Tag Archives: law firm management

Beware ‘Blind Spots’ in Partner Compensation Systems

Posted on May 15, 2013 by | Leave a comment

Change is always hard. But thanks to a recession that left many firms’ partner compensation systems “grossly out of touch with the new business of law,” change may be necessary, according to preliminary findings from LawVision’s Partner Compensation System Survey. But beware blind spots that could lead to unintended consequences.

Likening changing a partner compensation system to handling dynamite, Michael D. Short writes that many such systems should be objectively and thoughtfully reexamined even if everything seems to be fine.

“If you know what you’re doing and why, everything will go well,” he says of changing a system. “If you don’t, you could accidentally create some major damage. It is a process fraught with unintended consequences.”

The process is also fraught with several potential blind spots you need to be aware of in order to ensure your partner compensation system isn’t creating long-term problems. The blind spots include:

  1. Succession Planning. Thanks to the “graying” of many partnerships, Short calls this a “ticking time bomb” since most partners simply don’t have a plan to pass on their knowledge or to transition their clients to new attorneys when they retire.
  2. Practice Profitability. Today’s increasing fee resistance and declining realization rates have taken a toll on firms’ ability to generate revenue, which decreases the firms’ profitability. Yet many partners are still paid based upon the revenue they generate without taking into consideration the costs of generating that revenue.
  3. Common or Shared Work Ethic. In some firms, partners are paid based solely on their billable time, not their nonbillable time. This creates two problems: 1. The bigger the variance between top and low performers’ hours the more likely top performers will leave because they believe low performers aren’t pulling their own weight, and 2. So-called “low” performers may, in fact, be spending many nonbillible hours in business development.

Short calls the preliminary data “valuable information for a firm to determine if changes are needed and which combination of changes may make the most sense,” noting that over 90 law firms have so far contributed to the survey. To read the full article, and find out about participating in the survey, click here.

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Monday Clicks: Put the ‘Service’ in ‘Customer Service’

Posted on May 13, 2013 by | Leave a comment

Let’s face it: Unhappy clients go elsewhere. Good customer service is, therefore, key to keeping clients. Better serve clients by learning the importance of “service” in “customer service,” helping them move forward when needed and never promising what you can’t deliver.

  • “Some lawyers think that good customer service means spelling the client’s name correctly on the bill or including a self-addressed stamped envelope,” writes Jay Shepherd in a Small Firm Innovation Post, “3 steps to outstanding customer service.” The steps: clarify the goal, show you care and address the fears.
  • Great customer service should never be “disrupted,” according to Adam Ziegler at Small Firm Innovation. “With customer service, there’s no worse sin than indifference,” he notes. Adding that to keep your customer service great, you have to make your client’s problems your own and help them avoid trouble.
  • Want to lose a prospective client? It’s easy! Just do one of these 10 things that prove you’ve forgotten the “service” in “customer service,” such as: constantly putting them on hold when they call or being impatient, uncaring or in a bad mood during the call or initial meeting.
  • When does pleasing clients go too far? The Careerist comments on the idea of “superpleasing” clients, saying that it might be a bit overboard but it’s “probably on the right track” since many lawyers do these personal things without realizing it.
  • “It’s the gap between what you promise and what you deliver that creates unhappiness in your clients,” writes Divorce Discourse. “The Formula for Creating Happy Clients” details the dangers of overpromising and underdelivering, saying that the only solution is “thoughtful consideration of your promises.” In other words: Don’t promise what you can’t deliver.

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Dissolution Imminent? How to Handle it Well

Posted on April 18, 2013 by | 2 Comments

Sometimes law firms fail. Sometimes it’s due to economic factors, but more often it’s because “law firms are fragile organizations that are held together by the will of the partners,” according to Michael D. Short in a LawVision post “Advice for Law Firms in Serious Trouble.”

“Many firms,” Short writes, “are one or two key defections away from the start of a downward spiral in confidence that can quickly pull any law firm apart.”

What can firms do in the face of imminent failure? There are three options, according to Short:

  1. A rapid, radical restructuring.
  2. A “savior acquirer” law firm that absorbs your firm into theirs.
  3. Dissolution.

