Law Practice Management Asked and Answered Blog

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Jan 04, 2018

Law Firm 2018 Initiatives and Goals

Question: 

Our firm is an eighteen attorney insurance defense firm located in Los Angeles, California. We have six partners and twelve associates. We represent insurance companies in personal injury and property claims. Over the last five years our growth and our profitability has been flat. We feel that we have enough work to reach our goals but we just don’t think our people are energized. We have a billing requirement of 2000 billable hours but few of our attorneys are hitting them. The partners met a few weeks ago and set for the first time set some goals for 2018. The firm does not have a business or strategic Plan. Do you have any thoughts on 2018 goals and how best we can implement?

Response: 

Since you do not have a strategic plan I assume that you have not done any formal planning in the past. Even firms that do have strategic plans often fail to engage and energize their team. Here are a few thoughts regarding your 2018 goals and initiatives:

  1. Most law firms are not run like a business. They haphazardly go through the motions without a plan, without structure, and with no order. The first thing I would suggest is for the firm to make a commitment this year to begin running your firm more like a business with more structure, order, and accountability from your lawyers and staff.
  2. If the firm does not have a budget develop a budget this year before the end of January and review the firm’s performance against the budget monthly. The revenue section is particularly important. Build it from the ground up timekeeper by timekeeper. Advise each lawyer and other timekeepers  of their revenue and or hours targets for the upcoming year.
  3. Consider a new year kickoff meeting, possibly breakfast or lunch, to jump start the new year that would include attorneys and staff. During this meeting you can accomplish the following:
    1. Recognize team members that performed well the past year.
    2. Provide information about the firm’s past year performance, where the firm is and where it is headed in the upcoming year.
    3. Review the firm’s mission and purpose and specific firm and individual goals for the upcoming year.
    4. The firm kickoff meeting sets the tone for the upcoming year, communicates firm and individuals goals, and energizes team members and solicits commitment.
  4. During the year consider the following meeting schedule:
    1. Kickoff meeting – attorneys and staff – early January.
    2. Attorney meeting – weekly
    3. Staff meeting – monthly
    4. Partner meeting – monthly
    5. Midyear meeting – attorneys and staff – early July
    6. Budget and Planning meeting – Partners or Management Committee –  early December.
  5. Review your attorney compensation system to ensure that it is rewarding the performance you are seeking.
  6. Review your attorney hiring protocols to ensure that you are getting the right people on the bus.
  7. Dig deeper and look into why attorneys are not meeting billable hours requirements. Possible reasons might be:
    1. Not enough work.
    2. Attorney not putting in the hours.
    3. Attorney has poor time management habits.
    4. Attorney has poor timekeeping habits.
    5. A combination of all of the above.
  8. Implement solutions to above.
  9. Take a tougher approach to those attorneys that are not meeting performance targets.
  10. Conduct formal performance reviews with each attorney and staff member annually.
  11. Commit to starting to work on a strategic plan no later than the third quarter of this year.

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

Dec 20, 2017

Law Firm Associate Billable Hours – Estate Planning and Probate Firm

Question: 

Our firm is a six attorney estate planning/probate firm in Mesa, Arizona. There are three partners and three associates in the firm. We have had associates for the last eight years and have never made money from our associates. Last year we decided to implement a billable hour expectation of 1800 hours for the associates. A year later no one is even close. Only one associate will even reach 1500 hours. Is our expectation reasonable? You insight is appreciated.

Response: 

The national norms for all practices is in the 1700 range for associates. Litigation firms range from 1800-2000 hours and up with most firms having a 1800 or 2000 minimum billable hour requirement.

I believe that 1800 billable hours is high for a small estate planning/probate firm if the attorneys are only expected to work forty hours a week and the firm does not charge for initial consultations or intake interviews. Many of the estate planning/probate law firm’s that I am working with are struggling to get to 1500 billable hours – many associates and partners alike are under 1400 hours. I believe that an estate planning/probate practice should be able to expect 1600 billable hours.

