Question:
I am a partner in a four attorney law firm in a small town south of Waco, Texas. We have two partners and two associates. Our practice is limited to elder law, estate planning, and estate administration. The practice was formed thirty years ago by the two partners. The firm has built a strong brand in elder law and estate planning/administration and does a significant amount of business in several other counties. The firm is doing well financially. Our main problem is that we are overwhelmed with work and we need to hire an additional attorney. We have interviewed an attorney that is a partner in another two attorney law firm in the area that has some limited experience in small business corporate work and estate planning. However, most of his experience is in personal injury plaintiff, criminal, and family law. If he joins our firm he wants to continue to develop these practice areas as well as bring his personal injury, criminal, and family law cases with him. Bringing him on board could solve our lawyer staffing issue as well as increase our business. Should we bring him on board?
Response:
It sounds like the attorney you are considering is a trial lawyer and has limited experience in your practice areas and he wants to expand his personal injury, criminal, and family law practice. You need help in your core practice areas.
This would cause your firm to become more of a general practice firm rather than the specialty firm that you are presently. While there are general practice firms that handle elder law and estate planning/administration, more of the successful firms your size are specializing in these practice areas. Bringing these practice areas into your firm would totally change the firm’s brand, image, culture, and strategy. Marketing will be more complex. The firm will have to fund client advances for the personal injury cases. You need to revisit your strategy and ask whether you want to go this direction. Personally, I think you should pass. If you want to expand into other practice areas you might consider real estate and corporate. I have several elder law/estate planning firms that handle real estate and corporate work.
I would cast a wider net and look for additional candidates. I would start by looking for an experienced elder law/estate planning attorney. However, these attorneys are hard to find. You might have to hire and train a recent law school graduate.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the managing partner of a sixteen attorney insurance defense firm in Kansas City. Several of our insurance company clients have advised us that they are willing to send us cases in Texas. We have decided that we would like to establish an office in Texas. Our plan is to hire three lateral attorneys with seven to twelve years experience with Texas based insurance defense firms. We are not certain as to the best city to establish this office. We are thinking it should be a central location. We would appreciate your thoughts.
Response:
Unlike many states that have one or two major cities Texas has several including Austin, Dallas, San Antonio, Houston, Ft. Worth, El Paso, Corpus Christi, and others. Austin, Dallas, San Antonio, and Houston are all desirable locations for branch offices. Austin is more centrally located if your goal is to service the entire state.
I think it would be risky to simply try to guess as to the appropriate location. Your clients may have law firms they are using in certain areas of the state and may be looking for you to serve a need in a particular area of the state. They may not be willing to pay your travel expense if you are on the other side of the state. If this is the case this is the area that you need to be. I suggest that you have a discussion with each of these clients and ask them where their cases are concentrated and where they would like to see you have an office. This should dictate the office location. Hopefully, each of these clients are on the same page. If each of these client’s cases are concentrated in different geographical areas ask your clients whether they are willing to pay for travel related expenses from a central location. This should guide your location decision.
I would also make sure that these commitments are solid from each of these clients. I would get commitments from each client as to the types and number of cases they envision sending to you so you can properly assess the profitability of establishing a branch office. Do some research on the availability of experienced lawyer talent in the area. I would also give some thought as how you plan to integrate these Texans into your firm and culture. See my prior blog on branch offices.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
Our firm is a sixteen lawyer firm – eight partners and eight associates located in Memphis. We handle business transactional work and litigation for small to mid-size companies. However, for the past forty years our mainstay has been small community banks. With recent bank mergers and new banking regulations our banking business has dropped off significantly. We have reached a desperate stage and we must replace this business quickly or consider possible dissolution. We have talked with a possible lateral partner that has a $300,000 book of debtor bankruptcy business. Is adding a lateral partner a good strategy for us?
Response:
Lateral partner acquisition is a growth strategy being used by many firms today. However, many lateral hires are not successful as a growth strategy. In a recent survey conducted by Lexis-Nexis and ALM Legal Intelligence only 28 percent of the respondent law firms found lateral partner acquisition a "very effective" strategy for growth.
I suggest you start with the following two questions:
I would question whether debtor bankruptcy fits within the firm's overall business strategy. I also don't believe a $300,000 book of business satisfied the one plus one equals three rule.
A lateral strategy may be a good strategy for the firm. However, I believe you need to expand your search and it may be difficult to attract candidates given your present financial situation.
Question:
I am a member of a three member management committee of a 16 lawyer firm located in Akron, Ohio. We have 10 partners and 6 associates. Several of our partners are in their 50s and 60s. Recently, we have had discussions with a couple of potential merger partners and laterals and in all cases they have backed out advising us that they were uncomfortable with our balance sheet. What can we do to better position ourselves. We desperately need to bring in new talent with books of business?
