Law-Firm-Management

GUIDETOLAWFIRMMANAGEMENTBESTPRACTICESIdeasForManagingYourPracticeJohnW.OlmsteadMBAPhDCMCAuthorOlmstead&AssociatesLEGALMANAGEMENTCONSULTANTSGUIDETOLAWFIRMMANAGEMENTBESTPRACTICESIdeasForManagingYourPracticeJohnW.OlmsteadMBAPhDCMCAuthorOlmstead&AssociatesLEGALMANAGEMENTCONSULTANTSOlmstead&Associatesisapracticemanagement,marketing,andtechnologyconsultingfirmthatworkswithlawandotherprofessionalservicefirmsranginginsizefrom100profes-sionalstofirmswithsolopractitioners.Thefirm,foundedin1984andbasedoutofSt.Louis,Missouri,servesclientsacrosstheUnitedStatesassistingthemwithimplementingchangeandimprovingoperationalandfinancialperformance,management,leadership,clientdevelopmentandmarketing.Clientsbenefitfromaresults-orientatedteamapproachtoconsultingengagementswherefocusisonimplementingchangeandimprovementsratherthansimplyprovidingadvisoryservices.Olmstead&Associatespartnerswithclientsandservesasamemberoftheclientsmanagementteamandfunctionsasanadvisor,coach,teacher,andfacilitator.Coachingpro-gramsprovidesattorneysandstaffwithone-on-oneaswellasgroupcoachingtohelpthemget“unstuck”andmoveforwardoninitiatives,reinventingboththemselvesandtheirlawpractices.Thefirm’sconsultantsandstaffhaveextensivebackgroundsinlawfirmstrategyandmarketing,management,administration,organizationalbehavioranddevelopment,humanresources,technologyandaccounting.©2003ByOlmstead&AssociatesAllRightsReservedContentsIntroduction......................................................................................................................................1HowtoUsetheManagementReviewChecklist.............................................................................4OverallLawOfficeManagementSelf-AssessmentScale...............................................................5InterpretationofSelf-AssessmentScaleResults.................................................................7DetailOperationalandManagementReviewChecklist.................................................................8Governance..........................................................................................................................8Image...................................................................................................................................9LongRangePlanning..........................................................................................................9Marketing,BusinessDevelopment&ClientRelations.....................................................10BusinessOrganization........................................................................................................13BusinessOperations...........................................................................................................13Financial.............................................................................................................................15HumanResources...............................................................................................................21Administration....................................................................................................................24InterpretationofResults.....................................................................................................26CaseStudy..........................................................................................................................26ManagementResourcesforImprovingPerformance....................................................................28IntroductionThe21stcenturyispresentinglawfirmswithnewchallenges.Thegeneralbusinesseconomyisinturmoilandlawfirmsarefacingnewrisksanduncertainties.Clientsarenolongertoleratingarroganceandmediocreservices.Clientsareholdinglawfirmstohigherservicestandards.Inordertoprosperinthe21stcentury,lawfirmsaregoingtohavetodrasticallychangetheirmodelsforconductingbusiness.Organizationalperformance,effectiveness,andleadershipmustrisetohigherstandards.Generalmanagement,problemsolving,andactiontakingskillsmustbeenhanced.Firmswillhavetoimprovetheiroverallmarketinginitiatives.Thiswillrequirethatmanyfirmsimprovetheiroverallmanagementeffectivenessanduseeverymanagementtoolavailable.Lawfirmswillneedtoidentify“bestmanagementpractices”thatcanbeemployedtoenhancemanagementeffectiveness.Thefollowingtrendsarecontinuingtopresentfirmmanagementwithevenmorechallenges:•Competitionisintensifyingandbecomingmoresevere.Sincelawfirmsaresellersoflegalservicesandbuyersoflegaltalenttheymustcompeteeffectivelyinbothmarkets.