the client organization for institutional clients, and the number of referral sources that you have that send the firm business.

Law Firm Management

Law schools do not train lawyers in management. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. It has been my  experience that lawyers who are “loners” have traditionally been poor managers. You are going to have to decide who will be good manager, or managers, and begin training and transitioning appropriate functions over to them.

The following are recommended areas in which the management skills should be developed:

  1. Client relations, including origination, development and retention.
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties.
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination.
  4. Administrative staff organization, relationships and utilization.
  5. Financial management including budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information to manage and run the firm.
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists.
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills that will be required.

I suggest that your develop a transition project plan in Excel with a breakout of tasks, responsibility for accomplishment, start date, and end date under the following broad categories:

Legal skills
Client and Referral Source
Firm Management

Under the client and referral source category each client/referral source contact should be listed.

You should also begin bringing other lawyers into your cases in order the your clients can experience working with them. Assign them as co-responsible attorneys on cases and gradually have them be responsible for billing and communications with your clients.

Click here for our blog on succession/exit strategies

Click here for articles on other topics

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

Nov 19, 2025

Law Firm Succession Planning – Selling Practice to Non-Equity Partners or Associates in the Firm

Question:

I am the sole owner of a five lawyer business transactional law firm in Cincinnati, Ohio. I  am sixty-seven and hoping to retire in the next three to five years. Besides myself there are two non-equity partners and two associates in the firm. I have not properly saved for my retirement and I am hoping to sell my practice to the two non-equity partners in the firm for a substantial sum. I founded the firm thirty years ago and believe that I have invested substantial sweat-equity in building the firm up to where it is today. I am not sure where to start and whether my expectations are realistic. Your suggestions and recommendations are most welcomed.

Response:

Years ago when interviewing non-equity partners or associates in a law firm I would never have asked them if they were interested in equity ownership or partnership since the answer would have been yes. Today, this is another story. Many non-equity partners and associates today do not want to own a law firm as sole owners or even have equity in a equity partnership. Don’t assume that your attorneys even have an interest.

So your first step will be to talk with each of them and determine their level of interest.

Your next step will be to determine the value of the firm and what you hope to ask for and how you want to be paid. Some firms have substantial goodwill value and others have little goodwill value at all. Firms that have little value are those where all the business is originated by the owner and he or she controls the referral sources. In these firms when the owner leaves there may be little to no future business.

In the final analysis the value of the practice is what an outside buyer or an attorney working for the firm will pay for (or invest) the practice. A balance often has to be struck between valuation and affordability. The valuation process is simply a tool to use to help you begin discussions and get to this point.

You also have to keep in mind that many of your competitor law firms are offering equity partnership with no buy-in at all.

I believe that firm value has to be balanced with affordability and a prospective equity member’s ability to pay for the shares. It all comes down to compensation. Generally, I find that a prospective equity member or partner must be able to see a significant compensation increase with a breakeven/payback period of around three years – no more than five. I also believe that when shares are seller financed the period should be no longer than five years. Many firms do not sell shares based on formal valuation – other methods are used.

Questions that equity member candidates usually raise:

1. Is the breakeven/payback from the investment in say three years as a result of the compensation gap?
2. How much more will he or she earn as an equity member?
3. Can he or she earn enough as an equity member to justify the investment?
4. Can he or she earn more as a partner somewhere else with as large investment, a smaller investment, or even with no buy-in at all?
5. Can he or she earn more somewhere else as an associate or non-equity partner?

In many law firms’ compensation is based upon performance and contribution and ownership shares have little or no bearing on member or partner compensation. Their primary goal is to acquire and retain talent.

Your expectations may be realistic if the clients and referral sources stay with the firm when you are no longer there and if your non-equity partners care about equity and owning a law firm and are willing to make the investment and take the risk.

Click here for our blog on succession

Click here for out articles on various management topics

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

 

 

Nov 12, 2025

Law Firm Marketing – Referral Networks

Question: 

Our firm is a six lawyer firm in ChicagoLand that specializes in the areas of estate planning, estate and trust administration, and elder law. Four of the six lawyers in the firm are equity partners and two are associates. Our firm was formed ten years ago and almost all of our business comes from the internet. While we are grateful for the success and business that we have developed we believe we have missed the boat is getting more business from referrals from lawyers and other professionals as well as past clients. We are spending a fortune on marketing and would like to take advantage of less costly means of acquiring business. Your suggestions are appreciated.

