Law Practice Management Asked and Answered Blog

Category: Law

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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

 

Nov 29, 2016

Law Firm Retainer Management – Replenishment

Question:

Our firm is a five attorney estate planning/administration practice located in Kansas City. Our estate planning work is handled on a flat fee basis for our clients. We collect one half of the fee upon acceptance of the signed engagement letter and the other half upon signing of the estate planning documents. This has worked well for us. However, we are not doing so well with our estate administration work. This work is time billed against a retainer. We do a good job collecting the initial retainer but then we fail to ask for replenishment retainers and when we bill for the remaining work we have collections problems. We have are over six hundred and fifty thousand dollar in accounts receivable over 120 days old. We would appreciate your thoughts.

Response:

This is a common problem that I see in estate planning/administration and family law practices. Here are a few suggestions:

  1. Assign someone in the firm to review a Summary Work In Process Report or similar report that shows the dollar value of unbilled work in process and the dollar value of used retainer at least once a week. (Some firms do this daily)
  2. Flag matters that are at 90% of retainer (unbilled work value to unused retainer) and bill clients for retainer replenishment in accordance with firm policy.
  3. Advise responsible/billing attorney of the retainer status, that a bill has been sent for replenishment, and again when the payment of the additional has been received.
  4. Responsible/billing attorney should consider the retainer balance status when scheduling work on specific matters that have reached 90% of retainer balance.
  5. Send retainer replenishment bills as frequent as necessary. It is easier for clients to pay small bills than very large bills.
  6. Stay on top of your receivables – smile and dial (call) after bills have been outstanding for thirty days. Reminder bills and statements are a waste of time.
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John W. Olmstead, MBA, Ph.D, CMC

 

Nov 22, 2016

Law Firm Billable Hours – Attorneys Not Meeting Expectations

Question:

I am a partner with a fourteen attorney business litigation defense firm in Los Angeles. I am the member on our three member executive committee that is responsible for financial oversight. This year we put in place an 1800 annual (150 hours per month) billable hour expectation for associate attorneys. No one has ever reached 150 hours. Are our expectations unrealistic? What is our problem? I would appreciate your thoughts.

Response:

I do not think that a 1800 annual billable hour expectation is unrealistic. Litigation defense firms typically have an expectation of 1800 to 2000 annual billable hours. Many litigation defense firms that I am currently working with have a 2000 billable hour expectation with many attorneys working 2200 billable hours.

Typical causes for an attorney not meeting expectations are:

  1. Not working or putting in enough hours.
  2. Not enough work.
  3. Poor time management habits.
  4. Poor timekeeping habits.

I suggest that you meet with each associate and discuss each of these possible causes.

Since this seems to be an across the board problem I suspect that the firm may not have enough work to support these billable hour expectations. Many of our clients are having this problem. They are hiring more attorneys that they actually need, have overcapacity, and simply don’t have the work to support billable hour expectations.

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

 

Nov 15, 2016

Law Firm Client Development – Using Social Media

Question:

I am the partner recently put in charge of marketing in our eight lawyer general practice firm. For years we have simply relied on referrals from past clients, lawyers, and other referral sources as our sole means of client development. A few years ago we invested in a website. We are now considering whether we should invest in social media. I welcome your thoughts.

Response:

A recent survey conducted by FindLaw reports that a majority of consumers says that social media plays a major role in deciding which attorney to hire and they would be likely to hire an attorney who has an active presence on social media such as Facebook, Twitter, and LinkedIn.

The FindLaw survey found that 84 percent of American adults use at least one form of social media, with Facebook the most popular (73 percent), followed by Instagram (28 percent), Twitter (27 percent), LinkedIn (21 percent), and SnapChat (16 percent). Fifty-four percent of consumers say they would be likely to hire an attorney who is active on social media. This is particularly true for younger consumers. Sixty-nine percent of survey participants between the ages of 18 and 44 would hire  attorneys who are active on social media.

