Law Practice Management Asked and Answered Blog

Category: Staff

Feb 21, 2018

Law Firm Staff Work Distribution Analysis

Question: 

I am a new firm administrator with a thirty-five attorney litigation firm in Los Angeles, California. In my accounting department I have seven staff members handling a variety of tasks. My partners are concerning that we are inefficient and over staffed. I am having a hard time finding where to start so to get a handle on  this issue. Please provide any information that you are willing to share.

Response: 

There are questions that you must ask yourself in order to analyze the work distribution of your accounting department. Such questions as the following will help you in knowing what to look for:

  1. What activities take the most time?
  2. Is there any misdirected effort?
  3. Are skills being used properly?
  4. Are you staff doing too many unrelated tasks?
  5. Are tasks spread too thinly?
  6. Is work distributed evenly?
  7. Are the right people on the bus?

Before you can analyze your accounting department you must be able to see clearly, in one place, all the activities of your accounting department and the contribution of each employee on each activity. A work distribution chart is the easiest and best way to arrange these facts in simple form. A properly made work distribution chart will help you determine if the largest time of your staff is devoted to the major function of your department. (Operations list down the left rows and staff names listed across the columns) It may indicate that more time is being devoted to other functions than is necessary. A function or task may require a more detailed study, as might be indicated where total hours seem unreasonable. You may discover that your accounting department is spending too much time on relatively unimportant or unnecessary work. Misdirected effort appears on the work distribution chart when staff are involved in tasks not contribution directly to the mission of the accounting department.

Here is an overview of the process:

  1. Have each staff member prepare a task list.
    1. List specific and clear activities for a specific time period with time listed for each activity.
    2. Task lists should cover a complete cycle of work. (Weekly, Monthly, etc.)
  2. Determine operations performed
    1. Prepare an operations list grouping related or same kind of tasks (operations).
    2. Check operations list against breakdown of department mission.
  3. Complete the work distribution chart
    1. Complete heading.
    2. List operations.
    3. Enter staff names in a column of the chart.
    4. Enter tasks, time, and work count for each operation.
    5. Total the columns and rows.
  4. Examine the present work distribution
    1. What operations take the most time?
    2. Are they essential?
    3. Is there misdirected effort?
    4. Are skills used properly?
    5. Are you staff doing too many unrelated tasks?
    6. Are tasks spread too thinly?
    7. Is work distributed equitably?
    8. Is the department overstaffed?
    9. Are the right people on the bus?
  5. Improve work distribution
    1. Consider eliminations, additions, and rearrangement of tasks and operations.
    2. Prepare a proposed work distribution chart.
    3. Discuss proposed changes with your partners.
    4. Put proposed changes into effect.

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

 

 

Feb 14, 2018

Compensation Ideas for Law Firm Staff – Goal Bonuses

Question: 

I am the firm administrator with a ten attorney firm in Long Beach, California. I really enjoyed reading your blog – Law Firm Compensation – Bonuses for Staff, dated December 27, 2016.  

I really like your approach of tying bonuses to measurable outcomes. Have you used other approaches other than percentage of salary? Can you give additional examples of specific goals that would be appropriate for a bookkeeper, office manager, or firm administrator?

Response: 

Research and experience tells us that employment expect the following five things from management:

  1. Mutual agreement as to what is expected.
  2. The opportunity to exercise his or her ability.
  3. Feedback on his or her performance.
  4. Direction when needed.
  5. Reward – compensation in equal measure to his or her contribution to the firm.

The problem with staff employee is quantifying and measuring performance so that bonuses are not “Santa Clause” bonuses. A bonus system tied to measurable goals/objectives can, as outlined in my earlier blog, eliminate the problem of bonuses being considered by employees as an entitlement.

Other approaches that some of my law firm clients have used is to develop a limited laundry list of goals with a specific dollar amount tied to each goal for specific positions such a bookkeeper, firm administrator, etc. Typically, there is a cap on how much can be earned per year – 5% – 10% of salary. At the beginning of each year the employee selects the goals that they plan on working on for the upcoming year, obtains approval from his or her supervisor, and both parties sign off on a goal plan for the year. The goals must be SMART goals. Bonuses are paid as goals are completed.

Here are some additional examples:

Bookkeeper 

  1. Reduce accounts receivable over 90 days by 25%
  2. Write and implement an accounting manual by December 31 of this year.

Firm Administrator 

  1. Manage the firm within the approved expense budget for the year.
  2. Reduce staff turnover during the year by 25% below an average of the past three years turnover history.
  3. Reduce headhunting fees for staff by 40% below an average of the past three years.
  4. Write and implement an Employee Handbook by December 31 of this year.
  5. Implement a new time and billing system by December 31 of this year within time and cost budget.

The key to the goals is that they are important to the firm and are measurable.

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

Jan 17, 2018

Attorney and Staff Performance Compensation

Question: 

I am the firm administrator for a twenty-two attorney firm, twelve partners and ten associates, in downtown Chicago. I have been with the firm for seven years. The firm pays the associates and staff a base salary plus a end of year discretionary bonus which is the same for all staff and associate attorneys. The firm does not do performance reviews and honestly I believe the raises are simply an annual cost of living adjustment and the bonus at the end of year a gift. Many of our associates and staff have been here for many years and salaries are getting out of control. We would welcome your thoughts.

