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Best Practice: Structuring and running your law firm like a business

Asked and Answered

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

Q. Our firm is a 34 lawyer litigation boutique based in San Antonio, Texas. We have 20 partners and 14 associates. I serve as managing partner at the will of the partnership and spend 35% of my time on firm management matters and the remainder of my time practicing law. A legal administrator and accounting manager assist me with managing the firm. While I have the general support of the partnership, maybe because no one else wants the job, I serve more as a filter and still find that I have to run most of the firm's management decisions before the full partnership. Often I feel that my staff and I are second guessed, management decisions take too long to make and are diluted and watered down, and the firm has missed out on opportunities due to our structure or lack of structure. Other law firms that we have competed against for years have passed us by and have grown while we have stagnated. Do you have any suggestions concerning our approach to managing the firm?

A. Your firm has reached a size where more structure is usually required. The democratic system of all partners being involved in virtually every management decision might have worked when you were five or six attorneys but has now outgrown this structure. Think about how some of your business clients are organized and structured. Ask around and talk with other law firms and accounting firms your size. I think that you will find that they have put in place more structure to support their business models.

I suggest that you:

1. Put in place a structure consisting of the full partnership that weights in on matters pertaining to firm policy/strategic direction, size of firm, partner admission/termination, merger, dissolution, etc.

2. Appoint a three to five member executive committee that serves as a board of directors that is charged with planning the firm's future and submitting plans to the partnership, budget approval, general oversight of the CEO or managing partner.

3. Create a CEO or managing partner position that implements firm plans, oversees the budget, oversees practice group chairs, and supervises the firm administrator. The CEO or managing partner reports to the board of directors.

4. Firm administrator and practice group chairs.

5. Put in writing a management or governance plan. Start by adopting a list of decisions which require a vote of the partners. Charters and job descriptions should be established to clarify roles, authority and expectations for the partners, board of directors or executive committee, managing partner (s), the firm administrator, and practice groups heads. Mechanisms should be put in place to insure conformity and accountability.

6. While the firm should always seek consensus, we recommend you have no requirement for unanimous partnership vote on those matters requiring partnership vote. Such requirements can result in the firm being held hostage by one partner.

7. The partners should delegate full authority for decision making to the board of directors, except for those decisions specifically reserved to the partners, the board should delegate appropriate authority to the CEO/Managing Partner and he/she should delegate appropriate authority to the firm administrator.

You should start with general partnership discussion on how the members would like to work together and the kind of firm they want going forward. Are the partners willing to be managed and willing to be accountable to each other and to what extent? Then go from there.

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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. 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.

Posted on Jul 18, 2012 by Chris Bonjean | Comments (0)
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