Response:

Past client, lawyer and other professional referrals are still are very viable methods for acquiring business even in the internet age. I have many estate planning/administration/elder law firm clients that obtain all of their business through these referral sources and spend very little on marketing.

Referrals from former and current clients and friendly third parties are among the most desirable sources of new business.

It has been my experience that referrals generally occur because of the efforts of the attorney who is receiving such referrals. You should not expect such referrals to “fall into your lap.” You must initiate certain actions to try to make them occur.

There are two kinds of referral networks. One is an attorney referral source. The other is referral from clients or other “friendly third parties” who are not attorneys. Both types of referral networks are important to an estate planning/administration/elder law practice.

Attorney Referrals

To be in a position to receive such referrals, an attorney should develop an expertise in one or more areas of legal work and become recognized by other attorneys as being especially skilled in those areas. It is also necessary to inform attorneys who may be referral sources that you have such expertise and that you are interested in accepting referrals in these areas. To the extent you are interested in receiving referrals, you should get to know attorneys likely to be in a position to refer such matters. This may be accomplished by participating in bar associations, by writing on estate planning/administration/elder law issues, by speaking at CLE programs and by maintaining an active role in selected committees. Having your firm listed in legal directories may also help.

Once an attorney referral base has been established, it is important to maintain your network.

Non-Attorney Referrals/”Friendly Third Parties”

The first step is to identify potential referral sources. The best referral sources will have significant and repetitive contact with individuals who need your legal services. Examples for an estate planning/administration practice include accountants, financial planners, bank trust departments, etc. These sources should be able to identify the needs of potential clients and have their trust in order to make a referral. Identifying friendly third parties and cultivating their confidence is time consuming. Patience and perseverance is essential.

The initial contact with potential non-lawyer referral sources may be made by joining a professional, trade, social, civic, service or religious organization. You may be recognized by maintaining an active profile on influential committees.

Once these referral sources have been identified, you should develop and reinforce a personal relationship with these friendly third parties who come in contact with potential clients.

Maintaining the Referral Network

Once referrals from non-attorney sources are received, it is important that you work to maintain that base. Providing good service to referred clients and keeping them happy will reflect well on the friendly third party and encourage them to make additional referrals.

Maintain contact with referral sources even when you are not working on a referred matter. This keeps your name in front of that source for the next referral. A phone call, letter or lunch is easy to do and can be valuable in maintaining and reinforcing your relationship.

Set monthly goals for the number of referral sources contacted. Allocate time for this important activity. Make it part of your regular routine.

Satisfied Client as a Referral Source

Most satisfied clients are willing to make referrals.

The development and maintenance of a referral network is an excellent technique for marketing your practice and obtaining legal business from attorney and non-attorney sources. A successful referral base will require work and take time to establish. You must have patience and persistence. Most referrals go to those attorneys who have worked to establish and maintain their referral network.

Another successful approach used by estate planning/administration/elder law firms over the years has been seminars sponsored by the law firm. Today I am seeing more and more firms doing webinars and they are finding webinars to be a suitable replacement for live seminars and at a lower cost and time investment.

Don’t forget the importance of having a program to encourage Google reviews from completed client engagements.

Click here for our blog on marketing

Click here for articles on other topics

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

Jun 04, 2025

Law Firm Merger – What Should We Discuss in our First Meeting

Question:

I am a partner with two other partners in an estate planning firm in Seattle, Washington. All three of us are in our late sixties and contemplating retirement in the next few years. We have no associates in our firm and have been unsuccessful with retaining associates over the years. Therefore, we feel that we will have to either lock the doors or find a suitable firm to whom we can sell or merge with.

We have identified a candidate firm with a sole owner and two associates that might be a possibility. We have scheduled a first meeting but we are unsure how we should approach the discussion. We need some talking points.

We would be very appreciate as to your thoughts and suggestions.

Response:

