Best Practice Tips

Asked and Answered

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

Q. We are a five attorney personal injury plaintiff firm in central Missouri. In the last few years we have gone through tort reform, increased competition from other law firms doing extensive advertising, and now trying to weather the recession. From a profitability standpoint - we are holding our own. However, we are concerned about the future. What are your thoughts for firm such as ours?

A. We are hearing this question quite often and have provided some thoughts in past blogs and articles. The majority of our PI law firm clients are advising that they are having to work much harder at getting clients and investing more heavily in marketing - both time and money. PI firms were feeling the most of these challenges before the recession. However, the recession may accelerate the pace with which law firms re-evaluate existing processes and consider new business models. PI firms may want to begin by:

1. Develop a firm strategic plan and individual attorney marketing plans which include aggressive network/contact plans for past clients, attorney referral sources (non PI attorneys), attorney referral sources (other PI attorneys), and other referral sources.

2. Evaluate the feasibility of adding an additional practice segment to reduce the level of risk in the case portfolio and reduce cash flow variability.

The pick-off move isn't limited to baseball, as Hon. James Fitzgerald Smith and Sonja Dimitrijevic explain in the latest issue of the ISBA's Trial Briefs newsletter.

In class action cases, defendants "pick off" a class representative by tendering him or her complete relief before the class is certified. That moots the class action and "compel[s] plaintiff’s counsel to seek another class representative, which is frequently tricky," the authors observe.

Appellate courts, not fans of the move, developed a pick-off exception that allowed the class to be certified despite the tender. But the supreme court put a stop to that this year in Barber v. American Airlines, "explicitly rejecting the 'pick off' exception" and reaffirming "the 'pick off' rule, under which a tender prior to certification automatically results in the mooting of the class action," Smith and Dimitrijevic write.

They go on to discuss Gatreaux v. DKW Enterprises, LLC, a first district case from last month that implements the Barber pick-off rule. Read their analysis.

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

Q. As the administrator of our 17 attorney law firm, I am charged with the responsbility of managing and controlling costs. Our management committee is always complaining about our overhead - and then looking to me for solutions - with the focus usually on cost reduction. Do you have any recommendations?

A. I am often asked to help law firms design and implement profitability improvement programs. In most of my engagements the real problem is insufficient gross income and lack of sufficient investment (spending and time) on marketing and initiatives designed to stimulate client and revenue growth. For most firms increasing revenues is the most effective way of impacting the bottom line. However, we do find that there is waste and unnecessary overhead that eats away at profits and a cost control program is also recommended and implemented. During recessionary times such as we are currently facing – drastic cost controls are often the only option. Reducing overhead can immediately and effectively improve a firm’s bottom line.

The first step in an expense control program is to identify those areas where potential savings exist. Review your profit and loss statement. Resist the temptation to arbitrarily cutting costs which could cut the muscle with the fat and result in revenue loss as well. You have to spend money to make money – so if cost cutting is the appropriate strategy – cut the right costs. Think strategically about cost reduction.

After you have identified areas where savings can be made prioritize and develop specific strategies and implement action plans to achieve the savings.

 Here are a few ideas:

Asked and Answered

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

Q. Our firm is a three partner general practice firm in a small community. Our ages are 72, 68, and 64 respectively.  Our firm has not adequately prepared for succession/exit of the partners. We have over the years hired associates but have been unable to keep them - they have all left for greener pastures. We are now contemplating merger with a much larger firm that has 40 plus attorneys. We have had several meetings at the office and we have provided them with our financials. They have not provided us with detailed information. We are getting frustrated. It has been over four months since we began talking with this firm and we seem to be "stuck" and not maintaining momentum. We have other options that we have just begun exploring. How can we get "unstuck" and move this process along?

A. Right off the bat - admit that this is not a merger of equals - it is more of an acquisition.  Hopefully, you have discussed firm name, whether your existing office will be retained or closed, and the future roles of each you as well as your staff. These are often deal breakers and many firm merger talks never get past this point.