Law Practice Management Asked and Answered Blog

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Apr 30, 2020

How are Law Firm’s Doing During COVID-19

Question: 

Our firm is a four lawyer estate planning firm in Bakersfield, California. As you know our state has been under stay at home orders for sometime. We have everyone except our receptionist and one attorney working remotely from their homes. We are doing much better than I expected. In fact we are getting new clients at close to our usual number per month and our fee collections have actually exceeded our normal monthly fee collections. How are other firms doing?

Response: 

It depends on practice area and firm size. Many of the very large firms are facing dramatic work slowdowns and are laying off attorneys and staff and or cutting partner, associate, and staff compensation. However, many small consumer facing practices such as estate planning/probate, general practice, family law, and personal injury advise us that they are doing well in terms of fee collections and new matter signups. Intellectual property firms also advise us that they are holding their own.

The biggest issues for many of these small firms have been:

Small firms that are “paperless” and are using cloud-based billing and practice management systems are having the easiest time of working remotely.

Don’t get too comfortable based on March and April’s numbers. I believe that May or June will provide you with a better glimpse of the future both in terms of new business and fee collections. There could have been initial client demand based on the need for people to get some things done in preparation for the virus lock-down and you could see in May or June client demand dropping off. Also keep in mind that some of your fee collections were based upon accounts receivable and prior unbilled work in process. In addition, some of the billable work for the past month or so was probably performed on matters or cases that you already had in the pipeline.

May or June may give us all a better picture.

Good luck!

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

 

Mar 26, 2020

Law Firms Working Remotely During Covid-19

Question:

I am the sole owner of an estate planning firm in downtown Chicago with four other attorneys and six staff members. Since we are considered by the state of Illinois to be a  necessary business service most of us are still working at the office. I know that many firms are working remotely. How is that working out and what are the specifics of how to make that work – new client intake meetings, work on client matters, coordination with attorney and staff team, and client document signings?

Response: 

It is working out very well for many firms and better than expected. Here is what one of my estate planning law firms with four attorneys and seven staff members is doing:

  1. The firm has the receptionist at each of its two offices working at each office.
  2. The receptionist at each office answers the phones, makes appointments for new clients, and since the firm has landlines emails remote attorneys and staff their phone calls/messages who in turn return phone calls.
  3. The receptionist at each office receives mail at the office, scans the mail, and emails to appropriate attorneys and staff. Incoming client documents are scanned to client files. Vendor invoices are scanned and emailed to the firm administrator who in turn updates the billing and bookkeeping systems.
  4. The receptionist at each office makes remote bank deposits using the remote deposit scanner provided by the bank. A copy of the deposit report is emailed to the firm administrator who updates the billing and accounting systems.
  5. All new client intake interviews are being done over the phone or via Skype, Zoom, or GoToMeeting.
  6. Client document signings are being postponed or done at the office in a special sanitized room after clients are screened.
  7. The firm has been paperless for some time and attorneys and staff are able to access form documents and client files remotely. GotoMyPC was setup on each attorney and staff member’s PC in the office and access is obtained to the firm’s server via GotoMyPC.
  8. The firm administrator initiates the billing process by generating prebills in pdf and emailing to attorneys who in turn markup with comments on the pdf. The administrator makes changes, generates final invoices, email to clients that receive email invoices, and emails to the receptionist at each office who in turn mails to those clients that receive paper invoices.
  9. Virtual team meetings are held weekly.
  10. A new employee hired before Covid-19 will be trained virtually

This approach is working pretty well. The firm has sufficient work in process to keep people working and the firm, although new client calls are down, the phone is still ringing are the firm is signing up new business.

It would have been easier had the firm had cloud-based billing and accounting systems as well as VOIP phone system. However, the procedures and protocols the firm is taking is working reasonably well.

Personally, our firm went remote 20 years ago and we don’t miss the days of high office space cost, overhead, wasted commute time, etc. At that time I built out and dedicated 1,000 square feet of space in our home and we have all the systems (phones, file servers, conference room, etc.) that would be found in a typical office. We supplement this with a virtual arrangement with Regus.

