Law Practice Management Asked and Answered Blog

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Aug 29, 2012

Keeping Law Firm Clients Happy

Question:

I am managing partner with a 12 attorney general practice firm in St. Louis. As part of our marketing program we recently completed an informal client survey and were surprised at some of the feedback. The feedback was less positive than expected. Our clients advised us that our services took longer than expected and fees were also higher than expected. We work hard for our clients and I don't see how we can improve turnaround or reduce legal fees. I would appreciate any thoughts that you have.

Response:

Based upon client satisfaction surveys (telephone interviews) that we do for law firms we find that one of the biggest problems is that the attorneys are doing a poor job of managing client expectations. Your clients get frustrated when you promise one thing (timeline or fees) and the result is very different – especially when the work takes longer than promised or the fees are higher. Even though you don't structure it as a promise your clients take it that way. The key is to under promise and over deliver. I suspect that upon the initial client meeting you are under estimating the timeline and low balling the fee range. Reduce the promise – increase the - timeline and fee range and then shoot to deliver under that range. This will do wonders for improving the client relationship.

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

Aug 22, 2012

Admitting New Law Firm Partners

Question:

Our law firm is located in San Antonio, Texas. We have a total of eighteen attorneys which includes me and two other equity owners that founded the firm and contributed capital, three equity partners that were made partner that did not contribute any capital, two non-equity partners, and ten associates. The original three partners control the firm and make all of the decisions with little involvement or input from the others. They are not provided with financial statements or reports. The original three partners bring in virtually all of the business. We are faced with some hard decisions concerning partnership admission – non-equity to equity, associates to non equity, etc. Our compensation cost for attorneys is eating away at our earnings for attorneys that are worker bees and don't bring in any business. Your thoughts?

Response:

You may want to ask yourselves whether you want employees or partners. It sounds like the other three equity partners are not part of the inner circle and are not really functioning as part of the partnership. 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 are diluting the earnings pool and reducing the size of the pie for yourselves. Personally, I think in a firm your size 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.

I would start here by addressing these issues with the three equity partners. They I would 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 respective and expectations for each. (What it means)

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

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

Aug 14, 2012

Law Firm Management Roles – What Do I Need To Be Good At?

Question:

I am the owner of a 12 attorney firm in Dallas. We have 26 people including attorneys and staff. I founded the firm 20 years ago. While we have an Accounting Manager – I am responsible for the management and direction of the firm. While we have done okay over the years – I often feel deficient as a manager and am not always sure that I am covering all of the bases. Is there such thing as management 101 for guys like me?

Response:

Mention management 101 and I think of the five functions of management. Each of these roles must be performed by someone in every law firm and business if it is to be successful. In a small firm such as yours you must perform each of these functions and be reasonably good at all of them.

Here are the five functions:

1.  Planning

Deciding in advance what to do, how to do it, when to do it, and who is to do it. Planning bridges the gap from where you are to where you want to go. It makes it possible for things to occur which would not otherwise happen. Planning is often referred to as business, long range, or strategic planning.

2.  Organizing

Creating an intentional structure of roles, duties and responsibilites, and accountabilities. Defining  what is to be done, by who, and how? Sometimes this involves establishing departments or practice groups.

3.  Staffing

Manning the jobs which involves hiring, performance management, training, mentoring, and development of people to fill the organizational roles.

4.  Directing

Directing employees involves motivation, communications and leadership.

5.  Controlling

Measurement of accomplishments of events against the standard of plans and the correction of deviations to insure attainment of objectives according to plans. In essence this involves reviewing your business, long range or strategic plan or budget against actual performance using metrics and dashboards/reports to determine how well you are making progress. If you are falling short of firm goals – determine problem areas and take corrective action to get performance back on course.

Use the above functions as a report card. Ask your self – how good are you at performing each of these roles? Are you performing them at all?

In addition to these roles you need to have a working knowledge of accounting and finance and be able to manage the financial affairs of the firm "work the books" as well as being good at getting the right people on the bus (hiring right) and keeping them there.

As you continue to grow you will eventually need to hire management talent to delegate some of these functions to perform.

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

Aug 08, 2012

Law Firm Owners and Partners – What is Your Primary Focus – Business Person or Lawyer?

Question:

I am an attorney in Chicago. I am the sole owner of an estate planning practice consisting of 4 other attorneys, 4 paralegals, and 2 administrative support staff members. We have reached a size where I am having problems handling and balancing the demands of serving my clients and managing my firm. It seems I am working day and night and have no time for anything but work. I am frustrated and it is driving my crazy? I would appreciate any thoughts that you may have.

