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Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner of a six attorney personal injury plaintiff firm in San Diego. We are a high volume/small case firm that depends heavily on advertising. We have 1,200 open files and are currently are spending 17% of our revenue on advertising. While our case management system provides us with numerous reports - what are key reports that we should be using?
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner of a 22-attorney firm in Des Moines, Iowa. Our practice is 100% insurance defense representing insurance companies and their insureds. We are aware of some firms such as ours that have had to close their doors during the last few years. What should we be thinking about? You ideas would be appreciated.
A. Insurance defense law firms that have been approved as panel counsel for multiple insurance companies can inadvertently find that their revenue base is increasingly dependent on a shrinking number of insurance companies over time.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the sole owner of an estate planning firm in Evansville, Indiana. I have three associates that work for me and four staff members. I am 64 and wanting to get started on a succession program - either by forming a partnership with one or more of the associates or with another attorney or attorneys that I might bring into the firm via merger. I have always been on my own so I am a little cautious. I do want to work another eight years or so. What pitfalls should I be looking out for?
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the chair of the marketing committee for our 22-attorney insurance defense firm located in the Chicago suburbs. We are considering conducting structured interviews with our top 10 insurance company clients. This would be the first time that we have done this so I would appreciate your thoughts.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I have just been elected as the firm's first managing partner. We are a 9-attorney firm in El Paso, Texas. After a month, I am already frustrated and wish I had declined the role. I have two partners that are simply not producing, do as they please, and I am powerless. I would appreciate your thoughts.
A. Non-productive partners always pose a challenge. They are usually the “nice – easy to get along with folks” which makes it difficult to confront and deal with them as well. However, the longer that you let such problems fester the harder these situations will be to deal with in the long term. Layout performance expectations and deal with them in real time.
Consider:
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. We are an 8-attorney firm in Fort Worth, Texas. We have two partners - myself and my partner. Our approach to compensation has been based upon our ownership interest percentages which have been adjusted over time based upon working attorney (personal) collections. We have been discussing implementing a formula using working attorney collections and also bringing client origination credit into the equation as well - weighing each equally. Our ownership percentages would be adjusted based upon the fee credit ratio between the two of us. I would appreciate your thoughts on the matter.
A. My first thought is whether you are trying to build a firm-first firm or a group of separate practitioners. How will you incorporate other factors such as firm management, business development, mentoring and training associates, etc? If both of you are making roughly equal contributions in these areas your approach might have merit but be careful that you do not head down the path of separate practices - and become a lone ranger firm. My other concern is with client origination - this often gets tricky. With only two partners you don't have anyone to serve in the capacity of attribution police when and if there are disagreements as to origination credit. (attribution committee) So you will have to be able to discuss this subject openly and hopefully upfront. Share origination credit when appropriate, allocate to firm when it appears that a client came to the firm based upon firm brand or name recognition, and consider a 5-year sunset provision whereby the credit reverts to firm or responsible attorneys.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. We are a 8 attorney firm located in downtown Chicago. We have just hired our first administrator/business manager and he starts in two weeks. We are concerned that we get started on the right foot so our experience is successful. Any thoughts?
A. Relationship With Partners
On the first day of employment with the firm, the administrator must begin to develop a relationship with the firm’s partners that is based upon need, understanding, credibility and trust.
Governance Plan
Business management in many law firms suffers from decision-making paralysis — in other words, helpless inactivity and the inability to act decisively. Lack of effective implementation of decisions is also evident. The result: missed opportunities and a deteriorating competitive position in the legal marketplace. Administrators who can be proactive and turn this situation around will be off to a good start to solidifying their positions in their firms.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. We are a 12-attorney firm in Houston with three equity partners and nine associates. Several of our associates have been with the firm for over 10 years. My partners and I are all in our early 60s and are beginning to think about succession and retirement. If possible, we would like to keep the firm within the family and not go the merger route. What are your thoughts concerning two-tier partnership structures (equity and non-equity partnership)? Should we consider bringing associates in first into a non-equity tier?
A. I believe that a non-equity tier gives a firm a way to give associates the professional recognition and status of being a partner without conveying actual ownership and diluting ownership and control. Often a key differentiating factor between equity and non-equity partnership is client origination. Partners that don't originate a sizeable book of business often don't make it to the equity tier. For very small firms a non-equity often does not make sense - for others it often does. If you believe, as I do, that equity partners should be client originators and if you currently have a mix of client originator and non-client originator associates with 10 years or more time with the firm you may want to consider a two-tier structure. You should carefully define, and put in writing, admission criteria for each tier.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner in an eight attorney firm in Chicago. We are having problems with office staff members getting along. Office conflict is rampant. Any suggestions?
A. You should begin by identifying some of the causes. Poor communications often can be the root cause of such problems. Interview each of your staff members individually and probe. What do they think? Is communications a problem? Are roles, duties, and responsibilities clarified? Lack of clarity can in these areas can lead to turf wars. You may want to design job descriptions for each employee and clarify roles, duties, and responsibilities for each employee. Conduct short weekly staff meetings to enhance communications. Use agendas. Take and publish notes of the meetings. Advise every one of your expectations including all members working together as team members. Let them know that working together as a team is a performance factor that will be considered in performance evaluations and reviews. Conduct periodic performance reviews. Counsel and take action against problem employees.
Maybe it is time to hire a firm administrator or business manager and let them deal with it.
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. We are a 12 attorney firm in Dallas. Our practice areas are business transaction and litigation. We also have an active energy practice. The past two years have been difficult for us financially. What are some of the successful firms doing right?
A. In spite of the recent economic woes many small firms have still done well. Many of these firms were those that:
I believe that law firms that fail to focus their practices, set goals, measure accomplishments, and foster accountability will fall short and not meet their financial objectives. Law firms that fail to plan are planning to fail.
Law firms as well as solo practices need to begin focusing their firms and practices, setting firm and individual production goals, measure accomplishment and implementing systems to instill accountability from all members of the team - attorneys and staff alike.
What gets measured is what gets done.