Law Practice Management Asked and Answered Blog

Category: Associate

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Mar 21, 2017

Retaining Valued Associate Attorneys – Conducting Exit Interviews

Question: 

Our firm is a fourteen attorney law firm in San Diego, California. We handle business transactions and litigation for business firms in the area. I am a member of the firm’s three-member executive committee. We have been experiencing associate attorney turnover for the past two years and don’t know whether it is due to more opportunities in the job market as the economy has improved or whether we have internal issues. We would appreciate your thoughts on the matter.

Response:

I suggest that in the future you conduct structured face-to-face exit interviews when associates resign their positions. You may want to even interview associates by phone that recently resigned and left the firm. Exit interviews can provide an opportunity to find out how you can retain your valued associates. Departing lawyers that are willing to be open regarding their experience with your firm can provide valuable feedback and information as to how your firm is viewed by your associates, why your associates are leaving, and what the firm can do to resolve issues and improve retention.

I suggest that you conduct either face-to-face or telephone interviews or as a last resort written confidential voluntary questionnaire. Questions might include:

  1. What influenced your decision to join the firm?
  2. Has the firm met your expectations? Describe?
  3. Were your work assignments aligned with your personal and professional goals and interests?
  4. Did you find your work assignments interesting and challenging?
  5. Were there particular individuals who had a substantial impact on the quality of your experience here? How did they impact your experience?
  6. Did you receive timely and quality feedback regarding your performance?
  7. What experiences did you find the most positive?
  8. Least positive?
  9. Is there anything that the firm could have done to improve your experience here?
  10. Were you satisfied with your compensation and benefits?
  11. Why did you decide to leave the firm?
  12. What factors influenced your choice of the new firm that you joined?
  13. Other issues or recommendations that you feel would be helpful for the firm to know.

After you have solicited feedback via exit interviews it is critical that you look into any issues reported, determine whether there is merit, and take appropriate actions that can be taken to resolve issues and improve retention.

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

Nov 01, 2016

Law Firm Associate Compensation – How to Deal With Overpaid Associates

Question:

I am the managing partner of a twelve attorney defense litigation firm in Santa Monica, California. We have four partners and eight associates. Associates are paid a salary. We have several associates that are being overpaid – they are being paid $150,000 – $180,000 and just barely generating $300,000 in working attorney fee receipts. I would appreciate your thoughts.

Response:

Do they have enough work? Do they put in enough hours? Are they good time managers and good timekeepers? If they have enough work – then meet with each of them – lay out the expectation of 1800 hours and consequences for non-achievement. If they have issues with time management or time keeping impress upon them the importance of improving these skills – in the meantime they may have to simply put in the extra time to get in the hours.

Suggested consequences:

  1. For those not meeting expectations. Manage and coach them in real time- but be firm about your expectations. You are paying them a salary for a certain level of expectations and performance. If there is not enough work reduce their working hours and compensation. Consider production in future salary reviews and bonuses. Don't pay them an incentive bonus to perform the work you are already paying them to do. In worse case situation you may have to reduce salaries.
  2. For those exceeding expectations. Reward them with a performance-based discretionary bonus. But when advising them of the bonus advise them specifically what it is for and that is it a variable bonus and award for specific performance exceeding expectation. 

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

 

 

 

Jun 22, 2016

Law Firm Associate Satisfaction and Retention

Question:

I am the owner of a twenty attorney litigation firm in Seattle. The nineteen associates are all in the same tier or category and are paid a salary plus bonus. Their time with the firm ranges from one to fifteen years. I enjoy sole ownership but I realize that to continue to grow and prosper I must make some changes. I have recently lost several associates that I would have liked to have stayed with the firm. I am also getting stressed having all of the management responsibility since I currently make all of the decisions. Several associates have told me that the morale is low. I welcome your thoughts.

Response:

Compensation and benefits is one determinant as to whether associates are satisfied with employment at a firm. However, compensation and benefits is not enough to motivate and retain top performers. Law firms must help their associates invest in their careers and motivate and help them develop competencies and skills to enhance their productivity. With the downsizing, push for 2000+ annual billable hour push, etc., associates are skeptical about their futures and feel they have no power or ability to influence their careers. Associates want:

Here are a few thoughts:

  1. Share more information about the firm where you can – its plans for the future, where it is heading, it's strategic plan, etc.
  2. Improve and open up communications with associates.
  3. If there are other tiers such as senior associate, non-equity partner, equity partner – prepare and share with your associates documents that outline what it means to be a member in each tier and what performance and other factors are required to advance to each tier.
  4. Improve your review process and incorporate goal setting with each associate.
  5. Consider a management advisory committee or other committees where associates can participate in firm management.

