Many successful law firms are built on tradition – traditional practices and traditional methods of governance that carry over for decades, sometimes even a century. What distinguishes successful and long-held firms from others, is their reputation within the community and to peers as a cornerstone of the legal profession and practices built on excellent performance. To get to this point of excellence is not easy. To stay there becomes even more difficult as firms attempt to adapt to changing methods for managing a law firm.
Technology has played a major role in changing the way law offices operate, and niches in the legal market mirror the effects of the economy and the changes in the global marketplace. In other words, those practices and methods that made sense 50 years ago, can no longer be applied to the needs of today’s clients.
Sometimes it’s important for law firms to take a step back and analyze the composition of their client base, evaluate the effectiveness of their client services and find ways to be more productive and more successful in meeting their clients’ needs. All of these things must be tackled from the inside out, and often result in the need for changed behavior and practices. When times are particularly tough this evaluation will, in essence, force a firm to reinvent its practice on many different levels.
The cast in this case, so to speak, is the law firm of Kavanagh, Scully, Sudow, White and Frederick (KSSWF). Based in Peoria, Ill., KSSWF specializes in litigation, business & corporate law, personal and family issues, commercial real estate and governmental law. Having been in practice for more than a Century, the firm has a long-standing presence in the community and staffs 12 practicing attorneys and 12 supporting staff members.
KSSWF is the perfect example of a law firm that recognized the need for change, implemented strategic and innovative management strategies and reinvented its practice to better position itself for the 21st Century. Founded in 1883, KSSWF had been established based on the tradition and methods of its founding partners. Not that the practice was still functioning with a 19th Century mindset, but the firm was in need of minor repairs.
While the firm desired to grow and sustain profitability, changes in the firm’s size and structure were pointing to the contrary. The firm’s Executive Committee decided something needed to be done.
In 1996, the Executive Committee decided that it wanted to hire someone to specifically evaluate the make up and processes of the firm together to see what could be reconstructed. To gain the staff and client base the firm once had would require an evaluation of the firm’s management model and most likely some behavioral changes would have to be embraced by all practicing attorneys and staff.
“We made a decision that we needed an outside consultant to assist us in developing a holistic analysis of the firm’s practices and goals, evaluate how we interact with one another, basically to test the overall attitude of the firm. When we first began working with him, we were very open-minded and eager to hear his suggestions for moving the firm towards increased profitability and improved management and organizational behaviors,” said Brian Mooty, partner.
KSSWF invited Dr. John W. Olmstead, Jr., legal management consultant with Olmstead & Associates from St. Louis, Mo., to help reinvent the practice. After sifting through notes from hours worth of interviews with the staff and partners, Dr. Olmstead developed a strategy and outline of suggestions to help position the firm for growth and sustained profitability. He identified the firm’s major weakness was the lack of leadership. It wasn’t clear who in the firm was providing leadership and management direction. Too many people were trying to make decisions on behalf of the firm, therefore nothing was getting done.
Secondly, practicing attorneys were taking on too much administrative responsibility. There was not a definitive outline of roles and responsibilities in the firm. Everyone dabbled in the day-to-day maintenance and administration of the office, leading to decreased profitability and billable hours. Not only were practicing attorneys practicing law, they were involved in the everyday management of the firm as it related to finance, staff and systems. Clearly these are roles within the office that could be delegated to a trained and professional administrator. It just takes a little push of encouragement and trust on behalf of the partners to let go of the day to day details of running the firm.
Dr. Olmstead worked with the firm to integrate a three tiered governance plan to help draw a line in the sand of responsibilities. In the law firm setting, it is appropriate to distinguish between administration, management, and leadership. Administration is concerned with the day-to-day business and practice support activities of the firm that should be the responsibility of the firm administrator, office manager or other assigned staff member. Specific functional areas of responsibility include supervision of staff personnel, accounting and billing, collections of accounts receivable, financial management and profitability analysis, budgeting, information systems, purchasing, and facilities management.
Management is concerned with the production and delivery of professional services to clients. Specific areas of responsibility include committee management, planning and oversight of information systems, development and enhancement of client relationships and communications and development and maintenance of practice support system. These functional areas are often the responsibility of the managing partner, executive committee or chairpersons of firm practice groups.
Leadership is concerned with the executive functions of the firm. These functions involve the long-term policy activities of the firm and are often performed by a board of directors, the partnership at large, or committee. Specific areas of responsibility include long-range strategic planning, practice development, marketing, lawyer recruiting and development, lawyer performance management, mergers and acquisitions, service quality management, and partner compensation.
Dr. Olmstead worked with KSSWF to develop job descriptions specific to management, administration and leadership and worked within each tier to further define firm procedures (i.e., process and chain of command for adding new partners, expanding the staff, purchasing office equipment, etc.)
As with most management reviews, Dr. Olmstead held extensive interview sessions with the Executive Committee, partners, associates, staff members and bookkeeper. With a series of open ended questions and a lot of probing for details, Dr. Olmstead listened to the positives and the negatives from each firm member and developed a comprehensive review of the findings, which included an overall financial analysis. As a result, Dr. Olmstead identified three aspects of the firm that needed to be changed or improved.
