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Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. Our firm used to have weekly firm meetings to discuss management and operational issues. We discontinued them due to the excessive time being spent and questionable results and value. Now we are finding that we are totally unfocused and having problems with poor accountability and things falling through the cracks.  We are now considering starting up weekly meetings again but want to insure that we do a better job of managing meetings than we did in the past. What are your thoughts? A. Before scheduling a meeting consider the purpose of the meeting. In general there are the following four types of meetings: 1. Strategy Meetings are rich group discussions involving strategy and planning sessions, brainstorming, group budgeting, marketing, or financial planning. These meetings are effective when everyone understands the purpose and the ground rules. 2. Reporting Meetings consist of one person informing the others in the room and sharing of information. These meetings are valuable only if the news is meaningful to most of the attendees. There may be Q&A and discussion, and different people may report out during the same meeting. These meetings should be structured. 3. Status Meetings are often low in value and you should keep them sort. Attorneys and other team members need to share information and brief sessions are effective at keeping the team on the same page. Consider stand-up meetings - where literally, everyone is standing. It keeps the meetings short. Require agendas. 4. Dilemma or Issue Meetings where just a few of the participants engage in detailed problem solving, are inefficient. Don't drag the whole group into dilemma or issue meetings. If your meeting is headed this direction deflect it for one-on-one time. Meetings work best when they have:
By John W. Olmstead, MBA, Ph.D, CMC Q. Our firm is a 25 attorney business litigation boutique firm in Southern California. I am a partner in the firm and chair of the firm's long range planning committee. Last year we spent a lot of time putting together a strategic plan for the firm. While we have a nice plan including specific action items - we are having problems with implementation. We are stuck and not getting anything done. What are your thoughts? A. This is a common problem. Even in Corporate America the implementation rate is low.
  • 90% of corporate strategies fail to achieve their expected results.
  • 80% of projects are late or over budget.
Many law firms experience similar results. They spend time and energy on mission, vision, goals, objectives and strategies but run out of gas when it comes to specific action planning outlining tasks, milestones and deadlines, individual specific accountabilities, and resource requirements. You just can't cut this step short. All strategic plans should include action plans that list under each strategy specific tasks with milestones, deadlines/due dates, name of person(s) responsible, and required resources. Consequences, compensation, etc.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. At a recent managing partner forum several of the attendees at the seminar discussed recent experiences with embezzlement by employees. What can we do to protect our firms? A. During the past 25 years that I have been working with law firms I have been amazed at the number of embezzlements caused by unscrupulous attorneys, bookkeepers, office managers and other staff members. And yes – even partners. One out of five law firms in my client sample has actually lost funds due to some form of embezzlement and caught the offenders.  While some of the firms have prosecuted and taken other actions against the offenders the process was very painful, time consuming, and typically the funds are never recovered in entirety. Of course, this is if you catch the offenders. Many small firms’ internal control procedures are so lax that funds could be lost through embezzlement and the firm would not even know it. Only through effective internal accounting and financial controls can law firms protect their offices from theft. The goal is not to catch offenders – but to have a system in place that discourages and prevents the theft from occurring in the first place. The process involves implementing internal accounting and financial controls. In essence – segregation of duties. Here is an overview of such a system: Internal Control is the plan of organization and all of the coordinate methods and measures adopted within a business organization to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies. The four basic elements considered essential in a satisfactory system of internal control are: 1. A plan of organization that provides appropriate segregation of functional responsibility and duties. 2. A system of authorization and record procedures adequate to provide reasonable accounting control over assets, liabilities, revenues, and expenses. 3. Sound practices to be followed in performance of duties and functions of each of the organizational areas. 4. A degree of quality of personnel (competency) commensurate with responsibilities. SUGGESTIONS: RECEIPTS 1. Have someone other than the bookkeeper open the mail. (i.e. receptionist) 2. Have the person who opens the mail prepare a list of all checks/cash received in duplicate. 3. Have person responsible for mail route one copy of the check/cash list to the office manager or managing partner and the other copy along with checks/cash to person responsible for making the bank deposit. 4. Assign someone responsibility for preparing the deposit and taking it to the bank. This person should verify the check/cash list against checks and cash, prepare deposit slip and make the bank deposit. 5. Upon return from the bank the deposit clerk should provide the bookkeeper with the deposit slip, receipt from the bank, and the check/cash list. 6. Bookkeeper enters the deposit into the computer system. 7. Office manager runs and mails monthly statements - not invoice fee bills - to clients. DISBURSEMENTS 1. Don't give bookkeeper check signing authority.