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Best Practice Tips

  • February 4, 2010 | Practice News
    Best Practice: Should we merge with another firm?
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. We are a small six attorney litigation firm. We have two partners and three associates. One of the partners wants to retire within the next five years. The other partner will continue to practice for another 10-15 years. We love practicing law and consider ourselves to be very good lawyers. However, we find firm management and administration to be a challenge and we are not skilled in this area nor do we want to be. We have a good book of business and clients. Recently, we began discussing the possibility of merging with another law firm. What are your thoughts about firms like ours merging with another law firm? A. Obviously, merger or acquisition of law firms is becoming more and more commonplace. Hildebrand reported 57 completed mergers/acquisitions in 2009 in firms with five or more attorneys). However, research indicates that 1/3 to 1/2 of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone. Right reasons for merging might include:
    • 1. Improve the firm's competitive position
    • 2. Increase specialization - obtain additional expertise
    • 3. Expand into other geographic regions
    • 4. Add new practice areas
    • 5. Increase or decrease client base
    • 6. Improve and/or solidify client relationships
  • January 27, 2010 | Practice News
    Best Practice: Strategies for 2010 and surviving the present economy

    Asked and Answered

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

    Q. I am a partner in a 5 attorney firm in downstate Illinois. We had a difficult year last year and are trying to plan 2010 and beyond. Do you have any thoughts as to what we should be thinking about? A. As law firms begin to plan for 2010 and beyond we suggest the following key strategies:
    • Develop an ongoing brainstorming program to facilitate the process of identifying new business opportunities. Incorporate client surveys into the process. Consider small client advisory boards and focus groups.
    • Get that business/marketing plan that you have been talking about for years done for 2010.
    • Focus - Focus - Focus your firm
    Research indicates that three of the biggest challenges facing professionals today are: time pressures, financial pressures, and the struggle to maintain a healthy balance between work and home. Billable time, non-billable time or the firm's investment time, and personal time must be well managed, targeted and focused. Today well-focused specialists are winning the marketplace wars. Trying to be all things to all people is not a good strategy. Such full-service strategies only lead to lack of identity and reputation. For most small firms it is not feasible to specialize in more than two or three core practice areas. Based upon our experience from client engagements we have concluded that lack of focus and accountability is one of the major problems facing law firms. Often the problem is too many ideas, alternatives, and options. The result often is no action at all or actions that fail to distinguish firms from their competitors and provide them with a sustained competitive advantage. Ideas, recommendations, suggestions, etc. are of no value unless implemented. We suggest the following: Recognize that unless your firm is a large firm - full-service may not be an appropriate strategy. Small firms should identify fewer areas of practice and specialize and aggressively market these areas.
    • Limit your practice
    • Consider industry niches.
    • Identify three to five key goals and strategies for the year.
    • Be selective in client acceptance
    • Use your business/marketing plan as a tool to keep you on track.
    • Create an environment in your firm for effectively getting decisions implemented.
    • Increase your marketing investments.
  • January 20, 2010 | Practice News
    Best Practice tip: Succession planning for your practice
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am the sole owner of a 12-attorney practice. I am 55 years old and am beginning to think about retirement. The other attorneys are associates in the firm. What do I need to be thinking about in order that I can transition out of my practice and have money for retirement? While I have put some money in a 401k, I am not yet financially secure enough to retire. A. You are not alone. As the baby boom generation ages - more and more attorneys are asking this question. Unless you have an appropriate Exit Planning Strategy and put in place a sound Exit Plan, it is doubtful that you will be able to cash in on the full value of the goodwill that you have created. To exit successfully you need:
    • A plan - a roadmap - that outlines the process and helps you decide on where you want to go and how you will get there.
    • Timeline - a disciplined implementation timetable keyed to your Exit Plan.
    • Start Early - Getting ready for exit takes time. Start early 5-8 years before you are ready to retire or exit.
    • Decide - When do you want to leave the practice?
    • Decide - How much cash do you need when you exit?
    • Decide - To whom do you want to transfer the practice?
    You will need to consider whether you should consider merger, sale of the practice to an outside buyer, or sale of the firm to the other lawyers in the firm.
  • January 13, 2010 | Practice News
    Best Practice: Is your firm ready for the new competitive landscape?
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC

    Q. At a recent partner meeting we discussed the current economy and what changes we need to be thinking about both now and when we come out of the recession. What are your thoughts? A. As law firms emerge from the current recession many will face many new business realities and be forced to consider whether existing business models are still appropriate for the future. Legal process outsourcing (LPO), off-shoring, virtual offices, alternative billing, etc. We believe that the recession may accelerate the pace by which firms reevaluate existing processes and consider new business models. Ten years ago (1999) the ABA hosted the "Seize the Future" conference in Phoenix, Arizona. Click here for my coverage of the event. The conference predicted massive change fueled by the Internet. Many of these changes we have already witnessed and experienced - others are yet to come - possibly in the near future. Richard Susskind's popular book The End of Lawyers: Rethinking the Nature of Legal Services paints an interesting future. As we emerge from the recession pressures will exist that may accelerate some of the other changes that have been predicted. Here are some changes that some firms are already implementing:
    • Outsourcing back-office support functions such as accounts receivable management and collections, leased employees (PEO), billing and accounting, IT support, payroll, facilities management, copying and duplicating, etc.
    • Outsourcing legal services to contract attorneys and paralegals and on-shore and off-shore legal process outsourcing (LPO) providers
    • Unbundled legal services by clients with segments of work assigned to in-house counsel, outside counsel, and on-shore and off-shore legal process vendors
    • Partnering by U.S. law firms with on-shore and off-shore legal process vendors
    • Internet service delivery models
    • Flat fee billing arrangements by large law firms with large major corporate clients
    • Success fees and risk sharing with clients
    • Virtual employees
  • January 6, 2010 | Practice News
    Best Practice: Partner compensation: Should management time count?
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am one of the founding partners in a 25 attorney law firm in the northeast. We have three equity partners, six non-equity partners and sixteen associates working in the firm. We focus totally on litigation. Each of us three equity partners have equal ownership percentages and since day one (20 years) have divided firm profits equally along those lines (1/3, 1/3, 1/3). We each put in the same amount of effort and work - but since I am managing partner - my fee collections are much lower than those of the other two equity partners and I am concerned that they may feel that I am not carrying my weight since my fee collections are lower. How should this be handled in our compensation system? A. This is a common question that we hear often. It sounds like you are still allocating income in the same manner that you did when the firm first started. Often when a firm grows the partner compensation system needs to be re-examined when and if partner roles or contributions change. As the firm has grown I suspect that your time spent on management activities has grown as well. I, as well as many other legal management consultants, believe that firm management (running the business) is as important as generating client fees and should be so considered in partner compensation systems. We have numerous law firm clients where at least one or more of the equity partners "run the business" and do not provide billable client services at all. Management time should not be used as a non-billable time category (excuse) to simply "dump" time.
  • December 30, 2009 | Practice News
    Best Practice tip of the week: Getting clients to pay
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC

  • December 16, 2009 | Practice News
    Best Practice tip of the week: When should a firm consider coaching for attorneys?
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC

  • December 9, 2009 | Practice News
    Best Practice tip of the week: The two-partner compensation system
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. Our firm has been getting by for 18 months since start-up.  We are starting to get some repeat business and I think we are on our way. However, my partner looked at the numbers for 2008 and realized that she made about a third more money last year, both in terms of actual dollars for her work and in terms of origination. Our actual hours were roughly even, but there might have been some slighter disparity. Now we are having that first talk about changing from the straight 50-50 split to the perhaps the other extreme of "each woman for herself" (after jointly paying basic expenses).  What are your suggestions? A. I have reviewed your comments. In small firms the best systems are those that are simple, easy to understand and easy to implement. Often two partners start out on a 50%-50% arrangement and the arrangement eventually has to be changed when and if their situations change that has a major impact upon their overall contributions to the firm. (Notice I used the word contributions - not necessarily - fees collected). However, until level of contributions change - I have often seen 50% arrangements work well in small firms that are looking to build a Firm - rather than simply their own practice and earn as much money as they can for themselves. When level of contributions change - in a healthy partner culture - the partners will be able to talk to each other and sit down and discuss an alternative arrangement that makes sense for them. I encourage firms to look beyond single-year timeframes - typically 3-5 year cycles. Sometimes in healthy firm cultures one partner may need to carry the other partner for awhile.
  • December 2, 2009 | Practice News
    Best Practice tip of the week: Building a better PI firm
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. We are a five attorney personal injury plaintiff firm. 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. While we do not want to be a high volume PI advertising factory - we believe we need to be doing something different. Do you have any suggestions on how we should plan our future? A. 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 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. 3. Reduce case portfolio risk and improve case profitability by implementing a intake system whereby all new cases over a specified level of projected case value are reviewed and approved by the partnership (or a client intake committee) in order for the case to be accepted by the firm.
  • November 25, 2009 | Practice News
    Best Practice tip of the week: How to take your firm to the next level
    Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am a member of a three attorney firm. I think we know where we are as a firm, where we want to be, but we just don't know how to get to the next level. Ideas? A. Rather that following the pack - attorneys need to find ways in which their firm's can "dare to be different." Many attorneys are providing the same service - solving the same sort of legal problems for their clients using similar tools strategies/approaches. To many clients - attorneys all look the same. What can you do to stand out? Marketing is about more than just promoting the firm to get clients. It is also about deciding on: 1.  What services to offer, where, and to whom? Sometimes less is more - by focusing on fewer areas of practice. Just because a law firm focuses on say three areas of practice - doesn't mean that it does not handle matters in other areas. It just means you are building you brand around the three core areas. These are the areas you primarily promote, speak about and write about. Broader geography? 2.  Pricing. Not just the amount to charge but how to charge. Clients are asking for budgetary certainty? Get creative. 3.  Delivery and producing the service. Are you doing all that you can using technology, staffing, work processes, etc. to minimize the cost of producing your services? If you are - aggressively promote it.