Good Luck to all during this challenging time.

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

 

Nov 12, 2019

Partner Compensation in Law Firms – Objective vs Subjective Approaches

Question: 

Our firm is at a crossroads concerning partner compensation. We are a twelve lawyer firm in Richmond, Virginia with nine partners and three associates. We are in our second generation of partners as the original founders have retired over the years. We do not have a managing partner or management committee – management decisions are made by all the partners. Our compensation is based upon compensation participating percentages set at the beginning of each year based upon the recommendation of a rotating member compensation committee recommendation which must be approved by the full partnership. These percentages are then used to allocate each partner’s share of firm profit. Monthly draws are taken against projected allocations and the calculations are trued up each quarter and at the end of the year. There is nothing in writing and it is unclear what is taken into consideration by the compensation committee. However, in general the primary metric is individual working attorney production collections. Supposedly, other metrics and subjective factors are taken into consideration but no one knows what they are. The majority of the partners have been relatively happy with the system but a few are not due to the vagueness of the system. I am wondering whether we should move more to a formulaic approach. What are your thoughts?

Response:

The trend in compensation, particularly in larger firms, is toward subjective or hybrid approaches and a movement away from strictly formulaic – eat-what-you-kill – objective systems. These systems are fine in “lone ranger” firms but often are unsuccessful in firms that are or want to be “firm first” or “team based” firms. The unhappiest partners that I see are in some of the firms with eat-what-you-kill objective systems. It sounds like your system has worked fairly well and a majority of the partners have been satisfied with the system. However, it may not be reinforcing the behaviors that you would like to instill in your partners if the only metric used, or is perceived as the only metric being used, is working attorney collections. Your firm is very partner top heavy and I would not be surprised if your utilization of paralegals as effective billable revenue producers is minimal. You are encouraging personal production period. What about delegation, new business origination, leadership, contribution to firm management, mentoring and training of associates, etc? Subjective or hybrid approaches often do a better job of dealing with overall contribution to the firm if they are setup properly.

I would suggest you fine tune your existing system. Consider the following:

  1. Put your system in writing. Outline the performance factors that are considered and the general importance or weights of each. This includes objective or directly measurable factors and the more subjective or harder to measure factors.
  2. Make more of the intangible or subjective factors measurable by requiring that a personal plan be submitted by each partner and reviewed with and approved by the compensation committee. This plan should contain specific measurable goals and objectives that are specific, measurable, attainable, rewarded in the compensation system, and on a specific completion timeline.
  3. Require that the compensation committee conduct personal partner interviews each and every year prior to their deliberations on compensation. This interviews should be mandatory. Self evaluations with related narrative should be provided by the partner being interviewed prior to the interview and the approved plans should form the basis for the discussion and reviews.
  4. The full partnership should either approve – up or down the compensation committee recommendation – not be allowed to pick apart or modify. If the partnership does not approve the committee’s recommendation the committee starts over and submits another recommendation. There should be a provision for what happens if a decision cannot be make – for example used last year’s percentages, etc.
  5. There should be an appeal process if a partner has a complaint with regard to the decision concerning his or her compensation.
  6. Consider extraordinary bonus pool for exceptional performance rewards.

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

May 15, 2019

Challenges in Law Firms that are Family Businesses

Question: 

I am a partner in a husband/wife owned law firm in Seattle, Washington. We have four other associate lawyers in the firm. One of these lawyers is our son and the other is the daughter of my wife’s (who is my partner) brother. We have four staff members of which one is also a family member. We are a general practice firm and we have been in operation for ten years. While the firm has done well over the years we have had our challenges. Office problems seen to follow us home and both staff employees and non-family attorneys are alienated. We have been experiencing turnover of both staff and attorneys. What should we being doing different?

