Best Practice Tips: Six Worries That Keep Law Firm Managing Partners Awake at Night
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am a new managing partner in a 35-attorney firm in Tucson, Ariz. I replaced the previous managing partner who retired. He was the firm founder and had been in the position since the firm’s inception. I have had this position for six months and I am finding the job overwhelming – trying to serve my clients and managing the firm at the same time is very difficult. What are the major challenges that managing partners are having?
A. I understand and appreciate your situation. Managing partners advise me that the following challenges are what keeps them awake at night:
- Managing cash flow. Investments in technology, higher salaries for attorneys and staff, and longer collection cycles are all having a negative impact on cash flow. Contingency fee firms have additional cash flow challenges. Managing partners must ensure that client bills are going out promptly, client payments are deposited promptly, and vendor bills are paid “just in time.” Cash shortfalls will have to be financed with additional partner capital contributions or bank loans.
- Satisfying hard-to-please clients. Institutional clients are demanding more from their law firms in terms of service offerings, geographical coverage, responsiveness, and fee arrangements. Law firms are finding that the market for legal services is a buyer’s market and that they must continually innovate in order to continue satisfying client demands. Many are conducting client satisfaction interviews to identify needed improvement areas and new opportunities.
- Competition from other law firms and non-law firm service providers. The oversupply of lawyers, advertising, and the internet have increased competition among law firms. In addition, law firms also are facing competition from other service providers. Managing partners are finding that they have to allocate more resources to advertising and marketing. Websites, internet search engine optimization, and pay-per-click internet advertising are becoming necessary tools for many firms.
- Getting new clients and keeping existing clients. Today clients are less loyal and more likely to switch law firms than in the past. Managing partners are having to work harder to retain existing clients and acquire new ones. Acquisition of new institutional clients often requires responding to requests for proposals, bidding for engagements and projects, preparation of quality proposals, and making presentations to prospective clients.
- Succession and retirement of senior partners. Many law firms are experiencing a “bunching” of numerous senior partners approaching retirement at the same time. Succession and transition planning is critical to the continued success of these firms. Getting partners to openly discuss their retirement plans is a major challenge.
- Getting and retaining top talent. Acquiring and retaining top lawyer and staff talent is becoming more difficult and costlier for law firms. Even though there is an oversupply of lawyers on the market, there is still a shortage of experienced lawyer talent in many practice areas. Lawyer search timelines and recruiting costs are on the rise.
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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.