Response:

You are not alone. This is a common problem in law and other professional service firms. I have similar problems in my own firm – it is very difficult to serve two masters – serving your clients and managing your firm. Eventually you have to pick one – client service (doing legal work) or managing and running your business – as the area that receives your primary focus. This is not to say that you should not do both – but you select the primary area that you are going to focus on and get help with the other area.

A question that I typically ask my new law firm clients – what do you want to be or do – be a business person or a lawyer. The answer to the question often provides a hint to how you should structure your firm. If you want to be more of a business person – hire legal talent to help with serving clients and performing legal work and spend more time working on your firm rather than in it. If you want to be more of a lawyer and do legal work and serve clients hire a legal administrator or business manager (this is more than an office manager) to manage and run your firm.

I have more and more owners of small law firms that are managing their law businesses and not practicing law. I believe the appropriate direction is what makes you happy and what type of work you enjoy doing. You practice should support and fulfill your personal goals, what you want out of life and what makes you happy. If that is managing – then manage. If that is doing legal work – do legal work.

Two great books on this subject are – The E-Myth Revisited and The E-Myth Attorney – available on Amazon. The theme of both of these books is:

Small business owners often spend too much time being the technician (i.e. lawyering) and not enough time managing and innovating.

Think about where you want place the priority of your focus – working on firm (business) or in it.

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

Jul 31, 2012

Using Law Firm Economic and Other Surveys

Question:

I am the firm administrator for a 16 attorney in Memphis. I am new to the field and just started with this firm. I have been asked to conduct some preliminary law firm economic research and obtain – purchase if necessary – survey data on the subject. Do you have any suggestions concerning using such surveys?

Response:

The use of sound secondary research surveys can be invaluable and can assist firms in their quest for “best practices.”  While law firms should strive to use surveys that meet the test of sound research, this is not always possible since no other source of information may be available. In other words – some information may be better than no information at all. In such situations law firms may decide to use research surveys that do not satisfy sound research guidelines. Such information can still be useful for exploratory analysis and when the information will be used for “benchmark” purposes. However, it is important for the firm to keep in mind the limitations of the study.

Many of the national law firm management surveys are designed to provide the information necessary for law firm management to evaluate their firm’s performance relative to comparable law firms. Statistics included in these studies represent broad performance benchmarks against which an individual firm can be measured. Law firms can use this information to compare their firm’s performance with other firms as a whole, as well as with firms of similar size, geographic location, population, practice specialty, etc. Keep in mind that the objective of such comparisons is
to identify potential “red flags” that warrant additional investigation. Deviations between your firm’s figures (for any performance measure) and figures in the survey is not necessarily good or bad. It merely runs up the red flag which alerts you investigate further. Information in these surveys should
be used as guidelines rather than absolute standards.

There are numerous considerations that should be investigated when acquiring and using secondary research. Due the extent and complexity of these considerations rather than outline these here is a link to an article that I wrote on the subject that provides a good outline, checklist and tool for using secondary research. How to Use Secondary Research to Manage Your Firm – A Primer

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

Jul 24, 2012

Focused Effort in Law FIrms – Effective Problem Solving and Implementation

Question:

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

Response:

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

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

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

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

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

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

 

 

Jul 17, 2012

Structuring and Running Your Law Firm Like a Business

Question:

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

Response:

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

I suggest that you:

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

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

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

 

Jul 10, 2012

Law Firm Marketing Investment/Maximizing Results

Question:

Our firm is a 6 attorney firm in downtown Chicago. Our practice is a litigation boutique focused on representing individuals in personal injury and divorce matters. We do a fair amount of advertising and have had mixed results. We tried radio and limited TV ads, have an innovative website, have done some pay per click ads on the web and are now considering a lead referral service. Do you have any suggestions concerning what we should be investing in marketing and what we should be doing to maximize our results?

Response:

Studies that have been conducted indicate that law firms that provide services to business firms (B2B) spend approximately 2.4% of fee revenue on marketing. However, law firms that focus on individual consumers (retail law if you will) spend much more – 10%+ of fee revenues on marketing – especially if strong referral networks are not in place. I have several PI, SSDI, Elder Law and Estate Planning firm clients that are spending 10%+ of their fee revenue or greater on marketing. I have some extremely successful PI firm clients spending 20% of their revenue on marketing.