Here are questions to ask/raise during the first meeting,

  1. Your firm
    1. Your retirement goals and timeline.
    2. Your preference – firm size.
    3. Discuss how your firm could be a growth opportunity for the other firm.
    4. Discuss people in the firm (attorneys and staff), backgrounds, ages, and what each does and who would probably stay and remain with the firm post you and your partners retirements.
    5. Discuss practice mix, percentages of revenue.
    6. Methods of billing – time bill, flat fee. Billing rates.
    7. Discuss revenue history.
    8. Malpractice ins, coverage.
    9. Does your firm retain original estate plan documents? If so, where?
    10. Business philosophy.
  2. Other firm
    1. Other firm’s goals re continuing to practice, growth, practice area focus, etc.
    2. How many years does other firm members plan on continuing to practice.
    3. Discuss people in other firm – attorneys and staff, ages, time with firm, etc.
    4. Other firm’s status with office lease if leased or if building owned – mortgage, etc.
    5. Discuss practice mix, revenue past five years, percentages of revenue by practice mix.
    6. Other firm attorneys experience in your practice areas – estate planning, estate admin, business law, municipal.
    7. Methods of billing – time bill, flat fee. Billing rates.
    8. Malpractice Ins, coverage.
    9. How are associates and staff compensated. Method and amount of pay.
    10. Business philosophy.
  3. Next steps.
    1. Explore any potential conflict of interest.
    2. Dependent on first meeting, other firm’s lease, level of interest, etc.
    3. If both parties believe there is a possibility, usually another meeting – getting to know each other socially and well as others in the firm or firms – cultural due diligence. If this does well – financial due diligence – 5 years tax returns and profit and loss statements and balance sheets for 2024, A/R reports, compensation for attorneys and staff, owner compensation, billable hours, billable rates, copies of malpractice insurance policies and application, etc.
    4. If due diligence does well, one of the parties makes a written proposal.
    5. Sometimes a pilot ‘Of Counsel” arrangement can be done prior to a merger. I have a client that is using an Of Counsel arrangement with another law firm to handle all of their estate planning with the senior partner announcing that he will not take on additional clients.

Click here for our blog on mergers

Click here for our blog on other topics

Click here for articles on other topics

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

Feb 26, 2025

Law Firm Management – How to Keep Branch Offices From Becoming Fiefdoms

Question 

I am the sole owner of an estate planning firm in the San Francisco Bay Area. We have one branch office and are contemplating acquiring another practice that would give us a third office. We have a total of four lawyers plus myself working in the firm, 5 paralegals, and five administrative members including the firm administrator.

We acquired the office office via an acquisition five years ago. At first we had a paralegal that we inherited from the prior firm as the only permanent employee at the office and we would send up lawyers from the main office for client appointments on an as needed basis. (The two offices are a 45 minute car commute from each other) This worked reasonably well for a little while but after a year I decided that we needed more permanency in the office and we hired a full-time experienced lawyer that was assigned to that office. A year later the paralegal retired and we hired another paralegal for that office as well as an administrative staff member. All went well for a couple of years but now we are having the following personnel issues:

  1. Infighting between attorneys and staff between the two offices.
  2. The lawyer and staff at the branch office act as if they are in a separate firm.
  3. The lawyer and staff at the branch office will not follow main office protocols regarding client acceptance and fees, document preparation, document storage, dress and appearance, client relations, or anything else.
  4. The remote office has become a separate fiefdom and the firm is becoming an unpleasant place to work.

I am having second thoughts as to whether I should have acquired this practice and whether I should go forward with another acquisition. Any thoughts that you have would be appreciated.

Response:

While opening a branch office can be tempting there can also be pitfalls. Typically reasons for opening a branch office include:

  1. Additional geographical coverage
  2. Access to additional clients
  3. Potential revenue increase
  4. Access to a wider talent pool

A branch can bring prospective additional clients and access to a wider talent pool but money has to be spent on office space, salaries, and other operating expenses which can negatively impact the profits and earnings of the firm if the branch office does not generate sufficient business and revenues. Even if the branch office is successful in terms of revenues and profits there are the additional management challenges that can arise such you are experiencing. Often the most difficult challenge is replicating your philosophy, norms, and practices – culture if you will – in the branch office.

In larger branch office plants the office is usually staffed by at least one attorney – usually partner level – that is transferred from the main office. As the office grows additional attorneys and staff are hired for the local area. This helps in transplanting the main office culture to the branch office.

In your situation due to your small size you options may have been more limited but you might have considered:

  1. Encouraging one of your other attorneys to work at the branch office.
  2. Requiring the paralegal that was acquired from the acquisition to work at the main office for the first month.
  3. Requiring the new attorney that was hired for the branch office to have worked for a time in the main office.
  4. Requiring the new paralegal that was hired for the branch office to have worked for a time in the main office.
  5. Weekly team meetings via Zoom including attorneys and staff from both offices.
  6. Quarterly face to face meetings with attorneys and staff from both offices.
  7. Consequences for behavior such as you are experiencing.

You must take a strong hand on this or the situation will only get worse. Your firm administrator should also play a key role in this.