While option No. 2 is cited as the “path of least resistance,” neither it nor restructuring may be possible. Dissolution, therefore, remains the only option. Once a firm has decided to wind down, Short says that it’s best to do it quickly, without declaring bankruptcy (if possible) and permanently.

Yann Geron, a partner at Fox Rothschild LLP who co-authored the LawVision article, offered further advice on how to proactively manage the dissolution and maintain credibility with creditors, avoid a leadership vacuum and successfully transition clients to new firms as the billing partners move those firms.

Read the full article here.

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Combat Silos in Your Law Firm

Posted on April 16, 2013 by | Leave a comment

Successful relationships—especially business relationships—require good communication. That’s why the silo mentality where different departments, teams or individuals cannot (or will not) share information with each other can be so damaging in law firms.

Silos are an “insidious threat,” according to Edge International’s Sean Larkan, “that can, by stealth, undermine much of what is good about a firm and over time, cause extensive damage or block progress.” It is therefore important to understand the types of silos that can occur and how to combat them, he writes for Legal Leaders blog.

First, he says, you have to determine the kind of silo that exists in your law firm: vertical or horizontal.

Vertical silos involve “a body of people within the firm that, notwithstanding position, role or seniority, tend to work somewhat alone and isolated from others,” whereas horizontal silos usually “develop when there is a lack of communication, sharing or interaction between groups defined by role or seniority.”

Both types can take hold without any kind of conscious choice by employees, and the silos can be very hard to pin-point—which makes it hard to convince people that there is a problem and to therefore combat it.

“Once [silos] are embedded in the culture and way of doing business of a firm, they are hard to eradicate,” Larkan writes. “Often they arise due to simple failings around fundamental matters such as communication, consultation, trust and respect or lack thereof. Addressing them requires a direct interest and commitment from senior leadership. Failing this, nothing changes.”

Larkan suggests that leadership first and foremost accept that silos happen and to “be very aware of the issue,” finding practical ways address the issue by involving as many senior staff and partners as possible since the best way to combat a silo is to break down barriers to communication.

You can read his full article here.

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Managing ‘Toxic’ Clients

Posted on April 4, 2013 by | Leave a comment

Conflict happens, especially in businesses like law firms that involve highly emotional, often financial issues. Some clients, however, are just bad news. From combative attitudes to downright toxic personalities, these clients can make you wish you’d never gotten into the law. But you can’t turn them away.

“The fact is that as much as there are some clients that law firms would do well to turn away or fire, they won’t,” writes business psychiatrist Mark Goulston in an HBR Blog Network article. “They’re just too profitable.”

And so, you best learn how to manage them.

First and foremost, Goulston suggests you accept that these clients will be nasty. “Expect such people to act awful, especially when they’re not getting their way,” he writes. Go into the conversation prepared for their toxic reaction, and when they push back with something mean: Do not take the bait.

Goulston writes that you should instead calmly look the client in the eye and ask them a question that forces them to think about what they just said, such as:

  • “Say that again?”
  • “Do you really believe what you just said?”
  • “What was that all about?”

It would be ideal, however, to prevent bad behavior from the get-go.

“If you wait until crap happens (and it will), the likelihood of your conversation turning into a combative conversation is high and the ability for people to listen to each other when both are reacting is very small,” Goulston writes.

He suggests you prepare the client for eventual bad news by asking them how they wish to be told about such news. Then, once you hit a problem, you can then remind the client about how they wanted you to handle such situations and then give them the bad news.

“[A]n ounce of preparation,” Goulston writes, “is worth a pound of abuse.”

You can read Goulston’s article in full here.

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Work-Life Balance and Unhappy Associates

Posted on March 28, 2013 by | 1 Comment

Do you feel like your work-life balance is teetering on a razor’s edge? You’re not alone. Lawyers Weekly recently found that of the 529 lawyers they polled, nearly three-fourths believe their firm doesn’t care about or allow work-life balance. And the firms’ culture, not their overall polices, seems to be to blame.

