Law Practice Management Asked and Answered Blog

Category: Associate

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Jan 22, 2020


Associate Performance and Coaching

Question: 

I am a partner in a three attorney law firm based in Orlando, Florida. I did a quick Google Search this morning and stumbled upon your excellent blog posting – Associate Attorney Compensation.  John did an excellent job in answering the attorney’s question.  We have an associate who I like very much; however, heading into her 3rd year with the firm, she has gotten a bit comfortable with our laid back style of management.  Our situation is similar in many respects to the situation posted by the Chicago attorney.

I would like to find out more about whether coaching could help us improve our associate’s performance. Her billable hours are 800 per year and net profit after deducting her salary, benefits and assigned support staff from her collected fees is around $15,000 and this does not take in to account other office overhead. Frankly, I am a bit hesitant to spend more money on her practice area as it is not really producing a profit for the partners in the firm. However, I am exploring ways that we can improve the situation for this part of the law firm.  I look forward to chatting with one of you. Again, I enjoyed reading the article.

Response: 

Whether coaching can help depends upon the specific situation and the cause or causes of the problem. It sounds like you might want to kick the can down the road and have someone deal with the oversight responsibility that you and your partner should be handling. Typical causes of poor associate performance include:

An outside coach could possibly be helpful if the problem is poor time management or poor timekeeping habits. You would want her on board with using an outside coach and might want even to consider having her pay half of the coaching fee. However, if the problem is one or a combination of the other three areas, an outside coach might be a waste of money. Maybe you and your partner need coaching on the top three areas. It is also possible that you simply have an associate that wants to work nine to five and may not be wrong person on the bus. Successful professional service providers whether they be attorneys, accountants, or management consultants don’t work forty hour or less weeks – they work fifty hour plus weeks.

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

Oct 23, 2019


Associate Attorney Compensation – Incentives Beyond Billable Hours and Working Attorney Collections

Question: 

I am the owner of a five attorney firm, myself and four associates, in Bakersfield, California. While we are a general practice firm, much of our practice is focused on commercial real estate, estate planning/probate, and corporate/business law. All of the associates have been with the firm over five years. The associates are paid a salary plus a bonus based upon their individual working attorney collections that exceed a quarterly threshold. While there have not been any complaints with this system I am not sure that it is the best system and that I am providing the right set of incentives. I would appreciate your thoughts and any ideas that you may have.

Response: 

Many firms use a system such as your system. However, other firms add more factors into the equation. A system that focuses on billable hours or individual working attorney fee collections often creates a firm of lone ranger attorneys that:

You might want to consider additing a component that recognizes delegation to paralegals and other attorneys (responsible attorney collections) and client origination (originating attorney collections). Some firms rather than rewarding client origination directly pay a bonus for handling new client intakes and successfully closing new business in the form of a flat dollar bonus after designated thresholds. You could also pay flat dollar bonuses for contribution to firm and business development – not time or activity – but for specific results such a having articles published, implementing a document assembly system, or writing a procedures manual. If you wish to avoid a formula approach simply use a discretionary bonus to reward firm these other factors and firm contributions. However, be clear about the factors that are be rewarded and the importance/weight of each.

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

 

Aug 01, 2019


Care and Feeding Associate Attorneys

Question:

I am the owner of a law firm in Chicago suburbs that specializes in estate planning. I started the firm twelve years ago. Over the years the firm has grown from just myself as a solo to a firm with myself and six associate attorneys. Prior to starting the firm I worked in several other firms as an associate and as a partner. I felt I was not being compensated for my hard work so I started by own firm. I have always worked hard and in addition to managing the firm and bringing in all the clients I bill 1700 billable hours a year. My associates are a disappointment. They work the bare minimum, some are lazy, and none are even billing 1400 hours a year. Some are not even billing 1200 hours a year. I have tried bonus systems based on production of fees collected and they have had no effect. In my old firms this was not the case, everyone worked hard and was self motivated. I am at a loss and I don’t know how to motivate these associates. I would appreciate any thoughts that you have regarding what I should do?

Response: 

I suspect that you, as a founder, expect the same sort of work ethic and drive that you, as well as others, in your prior firms had over the years. Welcome you the new generation of workers and the era of work-life balance. This is not to say this generation of workers is lazy – their priorities in life are different and work is not the only priority in their lives as it may have been in yours. They may not also not have the drive and self motivation that you had and require direction. You can’t simply put them on autopilot – they require care and feeding in the form of:

Often a little care and feeding will go a long way to changing performance and often accomplishes more that formulaic bonus systems. Here is a prior blog on how to go about this. 