I think that a forty hour work week expectation for attorneys is part of the problem. Most professionals service providers (attorneys, CPA’s,  management consultants, etc.) work more like fifty hours – not forty. It is hard to be a successful professional with a forty hour a week attitude. In addition to billable hours non-billable time has to be spent on client development, continuing professional education (CLE for attorneys), and firm administration.

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

Apr 11, 2017

Client and Management Transition in a Larger Law Firm

Question:

I am a member of the executive committee of a seventy-five attorney firm in Houston, Texas. We are a first generation firm. Several of our founders are in their sixties and we have recently begun discussing succession planning and how clients and management duties will be transitioned. We would appreciate your thoughts in these areas.

Response:

In larger firms, clients are more likely to be large sophisticated clients, possibly Fortune 500 companies, which refer many matters to the firm during the course of a year. Often such clients may be both a blessing and a curse for the firm. A blessing in that their business provides the firm with huge legal fees during the course of a year. A curse in that their business represents a large percent of the firm’s annual fee collections and a significant business risk if the firm were to lose the client. An effective client transition is critical, takes time, and must be well planned.

Successful client transition – moving clients from one generation to the next – is a major challenge for larger firms. Shifting clients is not an individual responsibility but a firm responsibility. To effectively transition clients the individual lawyer, with clients, must work together with the firm to insure the clients receive quality legal services throughout the transition process. Both the individual lawyer and the firm must be committed to keeping clients in the firm when the senior attorneys retire. Potential obstacles include:

In larger firms, partners may have management responsibilities as well as client responsibilities. A retiring partner may be a managing partner, executive committee chair or member, or serve as a chair or member on other firm committees. Retiring partners will have to transition these responsibilities to other partners in the firm.

Transitioning client relationships and management responsibilities effectively can and where possible should take a number of years – preferably five years – typically not less than three years. For this reason, many firms use five-year phase down programs for retiring partners. These plans provide detailed timelines and action steps for transitioning client relationships and management responsibilities.

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

 

Dec 06, 2016

Law Firm Client Development – Getting and Keeping Clients – Roles for Associates

Question:

Our firm is a twenty two lawyer insurance defense firm in Seattle. Over the years we have told our associates that they were hired to work on firm business and there was no requirement for them to develop or bring in client business. In fact we specifically asked them not to bring in business. Now we are rethinking that policy. Many of our equity partners are retiring and we are finding we have a group of grinders – with very few minders or finders capable of either retaining existing clients or bringing in new clients. What are your thoughts?

Response:

Over the years, I have seen many law firms hire associates and tell them that there is plenty of work and they are hired to service the firm’s work and there is no need, or even desire, for them to develop and bring client business into the firm. For years, these associates meet their billable hour expectations, work their files, and get good results on their cases.  Twenty years later they are still associates – what went wrong? What are they not equity partners? Often it is because they have not developed client business.

Successful lawyers in private practice must not only do excellent legal work for their clients they must also develop client business. I believe that each attorney must invest money and time in building and promoting their expertise, professional reputation, and their personal brand. Law firms should not only encourage but should require, support, and fund (money and non-billable time) marketing/business development at the individual attorney level. Client development skills have to be developed and practiced early on.

Due to your client base (insurance companies) it may not be that easy for associates to actually bring in new clients unless the firm is diversifying into other practice areas (unless that is your goal). However, they can start by being good minders – client relationship managers – and work on getting more business from existing clients and maintaining client relationships that the firm has.

Client Development is externally focused – relationship management is more internally focused.

Skills for developing new clients and those needed for maintaining good relations are not the same.

While you associates will each have different abilities they should be honing their skills in one of the following areas:

Rainmakers – win new business from new clients and their strength is networking.They serve on boards, attend events, play golf, and entertain clients; prospective clients.