Click here for our blog on mergers

Click here for our blog on human resources

Click here for articles on other topics

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

Aug 14, 2024

Law Firm Succession and Exit Strategy – Referring Out Work too Soon

Question:

I am an estate planning attorney in Chicago. I am currently 72 and have been in practice and owned my own firm for 45 years. In the past I had an associate attorney in the firm and a couple of legal assistants. Currently I have one part time associate no assistants. I do all of my own paralegal and administrative work. My associate has no interest in taking over my practice. Therefore, I am considering options as what to do with my practice. I have wound down over the last few year by cutting back on my time and hours and referring out almost all of the new prospective clients that contact the office to several other law firms. In fact, I quit taking on new clients three years ago and have referred out a substantial amount of work – gratis – without any form of compensation or referral fee.

I plan on speaking with a firm other law firms concerning joining as an “Of Counsel” with a transition plan for my retirement and taking over my practice. I would like to receive some compensation for the “sweat equity” for building the practice.

I would appreciate your thoughts.

Response: 

Of Counsel arrangements are the most common arrangements for sole owners/solos in situations such as yours. While practice sale is an option, I find the OC route the most common approach acceptable to other law firms. Your financial performance over the last five years often has a lot to do with the level of interest that there will be from other law firms, the compensation arrangements they are willing to offer, and if and whether they will be willing to compensate you for your “sweat equity” or book of business either while you are there as OC or post retirement. Unfortunately, your early winding down and referral of clients has resulted in your financial performance over the last three years dropping from what it was in the past. You have also referred out clients which also would be future referral sources to other law firms which would be a major selling point for establishing a “sweat equity” value for your practice. I often advise my clients – don’t wind down or referral out clients too early – do so when you have an arrangement with another firm. 

This does not mean there is not hope or that any other firm’s will have an interest in you or your practice. It could be that another firm is interest in you, especially if you have a unique skill set that the other firm does not have, and what you can do to help take their firm to the next level in a couple of years. When you are asked to provide financials to prospective law firms you might want to provide a list (redact the names of the clients) illustrating the value of referrals you have made to other firms over the last few years with fee estimates.

Click here for our blog on succession/exit strategies

Click here for our blog on mergers

Click here for articles on other topics

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

Aug 07, 2024

Law Firm Succession – Using Affiliation or Of Counsel Relationships as a As a Pre-Merger Pilot Test

Question:

I am sole owner of a law firm in San Rafael, California with an estate planning practice.  I have two part-time attorneys, four paralegals and three legal assistants. I am in my late 70s and want to retire in the next three years. I have recently had several discussions with another small firm that is interested in acquiring my practice via a merger. While I will only be practicing a few more years I want to ensure that I have the other firm would be the right fit for my clients and staff. Do you have any thoughts or suggestions?

Response:

Making the right decision concerning the “Who” is usually more important than the “What” or the “How”. Take your time to do the proper due diligence regarding the other firm. Get to know the partners as well as the employees of the other firm. Ascertain practice, client, and cultural compatibility. If you both determine that a a deal might make sense – then move to the “How”. Even though you have done the best due diligence you can – you won’t really know about the other firm until you try working together. So before you jump – consider taking a few baby steps first. You might start with an affiliation arrangement (Of Counsel) as a Phase I pilot test for six months. Under this arrangement you can both refer work to each other as well as have the other attorney work on some of your client matters. Outline the details of the relationship in an affiliation or Of Counsel) agreement. After six months review the success of the arrangement and whether it makes sense to take the next step. If it does – a Phase II step might be to enter into a more formal form of  practice continuation/transition arrangement with the other firm. Phase III would be either the eventual sale of your practice or merger with the other firm. Taking a phased approach allows you learn more about the other firm which will increase your odds of a successful transition and buys you time before actually merging your practice if that is the direction you should go.

Click here for our blog on succession/exit strategies

Click here for our blog on mergers

Click here for articles on other topics

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

May 29, 2024

Law Firm Structure and Governance

Question: 

We are a group of six partners that are in the process of leaving a well established firm in Los Angeles, California and will be starting our own firm. In our early planning we have been discussing how we will structure and manage the firm. You advise and suggestions would be most welcomed.

