Law Practice Management Asked and Answered Blog

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Mar 22, 2011

Considering Merging or Joining Another Law Firm: What Should I Look For?

Question:

I am a solo practioner in Southern Missouri. I have been in practice for 20 years. I have a very successful practice with an excellent client base. I have three paralegals that I am able to keep busy. I have recently been thinking about whether I should consider joining another law firm. What should I be thinking about and what should I be looking for?

Response:

I believe that the key question is – can a law firm offer its lawyers a measure of value independent of the skills, talents, and contributions of its partners? The answer can only be answered by recalling the advantages that the best law firms have over sole practitioners or groups of lawyers who share overhead and nothing more. These advantages include the following:

Just because a law firm holds itself out to be a firm does not mean that the advantages listed above exist in that specific law firm. If not – you might be better off staying solo.

Click here for our blog on partnership topics

Click here for our published articles

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

Mar 15, 2011

Does Law Firm Partner Compensation Make a Difference in Motivation and Actual Performance

Question:

We are a 21 attorney firm in San Francisco. Recently we have been considering overhauling our partner compensation in order to foster leadership and more of a team environment. Currently many of our partners are operating and functioning as if they are in separate law firms rather than part of a firm. What are your thoughts?

Response:

With thinner profit margins firms can no longer carry unproductive partners. Law firms are demanding more from their partners and asking everyone to think outside the box to help the firm innovate for the future and obtain/retain a competitive advantage.

This has renewed discussion and debate on the topic of partner compensation and in particular whether compensation can make a difference in motivation, actual performance, and contribution.

We are receiving many more inquiries from firms looking to overhaul and redesign their partner compensation systems. Based upon these inquiries we believe that many firms are expecting miracles from their compensation systems and are asking and expecting more than they will ever be able to accomplish. They are not just seeking to align pay with performance – but have far higher expectations. For example:

Expecting a compensation system to perform miracles such as these may be expecting more than any system can deliver.

Compensation does not drive behavior – it maintains the status quo. It serves as a reinforcing agent. Motivation requires leadership which can have a greater impact upon a firm than anything else.

An effective compensation system serves as a strong messaging and reinforcement agent that helps you obtain and retain top partner talent and helps align their goals and activities with the strategies and goals of the firm.

A well designed compensation system should provide:

While you must get partner compensation right in order to acquire and retain top partner talent as well as reward performance and reinforce desired behaviors, the starting point is hiring and retaining the right people to begin with. Jim Collins in his book Good to Great sums it up well with the following comment: “get the right people on the bus, the wrong people off the bus, and the right people in the right seats. People are not your most important asset. The right people are.”

“Your compensation system should not be designed to get the right behaviors from the wrong people, but to get the right people on the bus in the first place, and to keep them there. Your compensation system should support that effort.

I believe that the following three pronged approach is needed to strategically manage and motivate partner talent in your firm:

  1. Get Maverick and Unproductive Partners off the Bus (Deal with Problem Partners)
  2. Get the Right People on the Bus and in the Right Seats (Hire Right and Retain)
  3. Insure that the Partner Compensation is Reinforcing the Right Behaviors, Rewarding the Right People and Keeping the Right People on the Bus

Click here for our blog on compensation

 

Click here for our published articles

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

Mar 09, 2011

Optimal Time to Hire Additional Lawyers and Staff

Question:

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

Response:

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

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

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

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

Click here for our blog on HR Related Topics

 

Click here for our published articles

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

Mar 01, 2011

What Makes an Effective Law Firm Managing Partner or Administrator?

Question:

I was just elected as our firm’s managing partner. I will still maintain a full client practice as well. We have a total of 14 attorneys, nine of which are partners. I will be the firm’s first managing partner. Previously we all weighed in on every single decision. While I have been a practicing attorney for twenty years I have no prior management experience in law firms or elsewhere. What skills will I need to develope to be effective in this job?

Response:

Congratulations on your new role! Effective law firm managing partners:

  1. Ask – what needs to be done.
  2. Ask – what is right for the firm.
  3. Develop and implement action plans.
  4. Take responsibility for their decisions.
  5. Take responsibility to communicating.
  6. Focus on opportunities rather than problems.
  7. Run productive meetings.
  8. Think and say we rather than I.
  9. Are “Firm First” focused rather than Lone Rangers “Me First” focused.
  10. Know that you have to spend money to make money and encourges the firm to invest in the firm’s future.

The first two practices will provide you with the knowledge and insight about the firm that you will need. The next four will help you convert knoweldge into action. The next four will ensure that the whole firm is responsible and accountable.

Early on, as you transition into your managing partner role, you and the firm should formulate a constitution (governance plan) for the firm which outlines roles and decision-making rules for the partnership, your position, and other management or administrative positions in the firm. In order for this new structure to be successful you and the firm must:

  1. Stop talking about the firm’s future destination, and start thinking about the rules that all firm members will have to live by in order to get there; and
  2. Confirm that firm members are, in fact, prepared to be held accountable and live by these rules.

Rome was not build in a day. Your new structure and role will take take time. Be patient and it will all come together.

