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Best Practice Tips

Asked and Answered

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

Q. For years our 14 attorney firm has operated under a formula based eat-what-you kill system. We are moving toward a more subjective-based system. We have been advised that we will need a compensation committee. What are your thoughts regarding compensation committees?

A. The components of your compensation plan and partner buy-in will be important to the success of your program. However, how you setup and constitute your compensation committee will be crucial. In a subjective system trust is paramount. How the members are selected, who serves on the committee, how the committee operates, and other matters must be spelled out and communicated to all partners. Here are a few ideas:

Asked and Answered

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

Q. Our firm has been struggling for the past couple years. We have lost three key institutional clients, had partner defections to other law firm, and have suffered financially. We were a 40 attorney firm- six years later we are ten. We simply must improve profitability. What areas of our overhead should we attack first?

A. Many law firms waste considerable time trying to find ways to cut a pie that is too small up differently by implementation of new compensation systems or increasing the size of the pie by decreasing costs. While unnecessary expenses should be reduced - once they are reduced a repeated effort to slash costs proves fruitless as a strategy to increase the firm pie. The vast majority of law firm expenses are fixed or production-related. The percentage of costs that are discretionary is low, typically in the 20-30 percent range, and the number of dollars available for savings is small. The available dollars available for reduction disappear after a year or two of cost-cutting, leaving the firm with dealing with the effects of further cuts on production capacity. For example:

The attorney general's office and a circuit court judge describe steps they're taking to help prevent debtors from being unfairly jailed for failure to pay. Find out more in the February Illinois Bar Journal.

Asked and Answered

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

Over the last two weeks I responded to a question concerning starting a new law practice and I outlined the first to phases of start-up. Eventually, you must address and face Phase III.

Phase III – Partnership – Internal/Other Firm

Eventually the question of partnership arises – whether sooner based upon the need or desire to transition an associate into a partnership or to add a practice area by acquiring a lateral partner with his/her book of business. Maybe you are thinking about merging with another firm. Or maybe you have been solo or a sole owner for your entire career and are now contemplating retirement and are looking for a succession/exit strategy and now must either bring in a partner, merge with another firm, or sell your practice. Partnership with another attorney creates another set of interpersonal dynamics and another set of skills that will need to be developed at this stage of your practice.

More clients -- and lawyers for that matter -- are looking for value-based alternatives to the billable hour. The good news? They can be a win-win for attorney and client. Read all about it in the February Illinois Bar Journal.

In In re Marriage of Petersen, the Illinois Supreme Court ruled that divorced Mom could not force Dad to pay for kids’ college expenses that predate the filing of her petition for contribution. But Peterson did not stop a son from recovering college expenses retroactively from his parents, according to a recent Illinois Appellate Court opinion. Read Mike Kalcheim's analysis in the latest ISBA Family Law newsletter.

Asked and Answered

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

Last week I responded to a question concerning starting a new law practice and I outlined the first phase of start-up. Eventually, you must address and face Phase II.

If you are successful in Phase I you will eventually need help whether it be administrative, paralegal, or another attorney. Now you must manage others as well as yourself. More office space will be required – especially if you are currently in a home or virtual office. A new set of skill sets (people skills) is now required.

Some Lawyers Never Develop the Skills Needed or Desire to Go to This Level and Firm Growth is Restricted as a Result

I refer to this phase as Sole Owner Phase. I have client law firms in this phase than consist of an attorney owner, a handful of employed associates, paralegals, and staff. These firms may have 3 to 4 people or ten or more. I have sole owner law firms with over 100 employed attorneys and staff.

Phase II – Taking the Practice to the Next Level – New Challenges – New Skills Required

1. Additional People

a. Know what to look for
b. Know how to compensate attorneys and staff
c. Decide whether you are looking for long term vs. short term hires and relationships

2. Develop Skill Sets in the Following Areas – Managing Others – Finding, Managing, Motivating, Training and Retaining Talent

a. Hiring and Firing
b. HR Function
c. Devote time to managing others
d. Delegation of work
e. Supervision of work

3. Use the Following HR Tools and Processes

Asked and Answered

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

Q. I am an associate in a 6 attorney firm in Cleveland, Ohio. I have been a practicing attorney for four years and have been with my present firm since law school. I am considering starting my own firm. What is your advice for someone like me starting up a practice on a shoestring?

A. I receive at least 10 calls a week from attorneys that are in solo practice or are the sole owner of a small law firm with similar concerns and frustrations. However, there tends to be different needs and challenges depending which phase of development the firm is in. Here are a few survival tips for the first phase:

Phase I – Solo Startup

In this phase it is all about you. More than likely initially you will not have office staff. If you are a new attorney right out of law school you must learn your trade and develop competencies in lawyering and client service. Your first priority will be to supplement your law school education with nuts and bolts practice skills – and you will have to do it quickly. Since you won’t have a senior partner in your firm to mentor and train you – you will have to reach out to resources outside of your firm. You will not have an accountability partner in your firm. Your second priority will be getting clients. You will have to actively marketing and promote yourself and your practice. Funds may be limited so your largest marketing investment will be your non-billable time devoted to marketing and client development activities. Finally, your third priority will be getting paid by your clients. Self-discipline and exceptional time management and time keeping skills are critical success factors.

Asked and Answered

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

Q. Our firm, a 12 attorney firm in Detroit, needs to find a way to improve fee revenues and financial performance  in 2012. We do not have a business or strategic plan, have never had a retreat, and we don't even have a budget. We believe that we must do something for 2012 and yet we are out of time since 2012 begins next week. Any suggestions?

A. Generating adequate fee revenue is the primary challenge for most law firms and this is where I would start for 2012.

I am a strong believer in the power of focused goals and objectives when integrated with a system of accountability. I have clients that have improved fee revenue by 20% (over a two-three year period) with existing headcount simply by establishing production goals for each attorney and paralegal in the firm - reporting, measuring and reporting goal v.s. performance monthly using simple reports, and follow-up with individuals behind on their goal attainment. Solo practitioners can use the same system and use a staff member, spouse, or coach to serve as an accountability partner. You might want to consider the following:

1. Ask each attorney and paralegal to provide SMART (specific, measurable, attainable, realistic, and on a timeline - i.e 2012) goals for fee generation, fee origination, billable hours, etc.

2. Review and discuss these goals with each member and engineer an agreement (commitment). Insure that there is adequate stretch - but that the goals are attainable.

Plaintiffs seeking pre-suit discovery to unmask the anonymous online posters who allegedly libeled them must first state facts that support a defamation claim, the first district held. Find out more in the January IBJ.