Response: 

Most smaller to medium sized law firms choose one of three fundamental varieties of management structure. These systems may be characterized as management by:

  1. Democracy
  2. A managing partner
  3. An executive or management committee.

Full Partnership – Full Partnership or All Partners –  Under a full partnership each member of the firm has an equal voice in management and is “just as needed” as others to act. Any decision must be concurred upon by all partners, and various administrative tasks may be assigned or rotated among partners. Notwithstanding the perceived benefits accruing to partners as the result of participating in firm management and “controlling their own destinies,” democratic firms traditionally progress more slowly and at a less profitable rate than firms governed under one of the other structural concepts.

Managing Partner – This approach is probably the most efficient form of managing a law firm. A strong managing partner is oftentimes referred to as a “benevolent dictator.” Authority and accountability for all firm matters may be controlled by one partner or a tightly knit group of dominant partners. Typically, a managing partner is the person who opens the office in the morning and closes it in the evening. He or she may be responsible for originating and retaining the firm’s major clients. The managing partner frequently receives all work assignments from clients and parcels work out to other partners and associates. The managing partner typically determines the partners’ and associates’ compensation and perquisites.

Executive or Management Committee – The executive or management committee structural concept is a representative form of governance typified by a committee of partners having defined authority, accountability and responsibility. In most smaller firms this committee, frequently consisting of three partners, may be responsible for recommending and implementing policy for the firm, planning for the future, appraising results and recommending corrective action, as required.
A three partner executive or management committee is frequently recommended to avoid deadlocks or inaction and to spread the burden of administration among appropriate partners. 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. For example, one partner may serve as the financial partner. This would involve responsibility for insuring the preparation and analysis of income and expense budgets and financial reporting. This partner would oversee attorney production, fees, collections, etc. A second partner may be responsible for the personnel functions including associate career development, i.e., employment, training, evaluation, etc., and implementation of policy for the administrative staff. A third partner may serve as the general administrative partner, and oversee the implementation of administrative policy, systems, automation, etc. These partners may be assisted by an office manager, bookkeeper, etc.

To preserve continuity in the management function, it is recommended that tenure of partners on the executive or management committee be staggered over a two or three year period. The executive committee should communicate with the partners regularly or as issues arise. The executive 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 executive 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.

Click here for our blog on management

Click here for our blog on governance

Click here for out articles on various management topics

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

 

Mar 06, 2024

Law Practice Succession Planning for a Sole Owner – A Question of Value

Question: 

I am a sole owner of a three attorney firm in Chicago suburbs. I am sixty-five and have two associates in the firm. We do estate planning, elder law, and estate administration exclusively. While I want to continue working for the next five years I want to begin succession planning and gain some understanding of how to value the firm and what it might be worth, if anything. Your thoughts on this topic would be most appreciated.

Response: 

Prospective buyers whether they be attorneys in your firm or another firm must be willing to pay the price you are asking and they will, when determining what they are willing to pay for your practice, estimate the extent to which they are likely to make more money and improve their position economically by purchasing your ownership interest or practice. If they can do as well in salaried practice or within a short time by starting a new practice, they will be unwilling to pay more than a token amount for the goodwill of the your practice. Likewise, depending upon the individual personal and professional qualifications of a prospective buyer, the same practice may have a greater or lesser value.

Internal Strategy – Selling Your Interest to Other Attorneys in Your Firm 

This is the option that we like to see a firm start with. Determining and receiving a fair price depends largely upon obtaining the right buyer. They must have the ability to keep your practice intact and have the financial resources and inclination to take on the risk of owning a law practice. The right buyer must possess not only adequate professional qualifications, but also favorable personal characteristics which are just as important in determining whether a young lawyer will be able to take over an established practitioner’s practice. Most practices are not sold outright for cash. Usually, payments will be spread over a period of two or three, or more, years. If the buyer is unable to handle the practice successfully, he or she may be unable to continue your practice.

The plans for valuing a withdrawing, deceased, or otherwise terminating partner’s interest in an organized law firm are many. Law firms will generally turn to one or a combination of the formulas listed below:

  1. A dollar figure set for each percent of the share of interest or for each share of stock in a professional corporation (This can be reset each year or on agreement or formula).
  2. A valuation placed on the goodwill or contribution of those who originated the firm.
  1. A valuation placed on the contribution of a partner other than originators of the firm.
  1. Capital attributed to the partner whether contributed in the form of cash, library or other assets.
  1. A calculation to include unbilled work inventory and accounts receivable.
  1. A figure or formula related to annual earnings.
  1. Provision for a gradual reduction in earnings over a period of years.
  1. Provision for some participation for the rest of the life of the partner.
  1. Participation in earnings or other value based proportionately on the number of years of service with the firm.
  2. Funded pension arrangements under the partnership or professional corporation form of practice.

