Best Practice Tips: Law Firm Governance – Partner Participation in Management
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the founder, majority partner (80 percent), and managing partner of a 22-attorney firm in Phoenix, Arizona. The firm practice is focused in the area of healthcare. There are 12 equity partners, five non-equity partners, and five associates. I manage the firm as a benevolent dictator. I am becoming overwhelmed trying to manage the firm and practice law and I believe the firm is now at a size where others must become involved in managing the firm. I have been considering forming a committee of all the equity partners to manage the firm. Your thoughts are welcomed.
A. While I believe that your firm is of a size that warrants broader participation in the governance and management of the firm, you can go too far. Broad participation in decision-making and consensus-building slows things down. It can also make it difficult to reach a definitive conclusion. Getting all the partners to agree takes time. Broad participation can also diffuse responsibility. If everyone is in charge, no one is in charge. In law firms whose partners are overly deferential to their partners’ views, the decision-making process often seizes up. Unless firm partners who, when necessary, assert themselves and use their influence to press for action, the only decisions it’s likely to make are decisions not to decide.
I believe that you should stop short of broad participation by all the equity partners. Consider a three-member executive committee elected by the equity partners on three-year staggered terms. This committee would have responsibility for general firm management not delegated to your firm administrator (if you have such a position in your firm). Committee responsibilities would include financial management, human resource management/oversight, client development, IT systems oversight, procedures and policies, etc. Establish proper structure for the committee with a chair, identified roles and duties for each member, defined meeting schedule, and agenda and meeting minutes. Define in your partnership agreement those powers that are restricted to a vote by the full partnership and the rules for voting — one partner, one vote or vote by percentage interest. Other than those powers restricted to the full partnership, partners should let the executive committee manage the firm and not second guess.
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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 and author of The Lawyers Guide to Succession Planning published by the ABA. 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