Law Practice Management Asked and Answered Blog

Category: Admission

Sep 18, 2018

Law Firm Shareholder Admission Criteria

Question:

Our firm is a small firm of two shareholders and two associates based in Bakersfield, California. The firm was formed fifteen years ago by the two existing shareholders. We have never made any additional shareholders but we believe that we owe it to our associates to have some guidelines as to what we are looking for in future shareholders. A partner track program/document if you will. Do you have any suggestions?

Response:

I believe you should have at least a general set of guidelines laid out in writing. For example:

Associates that have been seven years in practice and two years or longer employment with the firm as an attorney and consistently performing as outlined below are eligible for Equity Shareholder level review based upon equity shareholder level openings, competencies attained, performance, and behavior.

Seven Years in Practice and Two Years or Longer Employment with the Firm as an attorney.
Individual Production Requirement
1. Annual Billable Hour Expectation
  1. The firm has an annual billable expectation of 1800 billable hours.
2. Origination Fees Collected
  1. The firm has an expectation of $100,000 or more per year for a minimum of three consecutive years.
3. Generated (Working Attorney) Fees Collected
  1. The firm has an expectation of $300,000 or more per year for a minimum of three consecutive years.
4. Responsible (Managed Revenue) Fees Collected
  1. The firm has an expectation of $400,000 or more per year for a minimum of three consecutive years.
Competency Level Attainment at Shareholder Level
1. Knowledge
  1. The firm expects associate candidates to be performing at shareholder level.
2. Skills & Abilities
  1. The firm expects associate candidates to be performing at shareholder level.
3. Work Management
  1. The firm expects associate candidates to be performing at shareholder level.
Character and Commitment
1. The firm expects associate candidates to have the commitment and character that the firm expects of shareholders. This includes a “firm-first” and teamwork attitude and behavior. Lone wolfs and mavericks will not be considered for equity shareholder status.
Professionalism
1. The firm expect professionalism in the firm of dress, appearance, and behavior in dealing with personal in the firm, clients, prospective clients, referral sources, and colleagues and other professionals outside the firm.
Client Service and Business Development
1. The firm expects associate candidates to be performing at shareholder level.
Supervision and Mentoring
1. The firm expects associate candidates to be supervising and mentoring junior associates, paralegals, and staff.
Client Satisfaction
1. The firm expects associate candidates to have a client satisfaction rating average over the last three years of 4.0 (maximum rating is 5.0) or higher as measured by the firm’s client satisfaction questionnaires that clients complete at the conclusion of a matter.
Other Factors Considered – Associates should:
1. Be willing to share in the risk and reward of ownership and invest time and capital in the firm.
2. Have a firm-first orientation and share the vision and core values of other equity owners in the firm.
3. Add value to the firm and pay for themselves, cover their costs and share of the firm overhead, and generate enough work to keep other attorneys busy.
4. Act like owners of small businesses.
5. Contribute to the management and marketing of the firm.
6. Mentor younger attorneys.
7. Follow firm policies systems and procedures.
8. Contribute capital, sign for the office lease, firm credit line, and share in other financial obligations of the firm.
9. Be good marriage partners considering the other equity members in the firm.
10. Exhibited the ability to supervise junior associate attorneys, paralegals, and staff.
11. Successfully tried cases (litigation attorneys).
12. Demonstrated the ability to either originate new client business or developed such a relationship with existing clients or referral sources that clients have sent business to the firm as a result of the relationship.

Associates selected for admission should be notified by the Executive Committee/Managing Shareholder and a meeting will be scheduled to discuss whether the Associate has a tentative interest in taking this step. If the Associate is interested in taking this step and after executing a non-disclosure agreement, the Executive Committee/managing shareholder should then prepare a detailed proposal outlining the mechanics and details required for admission. The proposal will include firm financial information, the buy-in or capital contribution requirement, and a copy of the firm’s shareholder agreement and equity shareholder compensation plan.

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John W. Olmstead, MBA, Ph.D, CMC

Feb 21, 2017

Law Firm Equity Partnership/Admission Requirements

Question:

Our firm is a sixteen-attorney business law firm in Cleveland, Ohio – six equity partners and ten associates. We the equity partners have been discussing putting in place an associate attorney career advancement program and outlining equity partner admission requirements. Can you share your thoughts on what we should be considering and how we should get started.

Response:

You might want to consider developing a competency model. Rather than using a timeline – how long an associate has been with the firm – base career advancement to senior associate, non-equity partner, and equity partner upon achievement of competencies at various levels. These include:

Core competencies and success factors which are the traits required to be successful at your firm.
Performance factors or criteria which are the specific skills, traits, and behaviors, that together describe the full behavioral dimensions of the core competency.
Behavioral elements which are the phrases that offer descriptions of distinct, observable behaviors, that would be exhibited by lawyers who have mastered a performance factor.
Levels or stages. For example, Level 1, Level 2, and Level Three. Level three might be the level that would be required to be considered to be eligible for equity partner.

Examples of core competencies might be legal excellence, client orientation, leadership, career commitment, etc.

In addition to competencies typically required to be a Level Three attorney equity membership has additional requirements and obligations. For example:

Equity owners will be sharing in the risk and reward of ownership and will invest their time and capital in the firm. They will have a firm-first orientation and they will share the vision and core values of other equity owners in the firm.
Equity owners must add value to the firm. They must not just be good worker bees – they must pay for themselves, cover their cost and their share of the firm overhead, and generate enough work to keep other attorneys busy.
Equity owners must be client finder, minders, and grinders.
Equity owners must act like owners of small businesses.
Equity owners must contribute to management and marketing of the firm.
Equity owners must mentor younger attorneys.
Equity owners must follow firm policies, system, and procedures – no lone rangers.
Equity owners should contribute capital and sign for the office lease, firm credit line, and share in other financial obligations of the firm.
Finally, future equity owners must be good marriage partners considering the other equity partners in the firm.

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