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

Oct 06, 2015

Law Firm Growth – Associate Hiring and Retention

Question: 

Our firm is a two partner firm located in Rochester, MN. We have been approached by a solo practitioner that wants to sell us his practice. The price and terms seem fair but we are concerned about staffing and managing the other office. His practice consists of himself and two staff members. We would have to maintain a second office, hire an associate or two for the office, and then manage both operations. We have recently tried to hire an associate without success by reaching out to targeted lawyers that we knew in our local area. Frankly, acquiring this practice is a little daunting. We would appreciate your thoughts.

Response: 

I believe the first issue is whether you are looking to grow the firm and are willing to undertake the additional management responsibilities that comes with growth. Some firms are ready for growth and others are not. Larger is not necessarily better. 

I would not let your unsuccessful associate hiring attempts discourage you from acquiring the practice if you desire to grow and the price and terms are acceptable. You may need to cast a wider net and be more focused in your efforts. Recently a two attorney firm in Mid-Missouri hired an associate from St. Louis. A two attorney firm in Central Kentucky hired an associate from Lexington, Kentucky. It may take some time but a concentrated recruiting effort usually pays off regardless where you are located – even in small communities. 

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

 

 

Aug 25, 2015

Law Firm Associate Compensation – Incentives

Question:  

I am the owner of a seven attorney litigation boutique firm in New York City. I am the only equity owner and the other six attorneys are associates. Currently all of the associates are paid a straight salary with raises given every year. I am considering freezing their salaries at current levels and putting in place an incentive bonus for individual revenue generation above a certain number. I am concerned that this approach might create an eat-what-you-kill mentality and destroy teamwork in the firm. Do you have any thoughts?

Response: 

I concur with an approach that ties compensation to individual performance such as working attorney collected fee generation up to a point. You are right that this could create more of an individualistic attitude and may spur internal competition which may not be all bad. However, since there are other aspects of firm contribution other than working attorney collections you might want to add a goal bonus component that outlines specific goals that are important to the firm and specifies specific dollars or percentage of salary for each goal with a maximum attainable per year. These goals must be specific, measurable, attainable, realistic, and on an agreed timeline. 

A goal bonus component will reward other non-financial contributions and serve as the glue that will minimize the potential for creating an eat-what-you-kill environment.  

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

Aug 04, 2015

Law Firm Associate Attorney Performance

Question:

I am the managing partner of a 8 attorney general practice firm in Chicago western suburbs. We have 5 partners and three associates. For years it was just the five partners all who started the firm together. In the last three years we added our associates. We are not making money from our associates and wondering what we need to be doing differently. One associates is logging 925 billable hours, one is logging 1200 billable hours, and the other 1400 billable hours. You thoughts are welcomed.

Response:

If these are full time associate positions and they have been with your firm a couple of years you should be getting 1600 – 1700 billable hours per year. If your firm does litigation – 1800+ billable hours. Some practice areas such as estate planning/elder law – range in the 1500-1600 hour area.

The starting place is setting expectations. During interviews with associate attorneys at client law firms I ask – what is your billable hour goal/expectation, etc. Frequently I am told that they have no idea or they tell me that they think that the expectation is such and such. Other times they advise me that the firm simply does not have a billable hour expectation. Of course the partners tell a different story and can't believe that their associates are not clear on billable hour expectations. 

Some firms put in place auto pilot type incentive bonuses based upon hours or dollars and believe that these bonuses in themselves will motivate performance and as a result billable hour expectations are not needed. Often this is simply not the case.

I believe that baseline expectations should be spelled out and measured monthly. These baseline expectations are the minimal requirement to remain employed and justify the base salary that the associate is being paid. If these baseline expectations are not been met, you must had some heart-to -heart discussions in real time. Outline the problem and consequences for non-compliance. 

The billable hours your associates are logging just won't cut it. If the work is there they simply must get their hours up to desirable levels. You might look into the reasons for the low hours – work ethic, time management issues, or problems with timekeeping. If there is not enough work – long term – you may have to consider reducing the work hours that you are paying for.

It sounds like you may not be adequately mentoring or training your associates. Consider performance reviews and active mentoring and coaching. Insure that you are providing adequate feedback to your associates. Your time investment in the short term will pay dividends in the long term. 

 

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

 

Apr 22, 2015

Law Firm Associate Attorney Billable Hours

Question:

I am a solo attorney in upstate New York. My practice is limited to estate planning, estate administration, and elder law. I have just hired my first associate and am trying to get a sense of the number of billable hours I should expect her to produce. You comments would be appreciated.

Response:

For many years the national norm for all firms has been around 1750 billable hours – much higher for litigation firms – often in the 1800-2000+ range. In my experience I find 1650-1700 a good target for most firms. However, I am finding that 1500 is more the norm for estate planning firms such as yours, especially if the attorney is also doing new client intake interviews and meetings. As a general rule attorneys should be billing approximately 70% of their total worked time. Of course this all assumes that you have adequate work to keep you both busy on a full load.