•Convergenceandreconsolidationoflegalworkiscontinuing.Institutionalclientsareusingfewerlawfirms.•InsuranceDefensefirmsarecontinuingtostruggle.Manyareclosingtheirdoors,mergingwithotherfirms,andreinventingtheirpractices.•Lawfirmsaremergingatanincreasingrate,especiallyinNewYork,SanFranciscoandChicago.•Whileentrylevelassociateattorneyhiringisstillstrong,lateralhiringisoutpacingentrylevelhiring.•Intellectualpropertyisstillthehottestpracticeareaandtheprimarytargetforfirmslookingformerg-ercandidates.•Morelawfirmsareimplementingsophisticatedbrandingcampaigns.InarecentsurveyconductedbytheLegalMarketingAssociation,fifty-onepercentoftherespondentsreportedthattheyhadconduct-edcomprehensivebrandingcampaigns.Ofthoselawfirmsthathadnotconductedacomprehensivebrandingcampaign,morethanone-halfindicatedthattheyplannedtostartonewithinthenexttwelvemonths.Manyofthesefirmshaveshortenedtheirfirmnameandadoptedsophisticatedidentitypro-grams.•WhiletheMDPissueisupintheair,especiallysinceEnron,lawfirmsarenotsittingback.Ancillarybusinessesarebeingformedatanincreasingrate.Examplesincludeareassuchasinsuranceplanning,employeerelations,financeandtrade,healthcare,governmentaffairs,strategicplanning,technology,humanresources,andwealthmanagement.•Morefirmshavestrategicbusinessandmarketingplans.InarecentsurveyconductedbytheLegalMarketingAssociation,fifty-ninepercentreportedthattheirfirmshaveawrittenstrategicplanandfifty-fivepercentreportedthattheyhaveawrittenmarketingplan.Astheprofitsqueeze,competition,andthematuringmarketplaceforlegalservicescontinues,lawfirmsmustbeontopofeveryopportunityandawareofeverythreattosurviveinthechanging2000sandbeyond.Asmarketschange;approachestothedeliveryoflegalservicesmustchangeaswell.Thiswillrequirestrongandeffectivelawfirmmanagement.Lawyersandadministratorsandothermanagementprofessionalswillneedtocontinuetosharpentheirmanagementskills.Managingpartners,executivedirectors,legaladministrators,marketingdirectors,andpracticegroupleadersexpresscommonconcernsregardingthelackofbenchmarkdataandgeneralinformationon“bestpractices.”Lawfirmmanagementneedsanswerstoquestionssuchas:GuideToLawFirmManagementBestPractices2•Howarewedoingfinancially?•Isourattorney/staffratioinlinewithcomparablefirms?•Shouldandhowdoweoffernewpracticeareas?•Areourbillingratescompetitivewithotherfirms?•Isourpartnercompensationinlinewithcomparablefirms?•Arewepayingcompetitivesalariestoourmanagementandstaffprofessionals?•Howdowemaximizeclientloyaltyandtheamountofbusinessfromeachclient?•Shouldandhowdoweopenanewoffice?•Whatlawyersshouldwerecruitaslateralhires?•Howdowepositionthefirminthemarkettomosteffectivelycompetefordesiredbusiness?•Whichmarketingtacticswillbethemosteffective?TheLawOfficeManagementReviewChecklistprovidesattorneysandlawfirmadministratorswithanassessmenttooldesignedtooutlinemanagementbestpracticesandidentifythefirm’sstrongareasaswellasareasneedingimprovement.TheLawOfficeManagementReviewChecklistwillprovideattorneysandlawfirmadministratorswiththefollowingbenefits:•Anoverallmanagementself-assessmentscalewithguidelinesoninterpretationofresults.Thisself-assessmentscale(ona1-5ratingscale),whichfocusesonthebroader“managementissues”askstherespondenttorespondtoquestionswhichratesthefirminthefollowingareasconsideredtobetheCornerstonesofSuccessfulLawFirms:-PartnerRelations-FirmManagementandLeadership-FirmAdministration-PartnerCompensation-MarketingandPlanning•Shortandeasytousegeneraloperationalmanagementandadministrationchecklistdesignedtoout-linebestmanagementandadministrativepracticesandidentify“redflags”withsimpleYES/NO/NAresponsesinthefollowingareas:-Governance&Structure-Image-LongRangePlanning-Marketing,BusinessDevelopment&ClientRelationsMarketResearchMarketPlanningPricing&FeeSettingPracticeManagementClientRelations-BusinessOrganization-BusinessOperationsTechnologyDeploymentPurchasing3GuideToLawFirmManagementBestPracticesLibrarySuppliesFileOpening/ClosingDocketControlandSchedulingConflictofInterest-FinancialBookkeepingandAccountingClientTrustAccountsCashManagementFinancialManagement&BudgetingCostControlControllingOperationsPropertyandEquipmentAccountsPayableandLiabilitiesRaisingMoneyCreditandCollectionsDealingwithBanksCostofMoneySpecialFinancialToolsFinancialPerformance-HumanResourcesHandlingAssociatesHiringSalaryAdministrationTrainingMotivatingCommunicationsandPolicies-AdministrationGeneralWorkFlowandProcessInsuranceProblemSolvingDecisionMaking•Brief,quick,easytouseself-assessmentscaleandchecklistwhichcanbeusedtoorganizeinforma-tionregardingthelawfirm’spresentmanagementpractices.