Click here for our blog on governance

Click here for my article on leadership

 

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

Feb 23, 2011

Times are Tough – How Are Other Small Firms Doing?

Question:

I am a partner in an 8 attorney firm in the Chicago suburbs. Our firm has started having discussions about what we need to be doing differently. This is huge for us – one meeting a year is our typical meeting frequency and then only to discuss how we are going to cut the pie. How have other firms done during the recession? What are you seeing?

Response:

In general small firms in the midwest have fared pretty well during the recession. Last year some firms had the best year ever while others experienced flat or 10% revenue declines. Small firms that had the biggest problems were those that had issues before the recession or were in problem practice areas. Big law firms have had to face unique challenges.

Small firms that have weathered the storm and fared the best were those that:

I believe that law firms that fail to focus their practices, set goals, measure accomplishments, and foster accountability will fall short and not meet their financial objectives. Law firms that fail to plan are planning to fail.

Law firms as well as solo practices need to begin focusing their firms and practices, setting firm and individual production goals, measure accomplishment and implementing systems to instill accountability from all members of the team – attorneys and staff alike.

Consider using budgeting which is a tool that can be used to measure goal attainment and how well the firm is doing.

What gets measured is what gets done.

Click here for our blog on law firm strategy

Click here for my article on creating strategic (business) plans.

 

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

Feb 17, 2011

Starting a Virtual Online Practice

Question:

I am a partner with an 8 attorney firm in central Illinois. Last week I attended the Illinois State Bar Association web-cast that you and others presented on Building and Managing the Virtual Law Firm. I thought the program was excellent. I do have a couple of questions.

  1. I can see how such an approach might make sense for a solo – but why would a 8 attorney firm with a brick and mortar office that has been in practice for 20 years consider such a delivery model?
  2. How would we go about it?

Response:

If your firm has a sufficient volume of work, does not have a need or desire to capture more commodity type legal work that it is either not doing at all now or is losing to lower priced competitors (law firms or content providers), or does not have a need or desire to extend its reach geographically a virtual delivery model make not make sense. However, if your strategic (business plan) requires you to extend your geographic reach or be competitive in a commodity practice area supplementing your brick and mortar practice with a virtual delivery model might warrant consideration.  Also consider that the younger generation that is growing up using the internet to shop, bank, and pay taxes may appreciate and or expect such an option. As we mentioned during the session certain practice areas are more appropriate than others. I have some firms your size that are supplementing their brick and mortar practices with on-line delivery models just to service one practice area that they could not effectively deliver in the traditional manner. Keep in mind the value curve that we discussed during the session.

During the session I illustrated a continuum and we discussed the difference between virtual practices (doing virtual things) and a total on-line virtual practice. Even if you decide that the firm is not ready for a total on-line virtual practice, you may want to consider doing some of the virtual practices (virtual things) that we discussed to offer your clients more delivery options and more flexibility to your attorneys and staff.

Start with your strategic plan and if you don’t have one begin developing your long range plan. If you want to move in this direction you can use my handout as a resource guide.

Click here for our blog on law firm strategy

Click here for my article on creating strategic (business) plans.

 

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

Feb 09, 2011

Surviving in an Insurance Defense Law Firm – Reinventing the Practice & Staying in the Game

Question: 

I am the founding partner of a 17 attorney firm in Missouri and I serve as the managing partner. We have 12 partners and 5 associates. Our practice is entirely defense – personal injury and workers compensation. The majority of our clients are insurance companies and third party administrators. We represent a handful of self insured companies. While we have had a successful past fifteen years are firm is now struggling. We have lost market share and our case counts are way down due to the economy and regulatory changes in Missouri. Our profitability has suffered as a result. We need to make some changes but are unsure where to start. Could you share your thoughts?

Response:

The present state of the insurance defense practice presents numerous challenges to the law firm. These challenges simply cannot be ignored – they will have to be faced head-on. The solutions are complex and will require time to sort through. While solutions can come in different varieties, they will take the form of one of two general strategic approaches.

  1. Reinvent the Practice – Stay in the Game
  2. Exit or Diversify the Practice

The remainder of this post will focus on reinventing the practice and staying in the game.

For some firms the appropriate strategy may be to stay in the game. These will be firms that have a well-established reputation in insurance defense, where insurance defense represents a major source of their revenue, and where adequate leverage and profitability and leverage exist. These firms will not be firms that dabble in insurance work. These firms will be committed to this practice area and will focus on it exclusively. Some of the following actions will be required to reinvent the practice and stay in the game:

  1. Get leverage back on track. Tough decisions will be required here. High priced senior associates will have to be let go. Unproductive partners will also have to leave. Paralegals should be hired. Ratios need to get back to 4 to 1.
  2. Partnership admission criteria will become more demanding. Time required to make partner will be lengthened.
  3. Compensation will be based upon performance.
  4. Billable hour quotas will be enforced.
  5. Expenses will be tightly controlled.
  6. Flat fees and other forms of alternative billing will be commonplace.
  7. Unique out-of-the-box solutions will be designed to provide tailored services to meet client needs and differentiate the firm from competitors. The firm will no longer wait for the insurance company to take the lead. The firm will take the lead and provide clients will a menu of service solutions.
  8. Technology will be employed to the fullest extent to reengineer work processes. It will not be used just for technology sake or to keep up with the corporate litigation law firms. When technology is employed old outdated practices and processes will be eliminated.
  9. Standardized practices and procedures will be developed and used throughout the firm wherever possible.
  10. Client focus groups, insurance company councils, and other forums will be formed to open up channels of communications with clients in order to mend the tarnished client relationship and reestablish a business partnership. Innovative insurance defense firms will take active leadership roles in this endeavor.
  11. Aggressive marketing and business development strategies and plans will be implemented in order to maintain appropriate growth rates and profitability. Relationships with unprofitable clients will be terminated. Marketing with be done as a team approach as opposed to being a function done at the individual lawyer level. Both firm and individual personal marketing plans will be commonplace.

Click here for my article – Trapped In an Insurance Defense Practice

Click here for our blog on law firm strategy

 

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

Feb 02, 2011

Why Training Programs for Lawyers and Staff Fail to Produce Results

Question:

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

Response:

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

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

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

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

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

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

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

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

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

Click here for our blog on human resources

Click here for my article on this topic

 

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

Jan 26, 2011

Law Firm Client Surveys

Question:

I am a legal administrator in a 20 attorney firm in southwest Texas. My partners have been expressing concern about loss of several key clients and wants to know what we can do determine why this happened and what we can do to improve client service? I have been thinking about doing a client survey? What are your thoughts?

Response:

Much can be learned by talking to your clients. Structured telephone interviews and other forms of surveys conducted by a neutral third party can provide many surprises as well as answers. Client satisfaction surveys can be the best marketing investment that you can make. Our law firm clients have found their clients to be impressed that the firm cares about their opinions. It is good business to listen to your clients. Understanding what bugs people about your services and those of your competition can be the most valuable input to strategy development you can get your hands on. Find out what bugs your clients and you will learn to out-think and out-service your competitors.

Before you invest any time, money, or effort in developing an overall strategy for service improvement, you must survey your clients to understand what your clients want and expect from your firm. An initial survey helps you identify the starting point for your service improvement journey.

Planning The Survey

The type of survey that your firm chooses depends on your purpose for doing the survey. Are you looking for some insight into why you’ve lost clients? Are you interested in getting a general idea of how your clients feel about your firm? Following are some of the basic types of surveys that you may want to consider:

Random Client Survey or Census

These surveys are used to measure overall client satisfaction and highlight any widespread service problems and identify new business opportunities. A random survey involves selecting a percentage of your clients (sample), contacting them by phone, mail or in person (or a combination of all three), and asking them to evaluate the services they receive from your firm. A census involves surveying all clients rather than taking a sample.

Lost Client Survey

This type of survey is used if your firm wants to know why you have lost a particular client or group of clients. With this survey interviews are conducted (usually by telephone or in person) with clients that no longer do business with your firm. Let the client know that you are sorry that he or she is no longer doing business with your firm and that you are interested in learning from your mistakes. Understanding your client’s reason for leaving will help you make improvements for future clients. One of the greatest benefits for this type of survey is that you are often able to discover the specific reason a client left.

Key Client Survey

Rather than doing a random survey of your client base, you may want a more targeted and focused survey of a particular client group. For example, if 80 to 90 percent of your business comes from ten clients, you may want to create a survey that is specifically targeted to them. The advantage of a targeted key client survey is that it is limited in scope and precisely focused. Before you commit time and resources to a client survey identify your purpose and establish specific goals and objectives.

Develop a survey plan. Insure that a follow-up strategy is incorporated into the plan.

Click here for our blog on client service

Click here for our article on the topic

 

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

Jan 18, 2011

Law Firm Profit Improvement

Question:

Our firm is in its second generation. While we are proud that we have been in business for over 60 years we also believe we need to re-examine our practice and embrace changes that may be needed for the firm to move forward and remain competitive. We are a 16 attorney firm located in Wisconsin. We have 12 partners and four associates.

Response:

More and more law firms are re-examining their business models and approaches and running the practice as a business. You may want to begin by conducting a management review or audit to determine where the firm is presently and where the firm needs to head in the future. 

Start by Asking the Following Questions:

  1. Are firm members frustrated with the amount of money they are making and taking home?
  2. Are firm members unsure whether the firm is competitive with other law firms?
  3. Is the firm taking advantage of some of the management “Best Practices” being used by successful law firms and possibly your competitors?
  4. Are firm members concerned about getting a handle on and controlling the financial aspects of the firm?
  5. Are firm members uncertain about the future and long-term direction of your firm?
  6. Are firm members frustrated with the lack of accountability of other attorneys and staff?
  7. Is everyone effectively managing their time?
  8. Are members concerned about the firm getting and keeping clients?
  9. Are members concerned about work-life balance?
  10. Are members concerned about the succession and exit of key partners?

I suggest that you conduct a practice management review that will provide you with a clear assessment of the firm’s practices and performance and outline a plan for implementing “Best Practices”. The assessment should focus on:

Click here for our blog on profit improvement and other topics

Click here for articles on other topics

 

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

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