I agree that 1200 billable hours is unsatisfactory and you should be expecting 1600 for your type of practice.  Expectations need to be established, if they aren’t, and consequences for non-compliance. I think bonus systems such as yours are fine but often do not accomplish desired results without some care and feeding. If you are unwilling to do some care and feeding your other option is to fire your worst offenders and try to replace them with self-motivated associates that have a documented track record of performance. Getting the right people on the bus can be more productive than care and feeding beyond a certain point.

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

 

 

Jul 17, 2019


Law Firm Succession – Pros and Cons of Hiring an Associate as My Succession Plan

Question: 

I am a sole practitioner in San Diego, California. My practice is mostly general practice with some emphasis on commercial real estate. I am 64 years old and am looking for a way to transition and exit my practice in the next three to five years. I am the only attorney in the firm however there are three legal assistants that work for me. I have been considering hiring an associate so that I have someone to sell my interests to in the next three to five years. I have never had an associate so I would appreciate your thoughts concerning the wisdom of hiring an associate at this stage of my career.

Response: 

In general I prefer an internal succession strategy when the firm has an attorney or attorneys in place that are willing to step up to ownership and take over the firm. Often this is easier said than done. Issues you will face will include:

  1. Unless you are loaded with work that you are unable to handle or you hire an attorney that can bring work with him or her you will be increasing your expenses and reducing your income/compensation.  Since you have operated all these years with just one attorney I assume that there is only enough work to support one attorney. If you are ready to slow down to a reduced work schedule and take less compensation that is another matter. If not, you may want to look for an experienced attorney with some business rather than hiring a lawyer fresh out of law school or wait a little longer till you hire someone.
  2. Associates require care and feeding – in other words training, mentoring, etc. A certain amount of training and orientation will be required even with an experienced attorney. Revenues may lag from one to two years and your will be saddled with their compensation and other related expenses. You have no experience with mentoring attorneys and this may be something that you are ill equipped to do or don’t want to do.
  3. You may end up hiring and training in an associate only to have them leave the firm in a year or so to join another firm and possibly take clients with them.
  4. The associate you hire may only be looking for a 9-5 lawyer job and have no interest in owning a law firm.
  5. The associate you hire may expect to have you hand them your practice for free and he or she may be unwilling to pay you for your practice.

Many firms have had positive experiences with transitioning their firm to associates. Just be aware of the possible pitfalls. You may be better off going a different direction.

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

Jun 26, 2019


Law Firm Succession Strategy When Candidate Associate Attorney Says No to Your Proposal

Question: 

I am the owner of a law firm in Mesa, Arizona. I started the firm twenty-five years ago. Our focus is exclusively on estate planning and we serve clients throughout the Phoenix metropolitan area. There are three other associate attorneys working in the firm as well as staff. One of the associates has been with the firm for ten years and the other two are right out of law school – one was hired this year and the other one year ago. I am sixty-three years old and I would like to retire and exit the practice within the next three years – the sooner the better as I have other interests that I would like to pursue.

For several years it has been my goal to transition my practice to my senior associate and he and I have discussed this vaguely over the years – just the idea in general – no specifics. Recently, I made a proposal to him where he would gradually buy my shares over the next three years and have all my shares paid for by the time of my retirement which would be three years from now. To my surprise he refused. Where do I go from here?

Response: 

Getting a “no” is not unusual. We are experiencing this quite frequently in our succession planning projects. Often this results in the firm exploring external succession strategies and having to merge with another firm or selling the practice. First of there is not the hunger for “equity” that there was thirty years ago. This is due in part to the fact that in many firms – large and small – there is now a non-equity partner status with the recognition of partner status, additional compensation and perks, and none of the risks of equity partnership. In addition, work life balance is important to many attorneys and many are unwilling to give up work life balance in exchange for the stress of equity partnership. Finally, many candidate associate attorneys either don’t have the capital/financial resources often required to obtain equity or don’t see the payback or return on their investment should they buy-in.

Here are a few thoughts concerning your situation:

  1. Reevaluate your proposal. Is the price you are asking for your shares reasonable and affordable for the candidate based upon the actual profits (your earnings) generated by the firm? If the price is not reasonable or affordable for the candidate consider providing an alternative proposal.
  2. Even if the price is reasonable and affordable, three years may not be a long enough period. You may have to settle with getting some of the value say three to five years after your retirement. Consider this as an alternative.
  3. Your associate may be reluctant not because of the terms but because he does not really want to own a law firm – he just wants a job as a lawyer. If this is the case it does not make any difference what you propose and you need to examine other options such as bringing in a lateral that is willing to take over your practice or a merger or sale of the practice.