Response:
First there are the obvious balance sheet items – bank debt, large tapped out credit lines, equipment leases and other liabilities. Then there are the items that are not recorded on the balance sheet – namely unfunded partner retirement buyouts and long term real estate leases. These are often major deal breakers in mergers and scare away laterals. If you have bank and other debt on the balance sheet work at cleaning it up. More importantly if you have unfunded partner buyouts begin either rethinking the desirability of these programs or begin funding this liability now with a goal of the liability being totally funded over the next five to seven years. Then shift to a retirement program that is totally funded. Unfunded partner retirement programs are becoming a thing of the past.
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John W. Olmstead, MBA, Ph.D, CMC
Two weeks ago I was asked by the managing partner of a 16 attorney insurance defense firm about staffing and growth models for an insurance defense firm and I listed the following models and discussed the first model – grow your own associate staffing.
Attorney staffing/growth models include:
This week I will outline the pros and cons for number 4 and 5 – Lateral Partners (Equity or Non-Equity) and Of Counsel.
Lateral Partners (Equity or Non-Equity
PROS
CONS
Of Counsel – Various Approaches and Purposes
Other models to be discussed in upcoming posts.
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John W. Olmstead, MBA, Ph.D, CMC
Last week I was asked by the managing partner of a 16 attorney insurance defense firm about staffing and growth models for an insurance defense firm and I listed the following models and discussed the first model – grow your own associate staffing.
Attorney staffing/growth models include:
This week I will outline the pros and cons for number 2 and 3 – Lateral Associate Staffing and Contract – Staff Associate Staffing
Lateral Associate Staffing
PROS
CONS
Contract – Staff Associate Staffing
PROS
CONS
Other models to be discussed in upcoming posts.
Click here for our article on hiring associate attorneys
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the managing partner of a 16 attorney insurance defense firm in Chicago Southwest Suburbs. We have 4 partners and the balance of our attorneys are associates – many of which have been with us for several years. We are on a growth spree and needing to hire more associates to handle client assignments. Associate hiring, mentoring, and training has always been a challenge for us and our clients are restricting us in the way we use associates on their files. I would appreciate your thoughts.
Response:
Attorney staffing/growth models include:
I will address the pros and cons of each model/approach in upcoming postings. I will begin by addressing the first one.
The traditional staffing model for insurance defense firms has been Grow Your Own Associate Staffing.
PROS
CONS
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John W. Olmstead, MBA, Ph.D, CMC
Question:
Our firm is a 16 attorney insurance defense firm in Central Illinois. We have 8 partners and 8 associates. We are in second generation, have inherited our existing clients from the original founders, and currently have no rainmakers. We need to bring some rainmakers into our partner ranks and have been discussing the possibility of merger. I would appreciate your thoughts.
Response:
While mergers can be a valid option making them work is often another matter. Research indicates that one third to one half of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone.
There can be a whole list of reasons for failure including poor financial performance, attorney defections, loss of key clients, and leadership and management issues. However, it has been our experience that most failures have been the result of poor cultural fit. The merging firms – after they have moved past conflict checks and excitement about new client potential – jump immediately to an examination of practice economics and the financials. They fail to perform proper due diligence on the people. It is critical that firms insure that cultural due diligence is a key component of the merger assessment process. Philosophies, personalities, and life styles should be generally compatible. The partners should like each other and the deal should make sense.
The question is not the what (merge) but the who (people).
I would suggest that you consider a lateral strategy as well as a merger strategy and let the WHO and right fit direct your thought process. Also insure that you have fully explored whether you have really developed the business development potential of the partners you have now.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am a partner in a mid-size firm in Memphis. We have 250 attorneys in the firm and I am considering making a move to a smaller firm. While I have a client base I am not sure how much business would go with me. I am currently making $600k in compensation. With my experience – 25 years plus – how important is a book of business initially? How big of a book will firms be looking for?
Response:
A portable book of business is critical – especially if you are looking to earn what you have been earning. A rule of thumb for many of the lateral moves that we have seen for compensation is 1/3 of book. You will need a book of $1.5 to $2.0 million to generate interest from major players.
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John W. Olmstead, MBA, Ph.D, CMC
Question:
I am the chair of our firm's executive committee. Our firm – located in downtown Columbus, Ohio – has 20 attorneys. In an effort to expand our practice and talent base as well as our geographic reach we are currently considering a seasoned lateral. We have a person in mind that currently works for a very large law firm. What suggestions do you have concerning starting the discussion and process?
Response:
Initially consider and decide upon the actual goals and objectives that you hope to achieve by bringing in the lateral and your particular requirements and specifications for the candidate. Start by focusing on the person – then move to the other areas that must be considered. It is critical that you get the right person on the bus.
Here are a few ideas to help you get started:
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John W. Olmstead, MBA, Ph.D, CMC