•Providesthefirm’smanagementteamwithatoolwhichcanbeusedtocompareexistingpracticeswithindustrybestpractices.GuideToLawFirmManagementBestPractices4•Completedchecklistscanbeusedtoassistinformulatingcorrectiveactionplansdesignedtostream-linethefirm’spresentmanagementpractices.•Annualupdatestothechecklistreflectingnewideasandchangesinlawfirmbestpractices.HowtoUsetheManagementReviewChecklistTheManagementReviewChecklistisamanagementreviewtooldesignedtobeusedbythelawfirm’smanage-mentteamtoaccessthefollowing:•Howthefirmratesinthefivefirmmanagementareasconsideredtobethecornerstonesofsuccessfullawfirms.Theseareasarekeytothelong-termsurvivalandhealthofthefirmandareoftenreferredtoasthe“managementconcerns”ofthefirm.Thisratingisaccomplishedbycompletingtheoverallmanagementself-assessmentscale.•Isthefirmawareofandtakingadvantageofsomeofthelawfirmmanagementbestpracticesthatarebeingusedbysuccessfullawfirms?Thisanalysisisaccomplishedbycompletingtheshortandeasytousegeneraloperationalmanagementandadministrationchecklistdesignedtooutlinebestmanage-mentandadministrativepracticesandidentify“redflags”withsimpleYES/NO/NAresponses.TheManagementReviewChecklistisdesignedtobecompletedbyfirmmanagementwhichcouldinvolvetheExecutiveCommittee,ManagingPartner,Administratororotherpersonnelwithfirmmanagementresponsibility.Thefollowingsequenceofactivitiesisrecommended:•Appointsomeonetocompletethereview.•CompletetheOverallLawOfficeManagementSelf-AssessmentScaleandtheDetailOperationalandManagementReviewChecklist.•Takenotesandnoteideasandimprovementareasasyoucompletethechecklist.•Prepareareportoffindingsandrecommendations.•Presentthereporttotheappropriategoverningbodyinameeting.•Basedupondecisionsmadeinthemeeting,prepareanactionplanwithbothspecificresponsibilitiesandcompletiontimetablesidentified.Accountabilityshouldbedesignedintotheplan.•Implementtheplan.•Follow-upandreview.5GuideToLawFirmManagementBestPracticesOverallLawOfficeManagementSelf-AssessmentScaleScaleCompletionInstructionsThisself-assessmentscaleratesfirmmanagementinthefiveareasconsideredtobethecornerstonesofsuccess-fullawfirms.Theseareasarekeytothelong-termsurvivalandhealthofthefirmandareoftenreferredtoasthe“managementconcerns”ofthefirm.Ratethefirmineachofthefivecategoryareasbyassigninganumericratingaccordingtothefollowingscale:1–Poor2–Fair3–Good4–VeryGood5–ExcellentI.PartnerRelationsThisareadealswiththeoverallpartnershipcultureofthefirmandtherelationshipsthatexistamongthepartnersinthefirm.A.Partnershaveahighleveloftrustforeachother12345B.Partnerslikeandrespecteachother.12345C.Partners“talk”andcommunicatewitheachotheronsensitiveissues.12345D.Thefirmdealswithunproductivepartners.12345E.Thefirmhasaprograminplaceforretirementfunding.12345F.Partnersareaccountabletoeachother.G.Partnersputthefirmfirstratherthanthemselves.AverageScore12345II.FirmManagementandLeadershipThisareadealswiththeoverallleadershipandmanagementofthefirmwhichfocusesonthe“managementissues”andnottheadministrativeoroperationalareasofthefirm:A.Qualityofleadershipskills.Dopeopleinfirmmanagementpositionshaveleadershipskills?Forexample,12345peoplewiththefollowingskills:1.Fosteringafirmvision.2.Providepurpose,passionandmeaning.3.Firm-firstattitude.4.Fostersandbuildsconsensus.5.Communicationandinterpersonalskills.GuideToLawFirmManagementBestPractices66.Trustedandrespected.7.Seizesopportunitiesandcreative.8.Createsdevelopmentalopportunitiesforothers.9.Biastowardaction,iscourageousandtakesrisks.B.Arethebestmanagersmanagingthefirm?12345C.Accountable?12345D.Isthefirmdoingagoodjobofassociatedevelopment&retention?12345E.Isthefirmdoingagoodjobofstaffdevelopment&retention?12345F.Isthefirmdoingagoodjobofpartnerdevelopment&retention?12345AverageScore12345III.FirmAdministrationThisareadealswiththeoperationaloradministrativeareasofthefirmandisconcernedwithallotherareasnotconsideredtobestrategicinnature.Typically,theseareasaretheresponsibilityofanadministratororofficemanager.A.Qualityofdelegationofadministrativedutiestonon-attorneyofficestaff?12345B.Qualityofnon-attorneymanagementskills?12345C.Qualityofadministrativemanagement?12345AverageScore12345IV.PartnerCompensationThisareadealswithbothattitudestowardtheamountoftotalcompensationandtheprocess,orthesystem,usedtodeterminecompensation.A.Overallsatisfactionofpartnerswithcurrentamountofcompensation.12345B.Overallsatisfactionofpartnerswiththesystemusedtodeterminecompensation.12345C.Effectivenessinmeasuring“totalcontribution”ofpartners.12345D.Effectivenessinencouragingbehaviorsthatthefirmisseekingtodevelopandreward.12345E.Systemisalignedwiththefirm’sbusinessstrategies,culture&personality12345F.Systemisperceivedasfairbyfirmpartners.12345G.Systemissimpleandunderstoodbypartnersinthefirm.12345H.Rulesarefollowedandappliedinaconsistentmannerfrompartnertopartnerandfromyeartoyear.123457GuideToLawFirmManagementBestPracticesI.Partnersmakingcompensationdecisionsaretrustedandrespected.12345J.Systemreinforcesa“firmfirst”attitude.12345AverageScore12345V.MarketingandPlanningThisisconcernedwithbothlongrangeplanningandmarketingprogramandactivitiesofthefirm.Inaddition,qualityofclientserviceisaddressedaswell.A.Qualityofthefirm’slongrangeplan.12345B.Appropriatenessofthefirm’svision,mission,andgoals.12345C.Effectivenessofthefirm’sstrategicorbusinessplan.12345D.Effectivenessofthefirm’sclientfeedbacksystem.12345E.Clientsatisfactionwithfirm’sservicesandprocesses.12345F.Effectivenessofthefirm’sactionplans.12345G.Qualityofthefirm’smarketinginfrastructure:123451.Marketingplansforfirm,practicegroups,andindividualattorneys.2.Marketingcoordinator.3.Integratedfirmidentityplanthatinsuresconsistencyinallexternalcommunicationscollateralmaterialssuchasletterhead,businesscards,websites,powerpointpresentations,brochures,newsletters,pressreleases,mediakits,seminarhandout,etc.4.Qualitycollateralmaterialslistedabove.5.Contentdrivenwebsite.6.Contactdatabaseofclients,referralsources,targetandprospectiveclients,mediasources,etc.7.Capabilitiescontentsuchasarticles,casestudies,recentverdicts,thatdemonstratetheuniquecapabilitiesofthefirm.H.Effectivenessofthefirm’smarketingplan.12345I.Qualityofthefirm’smarketingprogram.12345J.Firm’sinnovationability.12345AverageScore12345TotalAverageScore12345InterpretationofResultsUponcompletionofoverallratingineachoftheindividualcategories,totalthescoresinthecategoryareaanddividebythetotalnumberofitemsinthecategorytodetermineanaveragescoreforthecategory.Thentotaltheaver-agecategoryscoresineachofthecategoriesanddividebyfivetodetermineyourtotalaveragescore.Reviewyourscoresandusethesetodeterminewhereyoustandusingthefollowinginterpretationguide:GuideToLawFirmManagementBestPractices8Scoreof2.5orbelowResultsinasignificantdeficiencythatneedstobeaddressedanddeveloped.Scorebetween2.5&3.5Scoreswithinthisrangeareaverageandindicatesmediocreperformance.Improvementiswarranted.Score3.5to5Scoreswithinthisrangeindicatesthatthefirmmembersperceivethatthefirmisperformingwellandthatfirmleadershipshouldbementoringothersinthefirmwhoaredeficientintheirperformance.DetailOperationalandManagementReviewChecklistChecklistCompletionInstructionsThisoperationalandmanagementreviewchecklistisdesignedtohelpthefirmidentifywhetheritisawareofandtakingadvantageofsomeofthelawfirmmanagementbestpracticesthatarebeingusedbysuccessfullawfirms.Thisanalysisisaccomplishedbycompletingtheshortandeasytousegeneraloperationalmanagementandadministrationchecklistdesignedtooutlinebestmanagementandadministrativepracticesandidentify“redflags”withsimpleYES/NO/NAresponses.RespondtoeachofthefollowingquestionswithaYES/NO/NAresponse.Attheconclusionofeachsection,totalyouranswersforYES/NO/NA.Calculateagrandtotalforallsectionsattheendofthechecklist.YESNONAI.GovernanceA.Doesthefirmhaveafirmgovernanceplanthatidentifiesandoutlinesdecisions/responsibilitiesforthefullpartnershipatlarge,theexecutivecommittee,themanagingpartner,andtheadministrator/officemanager?


