Best Practice: Impact of law firm growth upon management and organizational structure

Asked and Answered

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

Q. Our firm is a five attorney firm in Peoria, Illinois - three partners and two associates with four staff members. One of our legal assistants wears two hats - she serves as our office manager and also performs legal assistant duties for clients. Three years ago we had two attorneys and two staff members. We are feeling the consequences of our growth - our caseload has increased by 200%, our overhead is much higher and even though we have greater revenues - our take home earnings declined. We are overwhelmed. I would appreciate your thoughts?

A. It sounds like your firm has outgrown your management (organizational) structure. A firm with nine people is a different firm than a firm with four people. You are at a difficult size - large enough to feel the pains and challenges of being larger than two attorneys and two staff members but not large enough to reap the organizational benefits of a larger firm such as a full-time firm administrator, accounting manager, HR manager, etc. (I believe that as a law firm grows - management gets harder until a firm gets to around 12 attorneys - then as the firm begins to put in place a management team - it gets easier.)

In the meantime you might want to consider the following:

• Create an organization chart and map out your management structure for the two management sides of your firm - client services and business services.
• Define roles, responsibilities, expectations, and accountabilities for each management function and specify in job or position descriptions. (Example: Partnership, Managing Partner or Management Committee, Office Manager, IT, Accounting, HR, etc.)
• Assign your people to the positions - some may do double duty - for example an office manager may perform duties of office services manager, accounting manager, and human resources manager.
• Determine if your office manager is best suited for legal assistant work or office management. Determine where her interests lie. The firm may have outgrown her management abilities and she may not be able to function well in both roles forever. An effective office manager should have good accounting, interpersonal, and human resource skills. The firm may need to begin to use her in one role.
• Consider a full-time office manager position that handles accounting, HR, IT as well as other functions as needed. (This could be the existing office manager or some recruited for the position.)
• Begin to formalize the firm a little more - conduct annual performance reviews with goal setting for all attorneys and staff - document procedures and policies in an office procedure manual and employee handbook.
• Get a handle on the financial management function - not just the bookkeeping - but proactive financial management that sets goals for operations and production and uses key metrics and dashboard reports to insure that the firm is performing as it should in real time.  Don't wait until the end of the year to find out that the firm has fallen way short financially - then it is too late to take corrective action.

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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.