Lexis has published a couple of studies on billable hours that you might find useful - Billable Hours Survey Report, Non-Billable Hours Survey Report and Where Do all the Hours Go

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

 

Apr 14, 2015

Law Firm Associate Compensation – Bonus Tied to Performance

Question:

I am a partner in a 14 attorney firm in San Francisco and I serve on our associate compensation committee. Presently associate compensation is based on a salary and discretionary bonus. I would like to see a stronger tie to performance. I would appreciate your thoughts.

Response:

I believe that salary should be the primary element in your compensation system for associates. However, you might want to pay a performance bonus for working attorney fees in excess of a certain threshold – say three times salary. So, if you are paying an associate $100,000 you might pay a bonus of 20% for fees collected in excess $300,000 ($75,000 per quarter) and pay the bonuses quarterly. In order to reward other contributions you might want to tie additional bonus to accomplishment of specific strategic goals agreed to in advance each year by you and each associate. For example:

Thus, a maximum of 10% of salary could be received by the associate in goal bonus ($10,000 for a $100,000 associate) and $20,000 could be received if $400,000 in fees were collected – for a total of $30,000 in bonuses.

The goals should be require some degree of stretch and should be result orientated rather than activity orientated. Chair on a bar association committee is a result – attending bar associate meetings without being notices is an activity.

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

 

Sep 02, 2014

Law Firm Staffing and Growth Models – Lateral Associate Staffing & Contract Associate Staffing

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:

  1. Grow Your Own Associate Staffing
  2. Lateral Associate Staffing
  3. Contract – Staff Associate Staffing
  4. Lateral Partners (Equity or Non-Equity)
  5. Of Counsel (Various Approaches and Purposes)
  6. Mergers (Or Small Firm Acquisitions)
  7. Branching

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

  1. Less training and mentoring time
  2. Will become profitable more quickly – maybe a year sooner
  3. They will be more acceptable to clients than new untrained associates
  4. May be able to charge higher billing rates
  5. Tradeoff of higher salary vs. quicker profitability and cash flow – sooner profitability may pay for itself in the short term depending upon the salary differential.
  6. May generate new ideas and skill sets/approaches/insights that can benefit the firm.

CONS

  1. May have to de-train them. They may bring practices and approaches that are undesirable to the firm
  2. Higher salary initially and expectations for more
  3. Sooner expectations for non-equity and or equity partnership
  4. Clients may not allow you to charge any more for these associates than new young associates
  5. May not result in higher profitability and cash flow any sooner than new associates (probably will – but if not costs will be higher)

Contract – Staff Associate Staffing

PROS

  1.  Allows the firm to staff up when needed using a project/matter staffing approach
  2. Allows the firm to better manage fixed costs and manage contract staffing as a variable cost and match costs to staffing needs
  3. Allows the firm to evaluate candidates before committing to full-time positions
  4. Can be experienced and seasoned or not

CONS

  1. Cost per hour will probably be higher
  2. Turnover due to uncertainty as to their future

Other models to be discussed in upcoming posts.

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

 

    

Jul 08, 2014

Law Firm Partnership – Client Origination Expectations for New Associate Attorney

Question:

I am the sole owner of a four attorney general practice firm in Rockford, Illinois. I am 58 and realize that in the next few years I will need to begin implementing a succession and exit strategy by probably bringing in a partner. Two of the associates have no interest in partnership. However, the newest associate hired, who had his own practice for several years, does have such an interest even though he was recently hired. He is off to a good start as far as his production. However, I believe that he must be able to originate and bring in client business as well. So far his energy and focus has been totally on performing legal work. I want to get him started on the right track in order that I can make him a partner in a few years. Please provide any thoughts that you may have.

Response:

I agree that in a practice such as yours that client origination is important. I suggest that you start by laying out and discussing with him your expectations. In other words what will it take for him to become a partner – production, quality of legal work, billings, client satisfaction, and origination of new client business? Be specific and set specific goals for him and your expectations for him but also your timeline for partnership consideration. I would suggest five years. Personally, I believe his client origination goal at the five year point should be between $300,000 and $500,000 or higher. Establish baby step goals for origination – say $50,000 after year one, $100,000 after year two, $200,000 after year three, $300,000 after year four, $400,000 after year five. This will require that you track origination fee dollars in your billing/accounting system. Specific guidelines and rules regarding the attribution of origination credit should be developed. In other words an attorney should not receive origination because a client calls as a result of the firm's brand, advertising, etc. and he is passed the call because he is the only attorney in the office to take the call.

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

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