Response: 

I have seen family practices go both ways – successful and not so successful due to the conflict and drama that can exit in family practices if they are not setup and managed properly.  A few of the challenges and issues that can arise in family owned law firms include:

Family practices must first start by recognizing that there are three social systems at play – the family, the law firm business, and overlap of the two. Unless boundaries and rules are established there will be conflict and tension. Family roles and roles in the law firm should be be developed. Here are a few guidelines that family practices should consider adopting:

  1. Develop family and law firm charters – sort of like job descriptions – that outlines roles and responsibilities in the family and the law firm.
  2. Establish criteria for who in the family can join the firm.
  3. Determine education and experience requirements for joining the firm.
  4. Determine how titles of family members in the law firm will be determined.
  5. Determine how job performance will be evaluated.
  6. Determine consequences for inadequate performance.
  7. Determine how compensation will be determined.
  8. Leave law firm business at the law firm – don’t bring it home.

Here is a link to an earlier blog in re children of partners who are attorneys working in law firms.

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

 

Mar 06, 2019

Law Firm Financial Management – Managing the Firm’s Inventory

Question: 

Our firm is a eighteen attorney firm in Portland, Oregon and I am the recently hired firm administrator. This is my first law firm. My previous employment was with a small manufacturing and distribution company. I have read some articles that discussed the importance of managing inventory in a law practice. Does a law firm even have inventory? I would appreciate your comments.

Response: 

Inventory (or pipeline) management is a term used in the management consulting profession to refer to the process by which you continually evaluate your active opportunities (prospective clients to booked clients) for their balance of QUALITY and QUANTITY. The goal is to continually stay on top of the overall health which is a full pipeline. Pipeline management allows client relationship managers to more accurately forecast fee revenues, better staff and manage client engagements, and close more client business.

I often also refer to Inventory or Pipeline Management in law firms in the context of using financial dashboards by which the individual charged with financial management responsibilities is continuously aware of significant changes in the firm’s Inventory or Pipeline (from prospects to cash):

By comparing these dashboard statistics to a prior month, quarter, or year – you are able to avoid financial surprises down the road.

Law firms do have inventory and that is their unbilled work in process (matters in process) or in the case of a contingency fee firm I usually refer to work in process as cases in process.

How well this inventory is managed – managing what is in front of you rather than what is behind you is a critical component of financial management and has a major impact upon the profitability of the firm. However, this responsibility falls primarily to the attorneys responsible for the matters. However, in your capacity as administrator you can provide the reports and oversight to help keep them on course.

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

 

 

Oct 31, 2018

What Law Firms Must Do to Remain Competitive in the Internet Age

Question: 

I am the managing partner of a twelve attorney family law firm in Kansas City, Missouri. We have been in practice going on thirty years. Over the last ten years we have shifted more of our advertising from print directories and advertising to the internet. Today virtually all of our work comes from the internet. While to some extent this has been a blessing it has also been a curse as we must continue to make investments in search engine optimization, update the website, pay to be included in online directories, etc. It is a vicious circle and we are losing business to new attorneys just starting out that are putting up first class websites and making online investments.  I would appreciate your thoughts.

Response: 

The internet as well as advances in information technology has and will continue to be the key driver forcing change in the legal marketplace as well as other segments and our daily lives as well. Shopping malls are disappearing from our communities and department stores are struggling for survival. Being the king of the hill or the biggest is not the strategic advantage that it once was. The internet is leveling the playing field in many industries as well as law firms.  There are new opportunities and new competitors. Consider the following:

  1. Everything is being commoditized. More practice areas are moving down the value curve and prices are becoming more price sensitive.
  2. Disintermediation of traditional delivery channels. The internet provides new access to information and is eliminating the middleman. It is impacting how we shop, bank, conduct business, and pay our credit cards and taxes. It is also impacting how clients locate and select lawyers and how legal services are delivered.
  3. Our society is becoming – more and more – a DIY (Do it Yourself) nation.
  4. Lawyers competitors are just a click away whether they be legal process outsourcing providers (LPO) in India, other lawyers in your state – but further away and servicing clients remotely, legal publishers, or online form providers.
  5. New client opportunities for your may also be just a click away.

Challenges and Questions to Think About

  1. How do you deal with commoditized transactions?
  2. How do you tie yourself to your client in an online world?
  3. How do you compete with new models and approaches to the delivery of legal services?
  4. How do you compete with virtual law firms?
  5. Would you consider adding a online delivery component to your traditional brick and mortar practice?
  6. Should you consider other practice areas?
  7. Should you consider expanding your geographical reach in areas where you are licensed and other areas by forming relationships with licensed attorneys in those areas.