When asked “Does your firm do enough to encourage its lawyers to maintain a work-life balance?” 36 percent of respondents replied that while their firm has polices in place, the culture of the firm doesn’t allow for work-life balance. A further 35 percent said that their firm’s only concern was racking up billable hours.

Yet nearly 15 percent added that it’s not the firm’s fault, but that of certain partners or practice group heads who demand long hours. Only 14 percent reported that their firm genuinely encourages work-life balance.

This lack of support for work-life balance may be why “associate attorney” tops the list of the least happy job in America, according to a recent CareerBliss compilation of the most and least blissful jobs. With an index score of 2.89 out of 5, associate attorneys came out as the No. 1 unhappiest job. The findings were culled from 65,000 employee-generated reviews taken nationwide in 2012.

“Associate attorneys stated they felt most unhappy with their company culture,” Heidi Golledge, chief executive of CareerBliss, was quoted in Forbes as saying. “In many cases, law firms are conducted in a structured environment that is heavily centered on billable hours. It may take several years for an associate attorney to rise to the rank of partner. People in this position rated the way they work and the rewards they receive lower than any other industry.”

Legal assistants also made the unhappiest list at No. 7, with a score of 3.38.

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Increase Firm Realization Rates, Revenue

Posted on March 13, 2013 by | Leave a comment

The best things in life may be free, but your legal services are not. Yet an article from Altman Weil says that there are several factors that can cause a firm to undercharge (or not charge at all) for the services it provides. Increasing your realization rate—which fell overall from 88 percent in 2008 to 84.5 percent in 2010—will increase your revenue.

“There are three metrics that make up timekeeper revenue—demand, pricing and realization,” the article states. “The recession ravaged all three of these metrics.” Noting that there’s not much a firm can do about the lower demand for legal services or rising rates that barely match inflation, the article suggests firms can do something about increasing their realization rates. But first, firms must understand what causes their rates to be so low. A few of the issues the article examines are:

  1. Under- or un-reporting. Inexperienced lawyers may think they took too long to complete a task and will, therefore, cut the number of hours recorded. Or, due to bad time capture habits, may record much less time than was actually spent. Teaching younger lawyers to value their time, as well as electronic time capture, can help decrease underreporting.
  2. Write-downs. At the time of billing, Altman Weil “found lawyers reluctant to bill for fear that the client will not perceive the value of the work done and push back on the amount or not pay for it in its entirety.” It is therefore important to communicate with the client about the value of your services.
  3. Client adjustments. Aggressive, complicated billing results in slow payments and increased adjustments (i.e., write-offs and discounts) as clients push back because the bill was higher than they were led to expect. Keeping the client abreast of what is happening and why will help stave off any surprises—in either the billing or payment.
  4. Pricing variance. The billing rate may be different for various employees, functions and project, resulting in a pricing variance where clients are charged different rates for similar matters. This variance may cause clients to be undercharged, so firms need to determine whether the alternate billing rates are being properly applied.

Other issues that reduce realization rates include low billing efficiency and slow turnover of both billed time and client payments. The article points out that lower realization rates are significant, saying:

Some might wonder the significance of [lower overall realization data]. So what if realization dropped from 88 percent to 84.5 percent? It is only a 3.5-point decrease. The problem is rates went up only 7.7 percent for the same period. Thus, realization wiped out 45 percent of the pricing increase, leaving 2.1 points per year, roughly annual inflation.

For a more in-depth look at the issue and possible solutions, read the full “Issues in Realization” article here.

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Culture Key to Recruitment at Mid-size Firms

Posted on March 7, 2013 by | Leave a comment

When it comes to attracting the best lateral hires, culture counts. Of the mid-size firms surveyed by TAGLaw and the Center for the Study of the Legal Profession at Georgetown University Law Center, 70 percent rated culture as one of the top two selling points in their recruitment process. The other was the overall quality of the firm.

The findings were provided by leaders at 68 firms with a median size of 40 attorneys. About half of respondents were located in North America, with the remaining split evenly among Europe and Latin America.