Since your firm is a general practice firm I assume that a majority of your clients are individuals rather than businesses. If this is the case you should have an active Facebook presence for this audience and an active LinkedIn presence for your professional audience. Your LinkedIn profile should be updated periodically. You should post to your Facebook account at least once a week.

Your biggest investment is your time and you can get carried away. Some of my clients outsource Facebook postings to their website providers or others that provide such services.

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

Nov 08, 2016

Law Firm Retirement – Planning Retirement

Question:

I am a partner in a six-attorney firm in downtown Chicago. I am sixty four and starting to think about retirement and would appreciate your thoughts on how where to start.

Response:

Begin to visualize getting older, your mortality, and retirement. Think about the amount of time that you have left on this earth. If you are sixty-five you may live to be eighty. Thus, you have fifteen years left and this is your planning horizon.

Retirement planning is deciding on how to use this time. It is about the process of deciding what you will do in your retirement and putting a plan into practice. As the amount of time left to you decreases, its value increases to the point where it will be more valuable than monetary assets.  It will be more valuable that a new house, a new car, a new boat, or a chest full of cash. Time enjoying life, being with your family, and spiritual renewal will become more important than earning money. The greatest change when you retire is how you will use your time.

Retirement planning begins with taking the time to think about how you will use you time. If you live fifteen years beyond your retirement your will have 28,800 hours that will have to be filled with retirement activities. (five days a week, eight hours a day, 48 weeks, for fifteen years)  Start by creating an interest activity list, a time plan, and then DECIDE, PLAN, and ACT.

You options include:

1. Continue working in your present situation;
2. Continue to work for compensation but in another occupation; or
3. Retire and pursue recreational and other retirement activities without compensation.

Click here for our blog on succession

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

 

 

 

Nov 01, 2016

Law Firm Associate Compensation – How to Deal With Overpaid Associates

Question:

I am the managing partner of a twelve attorney defense litigation firm in Santa Monica, California. We have four partners and eight associates. Associates are paid a salary. We have several associates that are being overpaid – they are being paid $150,000 – $180,000 and just barely generating $300,000 in working attorney fee receipts. I would appreciate your thoughts.

Response:

Do they have enough work? Do they put in enough hours? Are they good time managers and good timekeepers? If they have enough work – then meet with each of them – lay out the expectation of 1800 hours and consequences for non-achievement. If they have issues with time management or time keeping impress upon them the importance of improving these skills – in the meantime they may have to simply put in the extra time to get in the hours.

Suggested consequences:

  1. For those not meeting expectations. Manage and coach them in real time- but be firm about your expectations. You are paying them a salary for a certain level of expectations and performance. If there is not enough work reduce their working hours and compensation. Consider production in future salary reviews and bonuses. Don't pay them an incentive bonus to perform the work you are already paying them to do. In worse case situation you may have to reduce salaries.
  2. For those exceeding expectations. Reward them with a performance-based discretionary bonus. But when advising them of the bonus advise them specifically what it is for and that is it a variable bonus and award for specific performance exceeding expectation. 

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

 

 

 

Oct 25, 2016

Law Firm Management – Excessive Collaboration

Question:

I am a partner in a twelve attorney general practice firm in Upstate New York. There are eight partners and four associates in the firm. Our firm was formed five years ago when we broke off from another firm in the area. That firm was led and managed by a dictatorial founder and other attorneys in the firm including partners had no say in management matters whatsoever. When we formed this firm we decided that all attorneys including associates would be included in the decision-making process. All management decisions must be passed by all attorneys in the firm. When we were smaller this worked okay but not that we are larger we are having problems. I would appreciate your thoughts on the matter.

