Question:
I am the sole owner of a law firm in Walnut Creek, California. I have three associates and five staff members in the firm. I am looking to hire another associate. The associate I am considering has been out on his own for five years – no office and no employees. He would bring around 30 active matters with him. I was thinking of paying him a salary with a discretionary bonus based upon performance. Fees originated and generated would be a major component of the performance determination that would impact future salary increases, bonuses, and eligibility for partnership. However, I believe that I must do something with regard to the business that he brings with him. I would appreciate your thoughts and suggestions:
Response:
I agree with your general approach with regard to his compensation. Payments for originations for associates gives me pause. However, I believe you have to treat business that he brings with him differently. Here are my thoughts:
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John W. Olmstead, MBA, Ph.D, CMC
Question:
We are a three attorney personal injury plaintiff firm in Moline, Illinois. There are two partners and one associate in the firm. We handle a large volume of small PI files – currently we have 700+ open files handled by three attorneys and 5 assistants. We recently hired our fourth attorney – second associate – that came to us with 20 year's experience as an associate in several large firms (100 plus attorney firms). The attorney, who has been with us for about 8 weeks, has never handled personal injury cases and is having some problems getting organized. Do you have any suggestions?
Response:
I am a believer that time invested in orientation, training, and mentoring upfront can dramatically reduce a new associate's spin time, help them get online quicker, and improve overall profitability. Even though your associate has 20 year's experience in a large law firm – the work and the case management challenges are different. The associate may never have had overall management responsibility for cases or client relationships. The associate may have been assigned tasks to be completed with the partner having the case and client management responsibility. If the attorney did manage cases there is a major difference between managing say 25-50 large cases versus managing 150 small cases. There are new case management and client management skill sets and practices that will have to be developed and practiced in addition to the new area of law.
Invest time training and mentoring and share case and client management tools that can help your associate get off to a faster start.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the managing partner of a 16 attorney insurance defense law firm in Kansas City. We have two equity partners, four non-equity partners, and ten associates. Only the two equity partners bring in client business. Since our clients are insurance companies most of our work is new business from existing clients. Unlike other firms doing insurance defense work our billing rates are low and we have to put in a lot of billable hours and maintain a high ratio of associates and non-equity partners to equity partners.
In the past our associates stayed for a while and left after several years. As a result about the time they reached the higher compensation levels they left and we replaced them with lower cost associates. In the last few years – with the economy and the oversupply of lawyers – they are staying much longer. While we – the equity partners – want to be fair and are willing to share – we are concerned about our reducing profit margins and at what point an associate or non-equity partner's compensation is "maxed out." We would appreciate your thoughts.
Response:
Law firms of all types of practice are experiencing this dilemma. The problem is even more evident in insurance defense firms where much of the work is routine discovery work that can be handled as well by an attorney with two years' experience as by an attorney with ten years' experience at lower cost. Here are a few thoughts:
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John W. Olmstead, MBA, Ph.D, CMC