On the plane coming back from Philadelphia  I was asked by a colleague of mine, Tiffany Poulton, what I thought was an obstacle to change.  After a brief pause, I mentioned that perceived difficulty would be an obstacle to change.  She responded, "what about fear?"

It brought to mind a book and a play I read in college.  The book, Henry James' Beast In The Jungle, is about a man who spends his entire life waiting for an awful event that is to happen to him.  The play, Eugene O'Neill's The Iceman Cometh, is about a group of drunks who waste their lives living in the tunnel of a pipe dream, refusing to change and face their own realities.

In both of these works of fiction, fear is the main driver inhibiting change.  John Marcher, James' protagonist, is so self absorbed in fear that he can't see that he has many opportunities to free himself from the chains he has attached to his life.  Only when realizing his lost opportunities does he see that the "beast" is his own lack of action that has cost him the only thing that brought him comfort in life.

In O'Neill's play, his protagonist, Hickey, has already overcome his obstacle to change, self realization (never mind that it was done by murder), and though he attempts to share that knowledge to his peers, their own fear to accept who they are prevent them from waking from the intoxicated blur of their lives.  As the antagonist Harry exclaims, "Stay passed out, that's the right dope. There aren't any cool willow trees–except you grow your own in a bottle."

What is the obstacle that prevents change in your office?  Is it comfort?   Perceived difficulty?  Or is it fear? 

Why do some attorneys refuse to enter their time as work is performed?  Is it that they are too busy?  Or afraid of the expectation of adding another chore to their workload?

Why do some firms not establish and maintain a strategic plan?  Is it that planning is too time consuming and difficult?  Or are attorneys afraid of being held accountable to the results?

Why do some partners refuse to share work with associates?  Is it a lack of trust?  Lack of motivated associates? Client demands? Or fear that they won't be able to replace the work and thus their compensation may be adversely affected?

It's been said that the only constant in life is change.  However, embracing change for the sake of it alone won't improve income.  Any movement to change processes or habits should be looked at through the effects it can have to your bottom line.  How would it affect productivity to require attorneys enter time as work is performed?  What would happen to the relative tranquility of the firm if you implemented a strategic plan and held everyone accountable for the results?  How would requiring partners to shift work to associates affect the quality of services provided your clients?  How would it affect compensation?

When addressing concerns, be mindful of fear.  Fear may be underlying every reason why the change is fought.  The pipe dream of the status quo may have your attorneys in a self-absorbed state of fear of change.  At all costs this must be defeated to enact meaningful processes that will increase value to the firm, its clients, and its members.

Otherwise, as is written to end O'Neill's play, "The days grow hot, O Babylon. Tis cool beneath the willow trees."

 Tom Collins has written many times on the subject of change in the law firm.  All of them are highly recommended.  Some are linked below:

• Law Firm Plan Is To Change The Plan
  
• The Right Way To Manage Change In the Law Firm
  
• Getting Agreement To Change From Law Firm Partners
  
• A Law Firm's Future Depends On How Well It Can Change
  

 We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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The Estrin Report is a great resource for paralegals and other legal support professionals.  The March 22nd post quotes a Maryland Daily Record article where an attorney has been suspended twice - TWICE - for mismanagement of client trust funds.  He never took one penny, however.  Instead, he was the victim of two consecutive bad hires.

The Maryland solo practitioner hired a paralegal, among other things, to manage a client trust account.  The paralegal, without oversight, embezzled nearly $150,000 before being caught.  After being disciplined, the attorney hired another paralegal to "clean up the financial mess left by " the predecessor.  This one took over $170,000 from his clients.

The attorney complained that he had several hundreds of cases he managed and was in court a lot.  "You’ve got to delegate things. You can’t be there to sign every check.”   

Whether these were paralegals or not isn't the point.  What is noteworthy is the exposure attorneys have, especially in small firms, when trusting unmanaged staff to control firm finances.  Embezzlement is more common than we'd like to believe.  (Admin charged with embezzling over $200,000 from firm; Bookkeeper embezzles over $400,000 from firm;  New Orleans firm dissolves after Chief Financial Officer embezzles $2 million;  Office Manager embezzles $700,000 from firm;  Bookkeeper accused of taking over $4.3 million from escrow accounts)  

Ignorance is no defense.  You can't spend all day watching your staff either.  “You’ve got to have some trust in your employees,” the aggrieved attorney said. “You pay them good money.”  In his case, you'd think a little skepticism would have been prudent.

What are some things that can be done to avert a would-be-embezzler?  Tom Collins wrote the following in his September 6, 2006 post:

First, select business software with built-in audit trails and controls. Remain alert to the reality that it can happen in your firm. Keep your eyes and ears open. Obtain professional assistance to implement appropriate internal controls including segregation of duties. Insist that employees take vacations on consecutive days under an arrangement where others assume their duties. Do not let a crisis take over and circumvent normal controls and procedures. Budgeting, comparative financial results, and detailed review and questioning of monthly financial statements are an essential function of law firm management and play a vital role in protecting and preserving the assets of the firm.

Scott Barrett wrote an article in 2004 that addresses ways to avoid being a victim of embezzlement.  Read it by clicking here.

 We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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 Bruce MacEwen writes in his post The Ten Years War something that I have heard from many managing partners:  talent combined with work ethic from those in the "millennial generation" (those born after 1980) is difficult to find.  MacEwen quotes an article from The McKinsey Quarterly titled Making talent a strategic priority:

 

"People in this group see their professional careers as a series of two- to three-year chapters and will readily switch jobs, so companies face the risk of high attrition if their expectations aren’t met. The Gen Y cohort, already representing 12 percent of the US workforce, is therefore perceived as substantially harder to manage than its predecessors. As one North American HR director explained, 'The millennial generation doesn’t want to work 100 hours a week. These kids want a different deal; they have seen their parents work all their life for the same company and then get fired. They are not interested in killing themselves for work.'"