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. As the managing partner of a 12 attorney firm, I have been asked to see what the firm can do to improve profitability by reducing costs. Do you have ideas or recommendations in this area? A. In most law firms the real problem is insufficient gross income and lack of sufficient investment (spending and time) on marketing and initiatives designed to stimulate client and revenue growth. For most firms increasing revenues is the most effective way of impacting the bottom line. However, we do find that there is waste and unnecessary overhead that eats away at profits and a cost control program is also recommended and implemented. During recessionary times such as we are currently facing – drastic cost control are often the only option. Reducing overhead can immediately and effectively improve a firm’s bottom line. The first step in an expense control program is to identify those areas where potential savings exist. Review your profit and loss statement. Resist the temptation to arbitrarily cutting costs which could cut the muscle with the fat and result in revenue loss as well. You have to spend money to make money – so if cost cutting is the appropriate strategy – cut the right costs. Think strategically about cost reduction. After you have identified areas where savings can be made prioritize and develop specific strategies and implement action plans to achieve the savings. Here are a few ideas: STRATEGY #1: Reduce Headcount This is the largest area for potential savings. Downsizing is a strategy that has been used by many firms this past year. However, it can have long term negative consequences for revenue and talent management. Consider all levels – non-productive partners, associates, paralegals, and staff. Be prudent and sensitive in implementation. STRATEGY #2:  Reduce Compensation Obviously one way is to cut salaries – a strategy to be used as a last resort. A better approach is to reduce fixed salary (paying people for showing up) and add a variable pay component which will allow employees to earn additional compensation in the form of bonus for results achieved. Another approach is to freeze salary increases. STRATEGY #3:  Benefits A major area for cost savings – especially health insurance. Determine which programs are most important to employees. Do your best to protect those and reduce or eliminate programs that are less important. Consider offering more than one health insurance plan. Pay the premium for the lowest cost plan and provide options for employees to “opt up” to the better plans by paying the additional premiums. Consider increasing deductibles and requiring employees to pay a portion of the base premiums. STRATEGY #4:  Outsource Examine potential for outsourcing – from copy services – IT management – to your legal team.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am the firm administrator in our firm. We have 24 attorneys and are just transitioning to the 2nd generation of partners. I have been charged with obtaining information on strategic/business planning. Currently the firm does not have a strategic or business plan. What is the difference between a strategic plan vs. a business plan? Do you have a recommendation as to whether we should consider implementing a business plan or a strategic plan? A. Often the term strategic plan and business plan are used to mean the same thing. The general planning process is similar. However, I believe there is a difference. I consider a business plan to be the primary tool of choice when starting a new business or venture. Typically the audience is external - bankers, investors, prospective partners, etc. Due to the external nature of the audience the business plan document needs to be detailed with supporting narrative, company history, market analysis, marketing strategies, personnel plan, management biographies, and pro-forma financial statements. A strategic plan is typically the tool of choice for a going concern business or firm - such as an existing law firm such as yours. The intended audience is internal and its primary purpose is to focus the efforts of firm members and employees. Much less narrative and supporting detail is required. A strategic plan uses more of an outline format with bullet points and much less narrative and supporting detail.
By John W. Olmstead, MBA, Ph.D, CMC Q. I am the managing partner of our firm of 17 attorneys. Our practice is concentrated in insurance defense litigation. In an effort to provide the best services possible and differentiate ourselves we have been discussing whether we should implement a project management system. I have been reading more lately about legal project management and hearing more about it. Do you have any thoughts along this line? A. Legal project management has become the hot topic of late and we are seeing articles, workshops, and seminars on the topic. Over the years project management has evolved into its own discipline with its own jargon, tools, methodologies, software, etc. Project management as a discipline can become quite technical and complex. Many of the techniques such as PERT and CPM came from the department of defense and were initially utilized to manage projects such as the Polaris Submarine and space projects. The construction industry makes extensive use of project management techniques. Considering that a legal matter is a project, particularly a large litigation matter, with many moving parts there has been a push by clients and an effort by law firms to look for ways to improve the management of matters and related resources, costs, timelines, etc. and to improve and streamline the overall process. Legal Project Management is a customized approach to matter management borrowing and applying some of the principles of project management and incorporating into a simpler and leaner model. Numerous workshops, training seminars, and publications are being offered on the topic. The Hildebrandt Institute is offering a workshop in Chicago on June 21-22, 2011.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am the Executive Director of a 75 attorney firm in Miami. We are meeting in a few months to revise our strategic plan. Some of our partners have suggested that as a result of the current business and economic climate that we start with a clean sheet of paper. Where should we start? What do you see as the key questions that we should be addressing? A. Strategic planning is essentially a five-step process. The first step begins be asking questions. Start by asking the following questions: 1.      What substantive issues does the firm face today? 2.      What issues will the firm face tomorrow? 3.      How has technology impacted (or will impact) how the firm conducts business and delivers services to clients? 4.      What are we doing and doing well? 5.      What are we not doing well? 6.      What do we need to improve or enhance? 7.      What metrics will tell us how we are doing? 8.      What should be eliminated? 9.      What are we not doing that we should be doing? 10.  What kind of training will we need to plan for?