The amount of appropriate investment can depend upon referral networks in place. I have successful PI and Estate Planning firms that are spending very little on marketing, are getting all of their business from their referral networks, and spending next to nothing on marketing and advertising. (By referrals I am speaking about professional referrals not involving a referral fee and client referrals. If referral fees are involved they should be considered a marketing cost) So it depends upon your situation, the type of cases you are going after, etc.

Measure Return on Marketing Investment (ROMI)

As important as the amount of your marketing investment is to your program – you must constantly measure the effectiveness of your various marketing program activities and know at all times your ROMI (return on marketing investment). Then you determine what is working for you and what it now working – then fine tune your program.

Implement Effective Inquiry/Lead Management and Client In-Take Systems

Many firms spend enormous amount on marketing and then drop the ball on managing and processing prospective client inquiries. Inquiries that are generated thought the internet or advertising are colder leads than referrals from other clients or referral sources. Cold inquiries expect 24/7 response – often you only have a two hour window to get back with these inquiries or they will contact someone else. Before you make major investments in TV, Radio, Pay-Per-Click, or Internet Referral Programs insure that you have put in place the appropriate inquiry/lead management and client in-take infrastructure and staffed accordingly. Otherwise you may find that you are getting the inquiries/leads but are not being successful in converting them into paying clients.

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

 

Jun 26, 2012

Branding the Law Firm vs. Branding the Individual Attorney

Question: 

Our firm is a 42 lawyer firm in downtown Chicago. We have 22 equity partners. Five years ago we decided to allocate a significant portion of our marketing budget to branding the firm. In that regard we cannibalized the marketing budget to the extent that very little was left for individual marketing. Now we have many unhappy campers. Some of the partners are advocating scrapping the firm-level effort and going back to our past practices of "long ranger" individual marketing. What are your thoughts regarding firm branding? Should we continue our efforts in this regard?

Response:

In today's climate it takes both – a firm brand and individual attorney brands. Since I don't have all the details concerning your situation – it is difficult for me to generalize. However, based upon what I am seeing in the competitive landscape I believe that the firm was correct in deciding to invest in enhancing the firm's image and brand. However, personal attorney brands are important as well. I am often advised by law firm clients that they hire the lawyer – not the law firm. While this is only partially true, it bring home the importance of individual branding. Often lawyers think they can push off their business development responsibilities to "the firm" and go back to practicing law. This is simply not the case. Marketing and business development must occur at the firm, practice group and individual lawyer levels. Resources must be allocated to each.

Suggest that you review the firm branding program and what is working and what is not. Do not look for quick fixes. Modify the program if necessary. Review the budget and modify it so that resources are allocated to firm, practice groups if they exist, and individual lawyers. Insure that practice groups and lawyers submit business development plans and they are held accountable for results when their plans are funded.

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

 

 

Jun 19, 2012

Law Firm Dissolution/Winddown

Question:

Our firm has recently gone through a series of partner defections – we were a 40 attorney firm – now we are 10.  In our last partnership meeting we had some discussions about the possibility of dissolving the firm. If this comes to pass – do you have any tips or suggestions regarding winding down the firm?

Response:

Winding down a firm is like starting a firm but in reverse, harder, and has more steps. Sort of like building a house and then later tearing it down. You will have to deal with:

  1. Clients (notification, termination of representation, and disposition of case files)
  2. Retired partners
  3. Current partners
  4. Employees (associates and staff) – job placement, severance, etc.

Unlike other businesses – the major asset of a law firm are its clients, employees, and partners – many of which may have already defected or walked out the door. You may be left with only the liabilities.

One of your priorities will be to decide who will manage the winddown and who will manage internal and external communications.  Then you will need to develop a project management plan and dissolution/winddown plan/checklist. Major priorities will include:

  1. Bank Loans
  2. Building Lease
  3. Retainer Obligations to Clients
  4. Equipment Leases
  5. Retirement and Other Payouts to Former Partners

Firm should consider if it will retain a caretaker or trustee to manage the winddown.

You should insure that you review the ethical requrements with your state bar association concerning:

  1. Clients right to choose legal counsel.
  2. Notice to clients
  3. Proper and continuous handling of a client's matters
  4. Protecting a client's interest
  5. Disposition of client files
  6. Conflict of interest due to any new affiliations

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John W. Olmstead, MBA, Ph.D, CMC 

 

 

 

 

 

 

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