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

May 29, 2019


Associate Attorney Productivity When Client Work is Slow

Question: 

Our firm is a sixteen attorney municipal law firm in Detroit with six partners and ten associates. Like most firms that do municipal work we must deal with lower billing rates than other firms charge. The volume of our work can also fluctuate at times. All of our work is billed by the hour and billable hours is our most important key performance indicator. Our associates have a billable hour expectation of 1800 annual billable hours and only two of our associates are even close to reaching 1800 hours. Some are not even reaching 1200 hours. Some of the associates have the excuse that they don’t have enough work. We do not believe that this is the case. I would like to hear your thoughts on this matter.

Response: 

This seems to be a common issue. Failure to attain billable hour goals can be caused by any one or a combination of the following:

  1. Work ethic and simply not working enough “worked hours”
  2. Lack of work
  3. Poor time management habits
  4. Poor time keeping/recording habits

I would start by observing the number of worked hours they are putting in. Are the putting in the hours? Observe as well as review their time reports – billable and non-billable time. If you don’t track non-billable time start doing so. Then review and discuss with them their time management and time keeping/recording habits. Questions to ask include:

Review and discuss workload levels of each associate and determine if lack of work is an issue.

I have found that often the cause of the problem is a combination of some or all four of the above listed causes. Lack of work is often one of the causes. My question is then:

The firm should have an established protocol for assignment of work to associates and to whom the associate advises that he or she needs more work. When billable work is slow and not available the associate should be assigned non-billable firm or business development projects  such as developing document templates, writing articles, etc.

If the problem is work ethic appropriate consequences and disciplinary measures may be required.

If the problem is time management and time keeping training and habit building will be required.

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

 

 

 

May 01, 2019


Law Firm Associate Bonuses – Problems Measuring Flat Fee Work Working Attorney Fee Allocations

Question: 

Our firm is a four-attorney estate planning firm in Rochester, New York. We are a general practice firm and we handle a lot of estate planning work and estate administration as well. While some of our work is handled on a time bill basis a lot of our work is handled on a flat fee basis. Recently we switched our time billing system from a desktop-based system to a cloud-based system and we having trouble getting the reporting that we need out of the system. We do keep time on flat fee cases. Our bonus system is based on working attorney fee collections and the new system does not allocate fees correctly for flat fee cases when multiple attorneys and or paralegals work on a matter. Any suggestions?

Response: 

I have heard this complaint from many firms using both desktop and cloud-based billing systems. However, it does seem that cloud-based systems are lacking in the level of reporting that desktop-based systems have. Here is what some firms have or are doing:

  1. Working with the software vendor to determine what the issue is – is it your procedures or is it the software. In some situations, fee allocations are effected by the manner in which payments are entered when partial fee payments are made, whether such payments are first deposited in the trust account and then later applied after all time has been billed and adjusted, etc.
  2. If the issue is lack of software reporting capability try to get the software company to add this function to the software.
  3. Manually making the allocations in a spreadsheet for flat fees cases when all else fails.
  4. Changing the bonus system and basing bonuses on responsible attorney collections rather than working attorney collections. Many personal injury plaintiff firms that don’t keep time-sheets take use this approach. This approach works best if the attorneys primarily work on their own matters. One advantage of this approach is that it encourages delegation and discourages hoarding of work.

When evaluating these newer cloud-based billing systems don’t just look at the bells and whistles – determine your reporting needs and insure that the software meets these needs.

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

Mar 20, 2019


Associate Attorney and Non-Equity Partner Compensation

Question: 

I am the owner of a seven lawyer insurance defense firm in downtown Chicago. Two of the lawyers are non-equity partners and four are associates. Currently I pay the associates a set salary and a performance bonus based upon annual billable hours over 1800. Until last year non-equity partners were paid in the same fashion, however non-equity partners received a few additional perks such as a firm credit card and a country club membership. Last year I changed the non-equity partner compensation system to focus on collected receipts rather than billable hours. Non-equity partners receive a salary and a performance bonus based upon working attorney collected received above a established threshold and a delegation bonus.

Currently all of the non-equity partners are paid salaries above $100,000 and two of the associates are above $100,000.

My results with the two bonus systems are dismal at best. My objective was to motivate my attorneys to bill more hours. However, they don’t seem interested. Very few have received bonuses. Last year I had several lawyers that did not even bill 1500 hours. What have a done wrong?