Hired Guns – win new business from new clients – emphasis on expertise.(They speak, write, give seminars, and become experts in a specific field)

Brain Surgeons – win new business from existing clients – internal focus; emphasis is on expertise – they solve problems that others cannot.

The Point Person – wins new business from existing clients and have an internal focus.

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

 

Oct 19, 2016

Law Firm Governance – Executive Committee – Non-Equity Member and Procedures

Question:

Our firm is a fourteen attorney firm in Orlando, Florida. We have Two equity members, five non-equity members, and seven associates. We are currently managed by the managing member. In order to be more inclusive we are thinking about eliminating the managing member position and moving to a three member executive committee with one of the three members being a non-equity member. I would appreciate your thoughts?

Response:

I have several client law firms that have taken this approach. Here are a few suggestions:

  1. Draft a charter (position descriptions) for the equity membership and the executive committee outlining the specific responsibility and authority for each.
  2. If the firm has a firm administrator draft a job description for that position outlining his/her responsibilities and authority.
  3. Since there are only two equity members there will be no election for those members on the executive committee until such time in the future when there are more equity members. At that time the two equity members should stand for election by the equity membership for staggered three year terms.
  4. Have the non-equity members elect a representative non-equity member annually for a one-year term on the executive committee. 
  5. Suggest that each member have one vote including the non-equity member. The goal of the executive committee should be to manage by consensus but when they can't a vote should be taken.
  6. Have the non-equity member sign a non-disclosure agreement and advise him/her as to the content that can be shared with the non-equity members and content that cannot be shared.
  7. Elect a chair of the executive committee.
  8. Have regularly scheduled meetings.
  9. Use agendas and prepare minutes or notes after each meeting.

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

Sep 14, 2016

Law Firm Succession – Transition of Partners and Transition Plan

Question:

Our firm is a twenty-five lawyer firm with ten partners. Six of these partners are in their sixties. What should we be doing concerning planning the succession of these partners?

Response:

In a larger firm with multiple partners, shareholders, or members, succession and transition involves transitioning client relationships and management roles. Such transitions take time. Many larger firms have five-year phasedown retirements for this reason and require equity owners to properly transition clients and management responsibilities. Some firms tie retirement pay or compensation to completing a successful transition program.

A plan might included the following:  

Some firms are providing economic incentives for the transitioning partner to handoff work to others.

The internal succession/transition plan provides a mechanism for the firm to outline a general timeline for a senior partner’s retirement, a process to effect an orderly transition of clients and management responsibilities, and a vehicle for starting initial discussions.

Click here for our blog on succession

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

May 03, 2016

Law Firm Management Structure – Firm Administrator and Marketing Director

Question: 

I am the founder and managing partner of a 27 attorney firm in Dallas Texas. I own 90% of the stock in the firm. I have a three member management committee that serves as a sounding board, a firm administrator, and several people in accounting that work for the firm administrator. We are anticipating hiring a marketing director and are trying to think our way through how to structure this new position as well as future management positions down the road. I would appreciate any thoughts that you may have.

Response:

It will depend on the depth of experience of the marketing candidate that you hire and the level that you want them to perform. If you hire a heavy weight, they will be expected to have "director" in their title" and you will want them to have the respect of other attorneys in your firm, your clients and prospective clients. Therefore, they may carry a title such as Director of Marketing, Director of Client Development and Marketing, etc. If this is the case this position should report to either you, the managing partner, or the management committee, not the firm administrator. Depending on the level of your administrator it may be appropriate to retitle the position as Director of Administration and have it also report to you, the managing partner, or the management committee. Before long you may need a Human Resources Director and when that time occurs that position also could report to the you, the managing partner, or the management committee. Accounting and administrative staff would report to the Director of Administration, marketing staff would report to the Director of Marketing, etc. I would develop job descriptions for each position as well as your position and the management committee.