Response:

I concur that a collaborative culture should be a desirable goal. However, your approach takes too much time, wastes attorney time, takes too long for routine decisions to be made, and can lead to less than optimal results. I suggest that you separate management decisions into the following three categories:

All partners will still have control of the major issues and be spared from the day-to-day management and administrative decisions. A managing partner or three member management committee can be elected to handle the management decisions and an office manager/administrator can be hired or promoted from within to handle the day-to-day administrative decisions. Associates can attend periodic firm meetings, service on ad hoc committees, etc.

An approach such as this can still preserve the collaborative culture and you have strived to develop and improve overall management of the firm.

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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

Oct 11, 2016

Law Firm Management – Valuing a Personal Injury Practice

Question:

I am the firm administrator for a small personal injury five attorney practice in Des Moines, Iowa. The firm's owner is approaching retirement and is planning on approaching other law firms regarding sale of the practice or merger. He has asked me for reports in order that we can value the practice. QuickBooks is the only software that we use. What reports should I use to establish a value for the practice?

Response:

You will want to start by generating a profit and loss statement and a balance sheet from your software. I would run five years of profit and loss statements and the most recent balance sheet. The profit and loss statements will help you illustrate the revenue, expenses, and profit picture for the past five years. The balance sheet will provide a current financial snapshot of the firm's cash-based financial position. However, since most law firms keep their books on a cash-based basis the largest asset – contingency fee cases in progress – is not reflected on the balance sheet. Neither is any value for practice goodwill. Since you do not have a case management system you will have to setup a spreadsheet with columns for the name of the case, date opened, estimated settlement, estimated fee, client costs/advances, and projected date of receipt of fee. You will have to have the attorneys managing the cases help you with the estimates. These will be the key reports you will need initially.

Click here for our blog on succession

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

Oct 04, 2016

Law Firm Client Business Development – Motivating Lawyers to Develop New Client Business

Question:

I am the managing partner of an eighteen attorney firm in New Orleans. We have six equity founding partners, four non-equity partners, and eight associates. We represent institutional clients. Four of the six equity partners are in their sixties and two are in their late fifties. The six equity partners are concerned about the future of the firm as they approach retirement. If they retired today the firm would cease to exist – the non-equity partners would not be able to retain our existing clients and acquire new clients. We have not been successful at motivating our non-equity partners to develop and bring in new clients. We have harped on this for years and encouraged all attorneys to develop business. We implemented a component of our non-equity partner and associate compensation system to compensate them for new client origination. Unfortunately, we have not been able to motivate our non-equity partners and associates to develop new sources of business. Our non-equity partners and associates have a nine to five work ethic and an entitlement mentality. Would you share your thoughts?

Response:

Often law firms hire associates simply to bill hours and perform legal work. Then years later they are asked to develop clients. Many are unprepared and at a loss as where and how to start. I believe that if you want attorneys to develop clients you have to hire attorneys that have the personality, ability, and you have to get them started on business development in their early years.

To turn your non-equity partners and associates into rainmakers at this stage will be difficult but not impossible. Here are a few ideas:

  1. Insure that your compensation system reinforces and rewards business development  results. However, don't be surprised that even if your system rewards business development behavior does not change.
  2. Extrinsic motivators such as compensation often are not as impactful with professionals as intrinsic motivation that involves engaging in a behavior because it is personally and professionally rewarding – performing an activity for its own sake rather than the desire for external reward. Many law firms are requiring attorneys to submit annual personal business goal driven plans that are incorporated into annual performance reviews. I have found that these plans as or more powerful than compensation in developing new behaviors such as client development when an attorney is uncomfortable with such behaviors.
  3. Integrate the compensation system with personal goal plan achievement.
  4. Implement an equity partner admission program (partner track) that outlines requirements for admission. Make business development goal attainment a component. Make it clear that to become an equity partner you must be a rainmaker.
  5. Provide business development training and coaching for attorneys willing to participate.
  6. Have serious discussions with non-equity partners and terminate those that are not meeting production and client development goals.
  7. Consider hiring lateral attorneys with books of business or merging with another firm.

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

 

 

 

 

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