What Owners Must Do To Create and Maintain a Cohesive Law Firm Partnership

by Joel A. Rose
 

Financial stability within a law firm practice does not guarantee harmony within the partnership itself - far from it. Law firm management that does not acknowledge or reflect the contributions and needs of its members endangers a firm’s cohesiveness and its very existence, no matter how many clients come through the front door.

By examining the internal management problems of a hypothetical mid-size law firm, Baxter, Rice & Stern, some changes and solutions could suggest themselves to firms that may not know they have problems or wish to avoid certain problems.

The suggestions at the end of the article point firms in the right direction, in order to rally their members, build an identity, and nurture the allegiance that is required for a successful and thriving practice.

Exercising Leadership:

Hypothetical firm - real problems. Baxter, Rice & Stern is at a crossroads. It is no longer the firm founded 18 years ago by three partners, Ed, Tom and George, who left a larger firm because of their dissatisfaction with a big-firm setting.

Today, their own firm is run by a management committee comprised of the three senior (and founding) partners. The committee determines policy, makes major decisions affecting the firm, and sets partner compensation. Partner meetings are held monthly. The firm agenda and summaries of financial reports are distributed to partners at the meetings.

During the last three years, Baxter Rice has acquired two smaller firms. Although these acquisitions have been successful from an economic standpoint, the acquired partners and a few of the firm’s mid-level and junior partners have begun grumbling about the firm’s governance.

Although the firm’s overall client base appears to be solid, more active plans must be put in place for a smoother transition when some of the older partners step down by dint of age, health, etc.

The younger partners do not share the older partners’ degree of loyalty to some of the firm’s longstanding clients. This is not unreasonable from the younger firm members’ point of view. They have not necessarily received the benefits of these long-term relationships and, more to the point, have not been invited to participate in their cultivation.

While these factors might indicate that the crisis falls on the issue of age, this is not necessarily the crux of the actual problems. These problems have been built into the system, layer by layer, over the years. In order to plan effectively for the future, firm management must delve within and undo the chain of events, issue by issue, that has led to its present crisis.

The scenario. Ed Baxter is the senior managing partner and a member of the executive committee. His contacts and reputation have been the firm’s mainstay since its inception. Tom Rice is the second member of the executive committee. His ancestors’ good works have kept many doors open to the firm. George Stern is the third member of the committee. He sits on a lot of boards and has toyed with the idea of running for political office in the city.

Fred has been a partner for two years, and Sam will be a partner by the end of the year. There are many other such Freds and Sams at the firm. Imagine that the following exchange takes place between Ed Baxter and Tom Rice late one morning:

“Tom, have you seen Fred?”

“He was around earlier. Check with his secretary. Say, are we hiring that real estate guy?”

“I won’t be there, but George will announce it at tomorrow’s firm meeting. We’ll also probably want to see that labor specialist for a final wrap up. There’ll be some shifting around down there once he’s aboard but that area is flexible. Eileen, tell Fred I’m ready to those contracts.”

“I’m sorry Mr. Baxter, Fred is at a director’s meeting this afternoon.”

“Did they ask for him?”

“I didn’t take the call.”

“Sam, this is Ed Baxter. Could we get together about some contracts I need for a meeting in the morning?”

While this exchange is taking place, junior partner Fred is on the road, cultivating his own patch. Given the present state of affairs at the firm, he feels justified in setting his own strategy for success. While the client he is seeing is not yet the firm’s largest, it will be after Fred meets with the company’s directors this afternoon. Then at tomorrow’s firm meeting, he will make his own announcement.

Also at tomorrow’s meeting, the management committee will announce the particulars concerning a retreat scheduled to be held later in the month. The firm has decided for the first time that the retreat will be conducted by an outside consultant.

At the consultant’s advice, the firm’s attorneys have completed a questionnaire. In answering questions concerning the way things are done at the firm, both partners and associates have enumerated their growing dissatisfaction with firm management and policy, as follows:

1. They are not informed of firm activities that involve staffing or termination of attorneys, including matters that may affect particular partners or their areas of practice, lateral hires, etc.

For example, although Fred is on the recruitment committee, he did not feel his viewpoint was considered when the final decision was made to hire the real estate candidate. In addition, the lawyers in the labor area are not yet aware that they will have to shift ranks when the new hire comes in.

2. They are assigned responsibility for performing certain administrative or professional tasks without being granted adequate authority to accomplish the objectives. Again, Fred had tried to develop the real estate area but didn’t have the clout to garner support for his ideas and strategies.

3. Decisions are made by a select few, and the partner meetings are essentially eyewash. Major decisions are made prior to partnership meetings, and the partners feel they are being “managed” or “manipulated” by a senior partner or a committee of dominant partners. This likely will be the partnership’s reaction to the announcement concerning the influx of “new blood” into the labor area.

4. Senior partners do not share the decision-making process for the firm. In fact, there is a lack of open communication between the more influential partners and the rest of the firm. While the firm’s founders discuss firm business among themselves, the rest of the practice hears things via the ubiquitous grapevine.

5. Senior partners consider the firm their private domain and take others for granted. Younger attorneys resent the habit of some influential partners of embarrassing other partners or associates before clients by yelling at them, ridiculing them, and limiting their responsibility or participation in various client situations.

