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Profitable Law Firm Management - Briefing

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JOEL A. ROSE & ASSOCIATES, INC.
Management Consultants to Law Offices
P.O. Box 162, Cherry Hill, NJ 08003
jrose63827@aol.com
Telephone (856)427-0050 | Fax (856)429-0073
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WELCOME to Profitable Law Firm Management Briefing, a free, monthly newsletter that contains insights and information about law firm management and economics.

This special edition issue contains:

SPECIAL INTEREST ARTICLE: Partner Compensation Standards:  Eleven Factors to Consider
> Strategic Planning: A Necessity in Today’s Environment; and
> A Difficult Partner Calls for Tact and Action.

This issue contains insights on:

STRATEGIC PLANNING: A NECESSITY IN TODAY’S ENVIRONMENT
The difference between a financially successful and a marginally successful law firm may very often be traced to how well the combination of its leadership/governance (policy determination and implementation), culture, partner compensation system, and client base brings out the energies and talents of its attorneys. Firms that position themselves through strategic planning are simply operating like any well-run business in an intensely competitive market. The strategic planning process, if well-conceived and implemented, will foster communication, input and a sense of ownership and common direction that will bind the firm, help it withstands adversity, achieve longevity and success, and build "emotional equity," as opposed to financial equity.
http://www.joelarose.com/articles/strategic_planning_necessity.html

A DIFFICULT PARTNER CALLS FOR TACT AND ACTION
In a law firm, the actions and behavior of an individual partner have an impact on all of the other attorneys and administrative support staff. Problems frequently surface after the firm has experienced financial difficulties or its ability to serve clients in a high-quality, timely and profitable manner has diminished. Other lawyers may become increasingly disgruntled with the difficult partner as the problems continue to occur, thereby further exacerbating the situation. To keep an isolated incident from becoming a major ongoing problem, the firm must heed the early warnings indicated by circumstances that are not too difficult to recognize.The firm that ignores these early warning signs in the expectation that the situation will work itself out and disappear is merely compounding the problem. Inattention to these warning signs by lawyer management will be viewed by other attorneys and members of the administrative support staff as a tacit endorsement of the undesirable behavior.
http://www.joelarose.com/articles/difficult_partner_tact_action.html

Special Note: If you know of a colleague who would enjoy "Profitable Law Firm Management-Briefing" please feel free to forward this e-mail. New subscribers may sign-up at any time at www.joelarose.com.

23rd ANNUAL
CONFERENCE & WORKSHOPS
ON LAW FIRM MANAGEMENT & ECONOMICS
to be held at the
FOUR SEASONS HOTEL in PHILADELPHIA, PENNSYLVANIA
March 18 and 19, 2010
CLE applications have been sent for review and accreditation.
Visit our website to receive more information and register for the Conference.

TOPICS that will be covered at this year’s conference include:

(1) Determining, Implementing and Managing Alternative Billing Systems to Enhance Your Firm’s Competitive Position;

(2) Utilizing Partner Compensation to : Keep rainmakers happy with declining revenues; Motivate partners to attract new business from existing and potential clients; Encourage partners to delegate work to others; transition clients and client work from senior to other partners; Managing the firm and practice areas and train associates;

(3) Management Skills Needed by the Managing Partner and Executive Committee and How to Acquire Them;

(4) How to Write and Implement a Law Firm Business Plan and Gain Partner “Buy-in”;

(5) Approaches for Dealing with Superannuated and Less than Productive Partners; and

(6) Newer Approaches for Retaining and Transitioning Existing Clients and Attracting New Ones.

FACULTY Members that will be speaking at this year's conference include:

BEVERLY HALL BURNS, ESQUIRE
Miller, Canfield, Paddock and Stone, PLC
Detroit, Michigan

KEITH A. CLARK, ESQUIRE
Shumaker Williams, PC
Camp Hill, Pennsylvania

PETER R. SPIRGEL, ESQUIRE
Flaster/Greenberg, PC
Cherry Hill, New Jersey

DAVID H. WILLIAMS, ESQUIRE
Morris James, LLP
Wilmington, Delaware

MICHAEL E. WILLIAMS, ESQUIRE
Krieg DeVault, LLP
Indianapolis, Indiana

- SPECIAL INTEREST ARTICLE –
on
Partner Compensation Standards: Eleven Factors to Consider

by Joel A. Rose

Compensation systems in the more professionally and financially successful firms don’t just “divide up the profits.”  Rather, they are used as a system for management.  Hence, for the “good of the firm,” partners in many of the more financially and professionally successful law firms have identified and defined standards against which partner performance will be determined.  Data is gathered about the performance of each partner’s contributions and this data is used to support the firm’s decisions about the objective elements of a partner’s compensation, along with applicable subjective contributions.

In an overwhelming number of firms that adhere to this compensatin philosophy, it is geneally understood by the partners, and reinforced through communications and actions taken by the compensation committee or the management committee, that the firm will not endorse an “eat what you kill” attitude.  Instead, the full panoply of standards agreed to by the partners will govern assessment of each partner’s performance.