Here are a few suggestions:

  1. For your practice area you should continue what you are doing and maximize your online and electronic marketing investments.
  2. Online reviews are becoming more and more important. Have a protocol in place that asks clients for reviews upon completion of their matter. Make it easy for them by providing them with appropriate online links.
  3. Your website does not do enough to demonstrate expertise. I do not see any evidence of attorneys publishing any articles, serving on law related committees, or chairing such committees pertaining to family law. There are no testimonials from past clients or others on the website. Get your attorneys writing articles, get them published where you can, and get them posted to your website. Get testimonials from past clients and referral sources and post them to your website. Also get your attorneys involved in bar and other law related associations. Do more to build the brand of the firm and the individual attorneys. Many of my family law firm clients still receive a bulk of their business from past client referrals and referrals from other attorneys.
  4. Consider satellite offices in some of the suburban communities in Missouri and Kansas. I have family law firm clients that have been quite successful with multiple offices – staffed and not staffed.

Even in the age of the internet expertise, professionalism, and reputation is important. Do all you can to convey this through your website and your initial communications with clients.

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

Jan 23, 2018

Client Satisfaction Surveys in Law Firms

Question: 

Our firm is a seventeen attorney firm is San Diego. We are a boutique business litigation firm and we represent companies of all sizes. We represent several Fortune 500 companies. I am a member of our three member marketing committee and during our last meeting one of our members suggested that we consider a formal survey of our clients. What are your thoughts regarding client satisfaction surveys? Is this something we should consider?

Response: 

Personally, I believe that if you represent institutional clients such as yours, that soliciting feedback from clients and acting on that feedback is one of the best marketing/client development investments that a firm can make. During a recent client satisfaction telephone interview with a corporate client of a law firm a client told me, “If our lawyers would pay just a little more attention to us, take us to lunch once in a while – without billing for the time . . .if they would treat us like they care … I’d give them all of our business in the entire state of California.” Statements of this sort are not at all uncommon in client satisfaction interviews. Of all investments of a  firm’s marketing budget, none is as cost effective as a client satisfaction survey.

A law firm’s existing clients are important source of continuing and new business for the firm. The most efficient way to bring in business is to sell additional work to existing clients.

Surveying the firm’s clients is an effective method of monitoring satisfaction. It is the first step towards improving client relations and increasing revenue from the current client base. A well-designed client satisfaction survey can help a firm do the following:

For firms that represent institutional clients I believe that structured telephone interviews are the best survey method.

I have had situations where law firm clients have advised me that they had stopped sending files to the firm due to a relationship issue with a particular partner and the law firms, after being appraised of the issues, were able to resolve the problem and repair the relationship.

There are several articles on our website – see links below – that discuss client satisfaction survey programs and how to get started.

Click here for our blog on client service

Click here for our article on client satisfaction

Click here for our article on client surveys 

Click here for our article on analyzing survey results

Click here for our article on developing your client service improvement plan

Click here for our article on tips for rewarding and recognizing employees

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

 

Feb 14, 2017

Law Firms Moving to the Cloud

Question: 

Our firm is a twelve-attorney business litigation firm in Sacramento, California. I am one of three members on our technology committee. Our IT infrastructure consists of an in-house Microsoft file server, a separate Microsoft Exchange e-mail server, document management as well as time billing and accounting software. Our documents are stored locally and managed by the locally installed document management software. Several of our partners have talked with other firms that are operating totally in the cloud. We would appreciate your thoughts on whether moving to the cloud is something that we should consider?

Response: 

It would be interesting to know the size of firms that your partners have been talking with. I am seeing many solo and very small firms operating completely in the cloud using cloud-based time and billing applications such as Clio, Rocket Matter, and QuickBooks online with their e-mail hosted using Microsoft Office 365. Some are using products such as DropBox and Microsoft One Drive to store their documents in the cloud. These billing applications do not provide the functionality and reporting that larger firms require and as a result larger firms are still using systems that firms have been using for years. Some firms that are using these systems are having them hosted in the cloud. These firms have no premises file servers. All of their data is hosted in the cloud – applications, documents, and e-mail. (Note this is different that cloud-based applications).