Response: 

There are two basic compensation philosophies, which should be seen at opposite ends of a continuum. At one end is the entitlement philosophy and at the other end is the performance-orientated philosophy.

Entitlement Orientation

The entitlement philosophy can be seen in many firms that traditionally have given automatic increases to their employees every year. Further, most of those employees receive the same or nearly the same percentage increase each year. Firm’s and employees that subscribe to the entitlement philosophy believe that employees who have worked another year are entitled to a raise in base pay, and that all incentives and benefit programs should continue and be increased, regardless of changing economic conditions. Commonly, in firms following the entitlement philosophy, pay increases are referred to as cost-of-living raises, whether or not they are tied specifically to economic indicators. Following an entitlement philosophy ultimately means that as employees continue their employment lives, firm cost increase, regardless of employee performance or other firm competitive pressures. The firm acts as Santa Clause at the end of the year, passing out bonus checks that generally do not vary from year to year. Therefore, employees “expect” to receive the bonuses as another form of entitlement.

Performance Orientation 

When a performance orientated philosophy is followed, no one is guaranteed compensation just for adding another year to firm service. Instead, pay and incentives are based on performance differences among employees. Employees who perform well get larger compensation increases; those who do not perform satisfactory receive little or no increase in compensation. Thus, employees who perform satisfactory should keep up or advance in relationship to their peers in the labor market, whereas poor or marginal performers should fall behind. Bonuses are paid based on individual, practice group, or firm performance results.

Few law firm are totally performance-orientated in all facets of their compensation systems for staff and attorneys. However, more and more firms are breaking the entitlement mode and associate and staff compensation systems are being redesigned for that are performance focused. Santa Clause bonuses are being discarded and replaced with measurable performance bonuses. Salary increases are being tied to increases in skills, competencies, and overall performance based upon performance reviews.

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

 

 

Apr 04, 2017

Law Firm Retreats – Including Key Staff Members

Question: 

I am a partner in a forty-five lawyer firm in Memphis and a member on the firm’s executive committee. We are planning on having a two-day planning retreat in June of this year. We have had these retreats every year for the past six years. Past retreats have only included attorneys. This year we are considering including staff members. We would appreciate your thoughts as to whether this is a good idea.

Response: 

A firm invites all key staff to a retreat when they can play a major role in identifying problems and developing solutions. A firm retreat is an excellent forum if the partners or management have determined that individuals at different levels within the firm are having communication problems – for example – where communication is inadequate between:

Having these individuals participate in solving their own communication problems at the retreat usually produces better results than those obtained when the partners hand down orders that may not deal with the real issues. Staff participation can help identify problems and can involve more firm members after the retreat in the implementation of solutions – improved buyin.

As a rule, it is very productive to include individuals from nonprofessional or non management levels at a retreat when they are eager to be involved in problem solving efforts on a day to day basis.

A retreat solely for partners at the senior level is conducted to review firm progress and to deal specifically with financial, compensation, conflict between partners, growth planning, business development, or unique problems with staff members.

Some firm hold separate meetings for each level of staff in addition to combined meetings with attorneys.

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

Dec 27, 2016

Law Firm Staff Compensation – Bonuses for Staff

Question:

I am the sole owner of a four attorney firm in St. Louis, Missouri. Our firm has four staff members – 2 legal assistants, a receptionist, and a office manager/bookkeeper. It is that time of year again where I anguish over year end bonuses for staff which end up being Santa Claus bonuses with no relationship to actual performance. I would like to move away from this approach and tie their bonuses to performance. How do I measure performance for bonuses?

Response:

I like to tie salary increases to performance reviews tied to skills, competencies, value of the position in the market, cost of living, etc. Bonuses on the other hand should be tied to accomplishment of specific measurable results. Since staff results usually cannot be measured in terms of billable hours or collected dollars another measure must be used. I prefer to tie bonuses to accomplishment of specific agreed to goals or objectives.

Here is a system that some of my clients are using:

  1. Four goals are set at the beginning of each year.
  2. Two of the goals are firm goals. One goal might be for the firm to hit a certain revenue target. Another goals might be for the firm to hit a certain profit margin target.
  3. Two goals are personal/individual staff member goals that are discussed and approved by you.
  4. Goals should be SMART goals
    1.     S – Specific
    2.     M – Measurable
    3.     A - Attainable
    4.     R – Realistic
    5.     T – On a specific timeline
  5. Each goal (firm and personal) is worth 2.5% (maximum 10%). The percentage is taken times annual base salary of the staff member to determine bonus.
  6. At the end of the year determine which goals were met and calculate bonus.

The goals should be tough.

Example of individual goals that meet the SMART test:

  1. Write and publish an Employee Handbook by December 31, 2017.
  2. Write and publish an Office Procedures Manual by December 31, 2017.
  3. Successfully complete six hours in accounting at a local college by December 31, 2017 with a grade of B or better.

Other approaches can be taken – the key is to tie variable bonus to actual results.

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

 

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