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. Our firm is a 12 attorney general practice firm located in the Phoenix metropolitan area. In additional to general practice, we do a fair amount of insurance defense work as well. In an effort to improve firm profitability we have been considering alternative fee arrangements - particularlly contingency fees - with some of our existing clients as well as venturing into personal injury plaintiff work. Can we improve profitability by doing more contingency fee work? A. The CEO of the Howrey LLP, when interviewed about the law firm's recent dissolution, advised that deferred profits from contingency fee work led to the firm's demise.  Howrey is a good illustration of what can happen when the risks of contingency fee work is not considered or managed. Contingency-fee work can pose major risks for law firms, as they earn no fees if they lose those cases and sometimes have profits deferred in protracted litigation. In addition, cases can be lost with no fee whatsoever received. Whether your firm is considering "big deal" litigation or bread and butter run of the mill personal injury litigation you may want to consider the following: 1. Don't dabble in contingency fee work. Take it seriously and insure that your case portfolio is adequately diversified. 2. Reduce case portfolio risk and improve case profitability by implementing a sound case intake system to insure that you are selecting quality cases. 3. Realize that you have to spend money to make money and that you simply may not have the financial resources to take on certain cases. Learn how to say no and when to refer these cases out to others. 4.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I was just elected by my other partners to serve as managing partner of our 17 attorney firm. We are based in Nashville, Tenn. I do not have an accounting background and I have questions about our financial statements:
  1. Why does the income statement not reflect all disbursements for the month? For example it does not reflect partner draws, client advances, or payments on the firm line of credit?
  2. I have only been receiving the income statement. Should I been receiving other financial statements?
A. Getting a handle on the financial aspects of your firm will be your most important role - whether you have a firm administrator or not. You should also be receiving a balance sheet which reflects the firm's financial position as of a particular point in time. The income statement only reflects income and expense accounts and reports net income for a reported period of time. The income statement is different that a statement of cash flows which reports cash flows during the period. Partner draws, client advances, and line of credit payments are not expense accounts (they are asset, liability, and capital accounts respectively).  Consequently, they will not be reported on the income statement. These accounts will be reported on the balance sheet. Other than reviewing the balance sheet for activity in accounts such as discussed above the balance sheet (without adjustment) has limited use. Its purpose is to reflect the firm's financial position as of a point in time.
Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am the managing partner with a 14 attorney firm in Chicago. We recently hired a new accounting manager/bookkeeper. While she has worked in a few other law firms these firms did not require her to manage a high volume trust account. Our firm has a high volume of transactions that flow through the firm's trust account. We have had problems in the past with prior bookkeepers and outside accountants that did not balance/manage our trust accounts properly. What suggestions do you have or resources do you suggest? A. Failure to properly manage, balance, and reconcile the firm trust account can be a major problem for law firms - from professional responsibility, accounting, and tax aspects. From a bookkeeping standpoint - failure to maintain a trust account sub-ledger for each client that has money in the trust account and insuring that all of the sub-ledgers balance and reconcile back to the trust account bank statement in the biggest problem that I see. You must do more than simply maintaining a checkbook journal register - you must have a sub-ledger for each client. If the firm reflects the trust bank account on it's balance sheet there should be either a contra asset account or a liability account reflecting the same amount reflected in the cash account. The total of all of the sub-ledgers should also equal the number in each of these two general ledger accounts. All should reconcile back to the trust account bank statement.