B.Doesthepresentstructureseemappropriateforyourfirm?


C.Arepartnersaccountabletoeachotherandtothefirm?


D.Doesthefirmhaveadequateleadershipanddirection?


E.Doesthecompensationsystemfitthefirmsculture,structure,andgoalsandobjectives?


F.Haveseparatejobdescriptionsbeenpreparedandadoptedforthepartners,theexecutivecommittee,managingpartner,andthefirmadministrator?


G.Isthefirmproperlydelegatingadministrativetaskstoanofficemanagerorotherstaffmember(s)?


H.Doesthefirmhaveaneffectiveinternalandexternalcommunicationsprogram?


I.Haveboundariesandrolesbeenestablishedforthepartners,executivecommittee,managingpartner,andthefirmadministrator?


J.Istherespeedydecisionmaking?


9GuideToLawFirmManagementBestPracticesK.Doissuesgetconfrontedanddealtwith?


L.Isthereclearaccountabilityandresponsibility?


TotalNumberofYesResponses____TotalNumberofNoResponses____TotalNumberofNAResponses____II.FirmImageA.Hasthefirmidentifiedit’smission,goals,philosophies,purposeandimagethatitdesirestoportray?


B.Doesthefirmhaveafirmidentityplan?


C.Isthedesiredimagepresentedthroughaconsistentrepresentationofthefollowing:


1.Qualityofworkproduct.


2.Consistenthighlevelofclientserviceasreportedbytheclient.


3.Qualityofcollateralmarketingmaterials.


4.Website.


5.Personnel.


6.Officefacilities.


7.Presentationandinformationalmaterials.


8.Behaviorsandethicalpracticesofattorneysinthefirm.


TotalNumberofYesResponses____TotalNumberofNoResponses____TotalNumberofNAResponses____III.LongRangePlanningA.Doesthefirmhaveacompleteandup-to-datestrategic/businessplanwhichincludes:


1.One-yearandthree-yearprojections.


2.ExecutiveSummary.


3.BusinessDevelopmentandMarketingPlan.


4.ServiceDeliveryPlan.


5.AdministrativeExpensePlan.


6.OrganizationPlan.


7.StaffingPlan


8.FinancialPlan.


a.ProFormaFeeProjectionbytypeofserviceandbyclient.


b.ProFormaIncomeStatementandBalanceSheet.


c.Budgets.


d.ProFormaCashFlowStatements.


e.TotalRevenueDollarsandchargedhours.


f.DataonAccountsReceivable,Work-in-Progress,Hours(billableandnon-billable),andwrite-offsandwrite-downs.


GuideToLawFirmManagementBestPractices10YESNONAB.Hasthefirmanalyzedthepractice,clientsources,trendsinthecommunityandthefirm;thefirm’sstrengthsandweaknesses,theopportunitiesavailableforthefirm,andofhowthefirmisperceivedbytheclientsandpotentialclients?


C.Havegeneralgoals,long-termandshort-termobjectivesbeenformulated?


D.Hasthebusinessgrownatleastabovetherateofinflation?


E.Hasthefirmmetitsgrowth,income,andprofitgoals?


TotalNumberofYesResponses____TotalNumberofNoResponses____TotalNumberofNAResponses____IV.Market