External Strategy – Merging Your Practice with Another Firm

While you have a couple of associates working in the firm don’t assume that they will have an interest in ownership. If not you may have to consider merging with another firm. This is a common approach taken in such situations. More often, the lawyer or law firm will first assess the compatibility and economic feasibility of the merger. After determining that it is appropriate to proceed to join forces, favorable billing and other economic arrangements can be concluded with further considerations including a plan for ongoing income distribution arrangements among the partner and salary arrangements for employed lawyers and others who become part of the merged organization.

Click here for our blog on succession

Click here for out articles on various management topics

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

Feb 14, 2024

Law Firm Succession – Transition of Senior Partners Leadership and Management Roles

Question: 

I am one of three founding partners in a 17 lawyer insurance defense firm in Houston. We have a total of 18 lawyers in the firm – 3 founding equity partners, 4 other equity partners, 5 non-equity partners, and 6 associates. The three of us founding partners are in our 60s and approaching requirement and are concerned about succession planning and transition. We feel that we are in good shape concerning transition of clients but not so concerning management roles and responsibilities. The firm is managed by the three of us and we have kept tight reigns on the administrative/management side of the house. We would appreciate your thoughts.

Response: 

A successful transition strategy involves three components.

  1. Legal Skills (lawyering skills)
  2. Client and Referral Source Relationships
  3. Firm Management and Leadership Roles

While it sounds like you are in good shape concerning legal skills of your other partners and client and referral source relationships, work needs to be done in the areas of firm management and leadership.

Law schools do not train or develop managing partners or lawyer managers, nor does doing excellent and complicated work for demanding clients. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. The better lawyer managers have a second sense for people and management, in addition to being good lawyers and possibly outstanding rainmakers. Many firms develop successors to management by delegating to selected mid-level and junior partners short term management assignments and by rotating these partners through various management areas to develop their general management skills rather than developing particular lawyers as specialists in specific management areas. These firms begin to train mid-level and junior partners by assigning short term, low risk management activities before entrusting them with key management jobs.

Management Skills

The following are recommended areas in which the management skills of mid-level and junior partners can and should be developed:

  1. Client relations, including origination, development and retention;
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties;
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination;
  4. Administrative staff organization, relationships and utilization;
  5. Budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information;
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists;
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills of mid-level and junior partners. Three of the most frequently used approaches for teaching management skills include being assigned to a committee, being elected or appointed to a management or leadership position and serving as a member of a special team.

  1. Committee Membership: Mid-level and junior partners may be appointed or elected to serve on the management or other committees. Depending upon the form of firm governance, partners may be appointed or elected to represent various age groups and/or regional offices in multi-office firms. They may be chosen to serve on other committees such as marketing, associates, recruiting, lateral hires, administrative staff, financial, ethics or the management committee, etc.
  2. Appointed positions: Partners may be appointed to manage functional areas of administrative or substantive firm activity. For example, a partner may be appointed to chair a practice area or one of its sub-specialties. Another one may chair the marketing committee. A third may serve as the firm’s ethics partners, etc.
  3. Special Team: A partner may lead a special team to address a specific issue or function. For example, a partner may be requested to recommend new or emerging practice areas. Another may explore the feasibility of establishing a new regional office. A third partner who has an interest or background in technology may direct the firm’s automation effort, etc.

The mid-level or junior partner selected for training should receive administrative assignments and his or her performance should be evaluated accordingly. Each lawyer manager should be requested to develop a plan for the year, including goals and proposed action plans for accomplishing their objectives. They should be required to review these plans with the head of the committee or the partner to whom they are accountable. Partners who are appointed or elected to specific positions should be accountable to a partner or committee responsible for their actions and be evaluated on their performance. Many law firms consider the success or failure of partners in planning and implementing administrative assignments when recommending or setting their compensation levels. This is done to encourage the firm’s “best and brightest” partners to accept administrative assignments and not feel uncomfortable because they may record fewer billable hours. Also, it would be wise for the managing partner or executive committee to identify and provide other non-monetary forms of recognition to successful lawyer managers.

Planning for the transition of law firm leadership and management calls for the ability of the current managing partner or members of the management committee to spot leadership and management potential among the partner complement. Once this potential has been identified the current management must nurture and develop this potential so as to provide the future leaders of the firm.

Click here for our blog on management

Click here for our blog on governance

Click here for out articles on various management topics

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

Archives

Categories

    Subscribe to our Blog