Culture was so important to firms, that preserving it was cited as the top reason not to seek mergers. Only 19 percent expect to grow through mergers. In fact, according to an ABA Journal story, 75 percent of the firms had been approached by a larger firm interested in a merger—but only 37 percent seriously considered the offer. “Faster growing firms—those reporting revenue gains of at least 10 percent since 2007—were the least interested in merging with a larger firm,” the story states.

When it comes to growth, 90 percent of firms plan to rely solely on organic growth and just 57 percent plan on expanding through lateral hires (though of the firms who have hired laterally, 92 percent said the new recruit lived up to expectations).

“The firms in our survey that are growing the fastest were the same ones that are most careful about their human capital,” Lisa Rohrer, director of executive education and a research fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center, said in a press release. “Successful mid-sized firms greatly value their culture and weigh cultural concerns carefully when considering possible lateral hire and merger opportunities.”

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Setting Client Expectations

Posted on March 6, 2013 by | Leave a comment

Like all relationships, navigating the client-lawyer dynamic can be tricky. It’s much easier if you set client expectations from the get-go.

“Early in my career,” writes Small Firm Innovation’s Jeffrey Taylor, “I recognized that there are two types of people: those who respect someone’s time, and those who don’t.”

Toward this end, Taylor emphasizes the importance of setting client expectations early. Clients must understand that your time (and theirs) is important. His rules for the first client meeting include:

  • Be open. Communicate openly about your expectations of their behavior, including the importance of being on time to meetings and calling only when it’s relevant to the case.
  • Be honest. You must be honest about your expectations for the client and their case, and clients must be totally honest to you, other lawyers, and the court.
  • Be blunt. Clear and concise communication helps avoid any miscommunications that could waste valuable time—or set the case back.

Taylor adds a few specific tips that work well for him:

  • Set boundaries. Taylor never gives clients his cell phone number or direct office number.
  • Communicate often. Taylor uses practice management software reminders to help keep clients regularly updated about how their case is progressing.
  • Empower staff. Taylor allows his staff to answer “the ever-present ‘what’s the status of this case’ question.” Clients can call and speak with his assistant (without a charge) for a quick update about the case status or to ask any generic questions.

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Only the ‘Most Adaptable’ Firms Survive

Posted on March 5, 2013 by | 1 Comment

The news is a bit grim. While U.S. firms had an OK 2012, a recent U.K. survey of partners found that 95 percent expect more law firms to collapse in the next two years. What’s a law firm to do? Evolve, according to a partner in a recent Wall Street Journal (sub. req.) story.

How?

Take a lesson from nature. It’s no longer “the survival of the fittest,” but the most adaptable who survive.

“Adaptability is the power to detect and respond to change in the world, no matter how surprising or inconvenient it may be,” writes Rafe Sagarin in an HBR Blog Network article. “All of Earth’s successful organisms have thrived without analyzing past crises or trying to predict the next one. They haven’t held ‘planning exercises’ or created ‘predictive frameworks.’ Instead, they’ve adapted.”

Drawing on what nature has to teach us, he found four practices of adaptable systems:

  1. Decentralization. For the most success, structure your system to avoid centralized control. This allows many individuals to independently see and adapt to change.
  2. Redundancy. While it’s not efficient, redundancy helps solve many problems. “Adaptable systems,” Sagarin writes, “make multiple copies of everything and modify the copies to hedge against uncertainty.”
  3. Symbiotic relationships. Symbioses extend an organism’s (or business’s) adaptability. They can occur between the most unlikely of pairs, with profound results.
  4. Recursive processes. Continuously build upon your successes.

Adaptation is a both a proactive and reactive process—and balancing the two processes is often difficult.

Robert Fafinski Jr., a founding partner of Minnesota-based Fafinski Mark & Johnson, got the balance right. He “knew the good times weren’t going to last forever and starting thinking ahead,” an ABA Journal article states. In the face of the recession, the firm cut partner pay yet expanded base practices. This positioned the firm to come back strong once the economy picked up.

“Everybody here as partners made less money, but we kept everybody employed,” Fafinski is quoted as saying in the article. “When the economy did come back in 2010 for us, we probably took off faster than most firms because we had the team ready to go. We’ve ended up getting rewarded for our patience.”

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