Senior partners are insensitive to the personal and professional needs of other owners (i.e., handing them projects at the last minute and demanding that the work be performed immediately), even though the matters may have rested on the originating partner’s desk for some time.

6. The compensation system is unfair. The more influential partners are greedy and manipulative, and created the compensation plans to suit their own purposes. While it was not necessarily intended to operate this way, the executive committee, for all intents and purposes, is also the compensation committee.

7. There is a lack of adequate planning for the transfer of client responsibility from senior partners to mid-level partners. The younger partners are seeing a fall-off in business due to client departure not anticipated or planned for by the firm. As far as these partners can tell, no plans exist for replacement of that work. The more senior partners have reduced their active involvement in producing work, originating business, or managing the firm but still expect to receive a significant portion of profits. There is a lot of speculation among the firm’s attorneys over whether this is reflected in the year-end distributions.

8. The firm’s founders are unwilling to bring in outside consultants who might be able to provide objective recommendations on future firm governance and other sensitive issues. General opinion is that management fears losing control. While agreeing to use a law firm consultant for the upcoming retreat, management has expressed grave reservations about “stirring the tempest” and creating problems that are more serious.

Building an alliance from within. If Baxter Rice is to cultivate the allegiance of its attorneys, it must allow them to participate in their own destiny.

One case in point is junior partner Fred’s effort on his own behalf. Both the firm and Fred know that he is a superstar. Once Fred gains a vantage point, the firm will have to acquiesce and listen to him. While the final results could conceivably benefit Fred and the firm, the process of building an alliance would be better served by a few critical differences in the firm’s relationship with Fred and, by extension, with all of its attorneys.

Although this hypothetical firm has been successful and aggressive enough to attract able and talented young partners, it has not provided the means for its attorneys to marshal their abilities to a unified end. The firm must take stock of itself, determine who it is and what kind of firm it wants to be, and then proceed to make that entity palatable to all its members.

Management must take particular care to assess the needs and requirements of all its lawyers and to give them the opportunity to use their skills and abilities to their own and the firm’s advantage.

The main point that management must recognize is that the partners need to participate in the activities and decisions that determine their future from the beginning of their relationship with the firm. Firm management must make an active commitment to instill its attorneys with the view that they have an important stake in the firm’s future. The firm can begin to build unity and cohesiveness by incorporating the following items into its organization, thereby establishing a structure that involves the attorneys at all levels of its system and management.

The firm’s leaders must be willing to:

1. Assign responsibility for client matters at an early stage in an attorney’s career. Introduce attorneys to the clients as early as is practical. This will enable the attorneys to step into the fray from the beginning and be more involved and informed on client matters.

2. Establish an ongoing, organized training program for professional growth. This can be done by setting aside time for attorneys to attend CLE seminars or meetings sponsored by other professional groups. Regularly scheduling in-house training sessions, under the guidance of partners with specialized expertise, would develop the skills required to succeed in various practice areas, including business development and management techniques.

3. Give the attorneys an opportunity to train and supervise other attorneys and paralegals to provide support on specific client projects or in the substantive areas in which the attorneys are involved. Besides serving immediate needs, this specialized team can be useful in developing additional future business. As a side benefit, all of its members will be able to feel like players in the firm’s future. This is also a good opportunity for the firm to note and develop the emerging talents of its potential leaders.

4. Assist attorneys in building their individual reputations through participation in programs sponsored by the bar association or by writing articles on substantive areas of practice for publication in bar association or professional journals. Encourage their participation in programs sponsored by the firm and other associations, such as accounting firms for clients and prospective clients.

5. Develop a formal evaluation program that will let the attorneys know where they stand and allow qualified associates to progress to partner status. Encourage active participation in the time-honored tradition of pro bono activities, especially ones in which the attorneys have a particular skill or interest.

6. Provide an ongoing forum for the attorneys to participate in discussions with one another concerning client matters (i.e., strategies), research findings, and input on decisions that may affect matters they are working on. Circulate an agenda before each meeting, and include all partners and associates.

7. Invite active participation and input from all attorneys concerning matters of firm governance. For example, revitalize the executive committee by rotating its membership and limiting tenure and consecutive terms or establish a compensation committee that represents attorneys from all levels of the partnership. Also, give the attorneys a voice in policy determination and other important administrative decisions and issues regarding office assignments, benefits programs, automation, space planning, etc.

8. Prepare a strategic plan that enables partners and associates to determine the firm’s immediate and long-term objectives. For example, let the attorneys participate in matters that involve the firm incurring substantial debts or changes in its capital structure. Show care and concern for the professional and personal welfare of both partners and associates, acknowledging that clients and firm pressures and workloads can contribute to stress and burnout.

9. Encourage the dissenting view, particularly on important issues. A willingness to listen to the other side is an important habit.

10. Set up a compensation system that attempts to be fair and consistent in rewarding all of the lawyers for their total contribution to the firm. Develop an incentive system whereby attorneys get credit for client origination, including enhancement of present client relationships, management of the firm and its practice areas, training of associates and paralegals, pro bono activities, and other nonbillable activities.

11. Provide attorneys with appropriate facilities and a high-quality administrative support staff that enables them to produce results in a timely and professional manner.

©1999-2017 Joel A. Rose & Associates