Firm’s your size are taking a more cautious approach to moving to the cloud. Many firms have large investments in their existing hardware and software and also have concerns about security and confidentiality issues. While it is tempting to look to the cloud as our savior from constant hardware and software upgrades as well as IT providers, moving to the cloud should not be explored without doing your homework.

Personally, I believe that in many cases the cloud may be more secure than the security that exists in many law firms on premises systems. Law firms and law departments are increasingly adopting the cloud. Fifty-six percent of the Am Law 200 firms polled in the Partnership Perspectives Survey use some form of cloud computing and 47 percent of those polled in the 2016 ITLA/InsideLegal Technology Purchasing Survey predicted that over a quarter of their firm’s software and service offerings could be cloud-based in the next one to three years. Sixty-one percent of small firms polled in the ILTA survey said that over half of their firm’s software could be cloud-based in the next one to three years.

Here are my thoughts and suggestions:

  1. Don’t rush off without doing due diligence on the application or hosting vendor. Checkout their security both while your data is in transit and at rest on their computers. Read all their whitepapers and contracts. Check references.
  2. Be careful of implmenting existing billing and accounting cloud-based applications. You may be going backwards until these systems mature and incorporate many of the features and reporting needed by larger firms.
  3. Don’t go with the new kid on the block. Insure that you go with a vendor that has staying power in the market.
  4. Take baby-steps – you might want to start with:
    1. Having your e-mail hosted.
    2. Later – implement a cloud-based document managment system.
    3. Later – have your existing billing and accounting applications hosted with a cloud provider.
  5. See where the time-billing and accounting cloud-based applications are in a few years and whether you should consider moving to such a system.

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

 

 

 

Dec 08, 2015

Law Firm Merger – How Do Firms Handle Integration of Assets

Question:

I am the managing partner of our six attorney civil litigation firm in Lexington, Kentucky. We are in the early stages of merger discussions with a fourteen attorney firm in Lexington. My partners have asked me how other firms integrate their assets when the merger become effective.  We would appreciate your thoughts?

Response:

A variety of approaches are often taken in upstream mergers.

One approach is to transfer all of the assets and liabilities to the other firm and receive a credit to your capital accounts for the value of the contributed assets/liabilities with a check from the other firm if the value of the assets contributed exceed the required capital contribution based upon the ownership shares that you are being offered in the merged firm.

The more common approach that I see taken in upstream mergers is for the smaller firm to retain the firm cash accounts, accounts receivable, work in process, and sell the fixed assets (furniture and equipment) to the other firm for cash or receive a capital account credit for the value of the fixed assets contributed. If additional capital is required, each partner would write a check to the merged firm for their capital contributions. Your existing firm would be responsible billing out old work in process and collecting old receivables and when the income is received these funds would be deposited in your existing bank accounts and entered in your old books. You firm would also be responsible for accounts payable and other liabilities that exit prior to the merger.

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Click here for our article on mergers

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

 

 

Aug 04, 2014

Law Firm Client Telephone Satisfaction Interviews in Insurance Defense Law Firms

Question:

I am the chair of our firm's marketing committee. We are a 24 attorney insurance defense firm in Houston. While we solicit feedback from some of our larger insurance company clients at lunch and face to face meetings – the sessions are not structured, data is not really tabulated, and only a handful of clients are usually involved. We have been thinking of embarking on a more structured process. I would appreciate your thoughts:

Response:

Our firm recently completed client satisfaction interviews for several of our insurance defense law firm clients. Here are a few quotes and a summary of what these insurance company law firm clients told us:

Much can be learned by talking to your clients. Structured telephone interviews conducted by a neutral in-house law firm marketing employee or outside third party can provide many surprises as well as answers. Client satisfaction interviews can be the best marketing investment that you can make.

Click here for our blog on marketing 

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

 

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