Response: 

There is noting wrong with your approach to compensation. You may have the wrong people on the bus. They simply aren’t hungry and this is not something you can teach. You are paying them salaries high enough that they can pay their bills – they are content and don’t want to put in the additional work to earn the extra income. Work-life balance is as important to more and more young attorneys as is money. If your attorneys are simply meeting the thresholds (billable hour or revenue expectations) and not exceeding them that is one thing. However, if your attorneys are not meeting the minimal expectations (hours or revenue thresholds/expectations – this is another issue as they are not producing at a level to justify the salaries they are being paid. Salary adjustments downward may be in order or simply terminating them. I don’t know many insurance defense firms that will tolerate less than 1800 billable hours.

While you must get compensation right in order to acquire and retain top lawyer talent as well as reward performance and reinforce desired behaviors, the starting point is hiring and retaining the right people to begin with.

Research from a classic business study that was highlighted in the popular business book “Good to Great” (Collins, 2001) authored by Jim Collins found that the method of compensation was largely irrelevant as a causal variable for high and sustained levels of performance. Other research also bears out that performance and motivational alignment are impacted by intrinsic and other factors other than just extrinsic factors such as compensation or methods of compensation. Over the years I have seen too many partners leave lucrative situations in law firms to join other firms for less compensation or to start their own firms to suggest that it is not only about the money or compensation package.

Jim Collins sums it up best in the following quotes from Good to Great (p 10-13)

“First who – then what”

“They 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.

James Cotterman, Altman & Weil, Inc., (Cotterman, 2004) contents that there are two groups of employees for whom compensation is not an effective management tool. The intrinsically motivated (6% to 16% of partners perhaps) do not need compensation as an incentive. The struggling performers (another 6% to 16%) will not react favorably to a compensation system that rewards positive behavior.

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

Dec 06, 2018


Hiring an Associate Attorney as a Solo’s Exit Strategy

Question: 

I am a solo practitioner in Central Illinois. I have been in practice for 30+ years and I just turned sixty. I have two staff members and no other attorneys in the firm other than myself. I plan on working another five years and then I would like to gradually exit from my practice and then retire. I want to have a home for my clients and employees and I would prefer to be able to sell my interest to an associate attorney working for the firm. I think we have the work to justify hiring an associate and this is the route I would like to go. I have never had an associate so I am not sure what I should look for. Your thoughts would be most appreciated.

Response: 

I believe that an internal succession/exit strategy is your best option if you can find the right associate. Unlike years ago, there are many associates today that just want a job and work/life balance is more important than taking on an ownership role in a firm. They simply are not interested in the work, stress, and risk that it takes to own and manage a law firm. So it is important when searching for an associate that you really vet out this interest to insure that you are hiring someone that will be willing to buy out your interest when you retire and take over your practice.

I have worked with a lot of firms that think they have an exit plan via an associate only to be told no when approached with a proposal to acquire their practice.  When you interview candidates look into their history and their family history to see if you can find a hint of entrepreneurship. You may want to hire a more seasoned attorney that has a small practice that could expand his or her practice by becoming part of your practice. Hire someone that has an interest in the business of law as well as practicing law.

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

Nov 28, 2018


Associate Attorney Mentoring and Giving Feedback

Question:

I am the owner of an elder law firm in Jackson Mississippi. There are three associate attorneys working in the firm that have been with me under five years. All three were hired directly out of law school. While I try to mentor and train each of the associates as needed in “real time” I also conduct annual performance reviews with each associate and provide them with a written performance evaluation. I am getting frustrated as it seems that the feedback that I provide them does not stick and they continue to make the same errors and mistakes. I welcome any thoughts that you may have.

Response: 

You may need more frequent discussions that are scheduled. I have some law firm client owners  that have an ongoing scheduled meeting with each associate twice a month. You may also want to examine how you actually provide feedback to your associates. Often owners beat around the bush and don’t really provide meaningful feedback.

Giving meaningful feedback contributes an essential component to effective associate management. Whether you give feedback informally, midway through the work or at the end, or formally through a scheduled  evaluation process, it gives you a powerful management tool, assisting individuals in professional development, teaching those you manage to work more effectively, and giving recognition and showing appreciation when deserved.

Effective feedback should be:

Praise you associates when deserved. Praise provides an effective motivator for most associates and should include:

Provide constructive criticism when deserved. It should include the items listed above and you should give it:

Use the following outline when giving constructive feedback:

Try to implement some of these ideas and go from there.

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

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