We provided some of our clients with a checklist of applicable partner compensation standards.   The following are the eleven suggestions that a firm might weigh when attempting to compensate partners fairly.

1. Client origination: Contribution to origination and development of new clients clearly need to be recognized by the partners. Obtaining new business is critical to the firm’s continued well-being and growth. This is particularly true in the highly competitive market. Consequently, the firm must recognize the obvious importance that it attaches to this particular skill.

2. Client retention: Additional business from existing clients, often the product of quality work satisfactorily performed by members other than the partner who originated a client account, is critical to the firm’s continued well-being and growth. This is particularly true in today’s highly competitive market. It, therefore, must be recognized as a valuable contribution to the firm. This trait cannot be measured in objective terms only, since it is impossible in many cases to know exactly what or who was pivotal in expanding existing client business, i.e., minders, binders, etc. Partners must recognize, therefore, the need also to “credit” those attorneys responsible maintaining and continuing positive relations with existing clients. Performance of quality work and maintenance of solid relationships with clients go a long way in securing the reputation and influence of “rainmakers” within the firm.

3. Quality of work product and timeliness: Generally efficiency, effort, diligence, competence, dependability, and timeliness in handling work, either of a chargeable, firm-management, or business-development nature need to be recognized. “Quality” includes knowledge of applicable law, imagination, creativity, and innovation, ability to write clearly and persuasively, ability to analyze quickly and accurately, good judgment, ability to plan and implement legal strategies, oral communication skills, ability to handle the unexpected, ability to negotiate, and ability to handle complex matters.

A partner must be willing to delegate work horizontally or vertically to the appropriate expertise or level of competence to ensure that work is done when it is promised to the client and, of course, within deadlines provided by law.

4. Partner productivity: The partners need to recognize that defining the productivity of an attorney is ore complex than simply looking at computer numbers. Productivity is an aggregation generated by the hours the partner works, the efficiency with which the work is handled, the number of matters handled, the effort generatd through working with other lawyers in the firm, etc. This includes the value of time worked or delegated to others, the condition of the partner’s accounts receivable and work-in-process inventory, the extent to which he or she properly utilizes other attorneys and other firm resources, and the like. Productivity goes beyond “billable hours.”

5. Seniority: The partner must recognize the importance and value of tenure and seniority within the firm. A lawyer’s value to the firm over the years and his or her contribution to firm growth and success cannot be overlooked. Seniority is not age alone, nor is it only the number of years a lawyer has been with a firm. Rather, it means the number of years the partner has spent developing and maintaining clients, building and enhancing the firm’s reputation, and participating in the training and development of a cadre of lawyers who produce for the benefit of all the partners in the firm.

6. Firm management and leadership: Contribution to firm management, including efficiency and effectiveness in handling management assignments, is critical to the firm’s future and must be recognized. These are major responsibilities and our long-range success depends upon the skill and success of those people involved. The responsibilities of management require large amounts of time be devoted to the task. Management responsibility in the firm, however, also includes practice management, recruiting, marketing, as well as the handling of “mega” pieces of work. A partner involved in firm management responsibilities must treat the work with the same importance he or she would treat client work. While the partners must recognize these factors, to the extent that management responsibilities are acknowledged by the firm, these duties should be given some weight in determining the compensation. This factor should be limited to the managing partners and in special circumstances to those partners designated by the partners.

7. Compliance with firm policies: Partners must recognize willingness to abide by the policies of the firm. This includes:

1. Abiding by policies to keep time accurately; to turn in time sheets promptly; and to follow policy on billing, collections, etc.
2. Turning over client management and other controls to other lawyers when appropriate.
3. Contributing to the equitable and efficient distribution of work assignments and client contacts.
4. Specializing and developing expertise in particular areas to complement other abilities of the firm.

8. Personal relationships and teamwork: Practiceing a team concept, including participation in, and cooperation on, firm committees, etc. is expected; clinet sharing, client introductions, and overall promotion of harmony and good will among firm members is critical and absolutely expected. This includes:

1. Maintaining good working relationships with both legal and nonlegal personnel.
2. Lending personal suppport and enthusiasm to all personnel.
3. Respecting each lawyer’s professional and management judgments and good faith, withholding all criticism except as necessary for management decisions, and managing that side of the process in a private setting.
4. Respecting others’ contrasting views and respecting each partner as a person.
5. Promoting and cross-selling other firm lawyers.

9. Partners participate in firm activities and functions: Partners are obligated to attend firm social and professional meetings, participation in those management decisions and activities which appropriately fall upon partners, and participating fully in the “drudgery” side of the business.

10. Lawyer development and delegation of work: Time and effort in working with younger lawyers to increase their professional skills must be rewarded. This includes the training and development of associates and paralegals.

11. Professional and community activities: Contributions that enhance the firm’s image and prestige through maintaining good relations with other lawyers, speaking at CLE programs, publishing, participating in bar activities, and assuming bar and community leadership positions must also be recognized.

Partners acknowledge the importance of being visible in civic or charitable matters in the community and within the bar, because it is the right thing to do, it assists in developing new work, and it assists in fostering leadership training for young lawyers.