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

Apr 05, 2016

Law Firm Debt – Impact of Debt and Other Liabilities Upon Future Growth Options

Question:

I am a member of a three member management committee of a 16 lawyer firm located in Akron, Ohio. We have 10 partners and 6 associates. Several of our partners are in their 50s and 60s. Recently, we have had discussions with a couple of potential merger partners and laterals and in all cases they have backed out advising us that they were uncomfortable with our balance sheet. What can we do to better position ourselves. We desperately need to bring in new talent with books of business?

Response:

First there are the obvious balance sheet items – bank debt, large tapped out credit lines, equipment leases and other liabilities. Then there are the items that are not recorded on the balance sheet – namely unfunded partner retirement buyouts and long term real estate leases. These are often major deal breakers in mergers and scare away laterals. If you have bank and other debt on the balance sheet work at cleaning it up. More importantly if you have unfunded partner buyouts begin either rethinking the desirability of these programs or begin funding this liability now with a goal of the liability being totally funded over the next five to seven years. Then shift to a retirement program that is totally funded. Unfunded partner retirement programs are becoming a thing of the past.

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

 

Jan 06, 2016

Law Firm Managment – Do Your Non-Equity Partners and Associates Really Want to be Equity Partners?

Question:

I am a member of our firm's executive committee. We are an 18 attorney firm in Baltimore with four equity partners, five non equity partners, and nine associates. Recently we asked one of our non-equity partners to join the equity ranks and he said no. We were shocked and taken by surprise. Is this a common occurrence? We would like to hear your thoughts.

Response:

This is becoming a more common occurrence and this is causing havoc with growth, succession and transition plans. Many law firms are seeing a growing sense of disillusionment from young lawyers that may not want to be an equity partner. While they want to be lawyers they do not want to take the financial and other business risks nor make the other work commitments such as working nights, weekends, and the 24-hour commitment that has historically been the requirements for equity partners in law firms. Work-life balance has become a priority for more younger lawyers.

I believe that you should through performance reviews, survey questionnaires, and other tools gather information sooner than later to get a feel for where your non-equity partners and associates stand as far as attitudes toward business and financial risk, desirability of being an equity owner, and willingness to invest capital and time in the firm. This will give you a feel for your mix. If it looks like you have too many worker bees – revamp your recruiting strategy – new attorneys or laterals – accordingly and look for attorneys that have an interest and the mindset that it takes to be an equity owner.

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

 

 

 

Nov 03, 2015

Law Firm Administrator – New and Struggling

Question:

I am a new administrator in a 17 attorney law firm in the greater Boston area. I am the firm's first administrator and this is the first law firm that I have worked for as a firm administrator. I been on the job for six months and I am struggling. I don't know whether I am living up to the expectations of the partners and I feel like I am lost. I would appreciate your thoughts.

Response:

While administrators have made great strides in terms of role and acceptance during the past decade, administrators in firms of all sizes still remain frustrated with:

– Poor, slow, and ineffective decision making
– Ineffective firm leadership and governance
– Internal politics and infighting
– Micromanaging
– Management by committee
– Lack of influence and ability to effect change

Being the first administrator for a law firm is tough. In additional to proving yourself to your partners you will have the additional task of justifying the position itself. After a few months when the honeymoon is over some partners will start questioning whether the position is necessary and worth the expense. Don't assume that the partners really thought through what their expectations were for the position prior to hiring you. Don't wait for them to manage you – you must take a proactive role – initiate discussions regarding expectations and identify priorities, projects, etc. Look for low hanging fruit when you can enhance revenue or reduce costs in the short term and track any results achieved.

Few things are as important to an administrator’s future as that person’s ability to influence the decision-making process and effect change.  Skills and competencies are important but so are results. In order to transcend to the next level and enhance their value to their law firms, administrators must help their firms actually effect positive changes and improvements and improve performance. This requires selling ideas to partners in the firm and having them accept and actually implemented. To succeed administrators must achieve three outcomes:

- Provide new solutions or methods
– The firm must achieve measurable improvement in its results by adopting the solutions
– The firm must be able to sustain the improvements over time.

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

 

 

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