Digging into the Financials
One of the major findings of Dr. Olmstead’s analysis pointed to less than average profitability. One of the reasons for low profitability also was due to the lack of individual goals and effective goal score keeping. Dr. Olmstead recognized that the lawyers leading the firm were not consistently informed of the firm’s financial status, making it difficult to gage who in the firm was being profitable and who wasn’t, revenues compared to expenses, and whether or not there was improvement or a decline in the overall profitability of the firm. Lacking was the firm’s ability to use their existing technology to create monthly financial summary reports. Dr. Olmstead helped them design a summary report that they could extract from their integrated accounting system with ease.
“I recommended that the firm develop a monthly financial summary report that contained everything needed to understand the fundamental financials of the firm. From everything from profitability, productivity per associate and accounts receivable to monies billed and time written off, everything would be available on one page so they can see how they are doing. Sometimes too many reports and too much information is worse than none,” said Dr. Olmstead. “This helps improve the overall financial success of the firm by making people more accountable for where their time is spent and how profitable they are. Why wait an entire year to see if the firm is profitable when you could see it each month before it’s too late.”
Filling the Gaps in Staffing
By dedicating several hours to speak individually with each of the partners, associates and staff members, Dr. Olmstead was able to get feedback on a variety of issues related to the firms management and leadership, office morale, policies and procedures, strengths and weaknesses, training, marketing, client services and employee compensation. While Dr. Olmstead made suggestions towards improving each of these areas, the most significant deficiency he identified was the need for hiring a legal administrator.
It was clear that the partners were all doing too much administrative work. In between phone calls to clients and days in court, they pitched in on administrative duties that were merely done out of necessity. Things such as developing financial reports on a monthly basis would have been a luxury at that point. To accomplish the financial goals set by Dr. Olmstead, and to help free up time for the partners so they could bill more hours, the firm hired a full-time professional legal administrator.
To help with the transition, Dr. Olmstead developed a job description to help define the responsibilities of the new administrator, and also helped in the orientation process. “We needed someone with experience that could easily take over operation of the billing and accounting systems, jump in and learn the new software, and basically help in cushioning time the partners were spending on day to day administrative tasks,” added Dr. Olmstead.
Other than being the driver at the reins of the firm’s administrative concerns, the new administrator’s role is to act as a catalyst and change agent in helping the firm focus and guide it’s way to improved profitability and performance.
Setting the foundation of leadership, implementing behavioral change
Like the saying, “Too many cooks will spoil the broth,” KCCWF had too many partners trying to make decisions that they had a hard time getting things done. The executive committee would meet to discuss many details pertaining to the daily functions of the firm, and often times had too much to deliberate because they were picking at issues as small as purchasing a new fax machine. This prevented them from discussing more strategic issues such as the firm’s management and financial goals.
Dr. Olmstead suggested that they implement behavioral changes. The partners needed to be re-educated about the need and desirability for strong leadership and centralized management. They also needed to become more formal in their Executive Committee meetings. This could be accomplished by developing a policy on how the meetings should be conducted, including a procedure to have minutes recorded, typed up and distributed to each committee member, unfinished business reviewed at each meeting, special attention given to follow up and accountability for action items discussed, and each meeting chaired by the appropriate official. All of these will help formalize the Executive Committee process, therefore making the time that they meet more effective.
After only a few years, the firm has seen many changes. They have maintained stability in the size of the firm, increased revenues and profitability, are utilizing an legal administrator on a full time basis and are working together to keep the firm profitable and running smoothly. The firm has also implemented internal and external communications programs. These include participating in public relations and marketing efforts to promote the quality of the firm, which incorporated a combination of published articles and advertising. The firm has also become more client focused and is working from feedback of clients to improve the overall performance and success rate of the practice.
For firms like KCCWF who have been in operation for many years, it’s easy to get into a rut doing business the way it has always been done. Committing to and embracing change is not always easy to do. It takes dedication, drive and commitment from all practicing attorneys and staff before a firm can successfully implement change for the betterment of the firm. Partial commitment and lack of follow up and accountability will not generate desired change. In the case of KSSWF, they all saw the urgency and benefits of embracing change and made a commitment to reinvent their practice. Sometimes it takes just one phone call to a legal management consultant, like Dr. Olmstead, to add a new perspective and a fresh outlook for rebuilding a firm for generations to come.
Laura Leckrone is Senior Account Executive for the Hauser Group, Inc., based in St. Louis, Missouri. Laura@hausergrouppr.com.
John W. Olmstead, Jr., MBA, Ph.D. is a Certified Professional Consultant to Management and the president of Olmstead & Associates, Legal Management Consultants, based in St. Louis, Missouri. The firm provides practice management, marketing, and technology consulting services to law and other professional service firms to help change and reinvent their practices. Founded in 1984, Olmstead & Associates serves clients across the United States ranging in size from 100 professionals to firms with solo practitioners. Dr. Olmstead is the Editor-in-Chief of “The Lawyers Competitive Edge: The Journal of Law Office Economics and Management,” published by West Group. He also serves as a member of the Legal Marketing Association (LMA) Research Committee. Dr. Olmstead may be contacted via e-mail at firstname.lastname@example.org. Additional articles and information is available at the firm’s web site: www.olmsteadassoc.com