 

Though the above sounds a bit overstated to me (is the threshold to being productive really 100 hours a week?), it hits on the point that many in mid-sized firms experience:  the unmotivated young attorney.  MacEwen cites the article's suggestions for battling this "ten year war" for talent:

• Target talent on all levels - not just on lateral partner hires - look for talent at all levels.  People tend to change in the environment they are in - if you have talent at all levels, this will encourage the right attitude.
• Communicate your firm's value propositions - it's what motivates behavior, says MacEwen.
• Bolster HR - MacEwen takes exception to this recommendation, arguing that "in many firms [HR's] reputation—certainly as a strategic asset—is tarnished beyond salvation".  Instead, he argues, have office managers and practice group leaders be the champions of recruiting.

For several years now, the ABA has made a focus on work/life balance, especially considering some firms where partners can work in excess of 2200 billable hours per year.   If you agree that work/life balance is important, how do you get young associates to buy-in to the work part?

Morepartnerincome.com is sponsored by Juris®.  For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

 877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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Management is achieving objectives through others. It's a continuing process of receiving input, processing input, taking action, receiving feedback, and repeating the process. It requires KASH in a real-time environment. It is a cycle of planning, organizing, actuating and controlling.

Prior to 1828, the path to becoming an attorney required not only to obtain a degree, but to serve several years as an apprentice before being able to practice law. President Andrew Jackson changed these requirements to break up the elitist methods of choosing attorneys (only attorneys could choose who the apprentice would be, much like real estate appraisers of today). By the end of the 1800's, apprenticeship programs for attorneys were well in decline and after the introduction of the American Bar Association in 1878, a more standardized formal process to becoming an attorney was introduced (Source: Bar Examination: Further Readings). An unintended consequence of this action was to lessen the importance of mentorship to young attorneys-in-waiting.

Today, the only qualifications (not to lessen their importance) to becoming a lawyer is a good dose of book smarts, focus and an ability to not crack under stress. Law school does much to help you think like a lawyer, but does nothing to help you act like a lawyer. Mentorship helps associates to learn from seasoned attorneys how to act as well as how to best service clients.

Management ensures that the value of mentoring is set as habit, achieving professional objectives not only for the individual, but for the firm. Unfortunately for some firms, management is treated much like strategic plans: either you spend time developing a plan but don't stick to it or you don't do it at all.

Good management starts by receiving input. Actively solicit feedback from your associates. Karen Asner wrote an article for Law.Com (Law Firm Partners Find Out What Associates Really Think of Them) regarding establishing an "upward review process":

Upward reviews give associates the opportunity to evaluate and provide input on the management and leadership performance of partners with whom they regularly work on deals, cases, committees or pro bono matters.

Law firms aiming to create an outstanding working environment for their associates and attract prospective recruits should seriously consider implementing an upward review process.

It's a good bet that associates, if put in a non-threatening environment to speak frankly, would have some pointed views on their plight. Some may be warranted; some may not, but if you want to consistently increase partner income, knowing what associates are thinking can be invaluable, especially if you are considering them as future partners. You don't want to find out after the attorney leaves how disaffected he/she was towards the shareholders. Plus, in an ideal environment, the associates are bearing the brunt of most of the work - you want to make sure they are well incented to be proper representatives of the firm, inside and outside of the office.

Implementing an upward review process is only the start: next, you have to process the input. The management committee or equivalent must review the results and develop a plan of action that will address concerns and further the firm's objectives. Accountability must be delegated to every member of the firm. Clear and concise roles and goals need to be communicated.

Then you must take action. Talking about management and goals is a waste of time otherwise. Taking action means mentoring associates - not only as to how to practice law, but how to act. Mentoring is a way to reclaim the lost art of apprenticeship. Not only will it allow the partners to dictate how the associate acts, but it also creates a bond of acceptance within the firm that the associate is part of the team. That can only help in fostering trust, a central component in management.

Measurement improves results. Always measure the effectiveness of your plan by again receiving feedback. Keep the upward review process going - quarterly, semi-annually, annually, whatever time frame will maximize the effectiveness of the campaign (understanding the resource drain on the review process - you don't want to lose productivity as a result of processes established to improve productivity). My suggestion is semi-annual.

Measure and adjust, then repeat the process. Nothing is gained by doing something only once. Consistency is the name of the game if you want to affect the habits of others. Don't let up, don't get down, never give up. Over the long run, your efforts will be rewarded with a smooth running operation that will scale with your profits.

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Training is based on the KASH principle. The principle conveys that new Knowledge, plus the right Attitude provides new Skills that, with use, become Habit.

For example, if a firm hypothetically decides they want to improve profitability through the purchase of technology that can help measure performance, the first order of business is a dedication to learn the new skill.

Knowledge is achieved only through taking time to learn the new skill. Acquisition of such knowledge must be calculated in the price of the new skill. There is a price in out-of-pocket expense. There is a price in lost productivity. This must be calculated into the price of gaining knowledge.

Attitude determines the length of time that productivity is hampered. With a positive attitude, there is less resistance to change and loss of productivity is minimized. With a poor attitude, knowledge is shielded from those who might gain from it and loss of productivity is inceased. In cases where poor attitude prevails, staff may leave the firm, setting you back to step one.

Skills are acquired through repetition and time. Patience and attitude are key. Patience means not only that those who seek knowledge through attitude and repetition remain focused in the face of frustration. Patience also means directing attorneys that notice of an impending crisis to others seeking knowledge through attitude and repetition (ie support staff) may be better communicated the day before the situation metastasizes into crisis. Any crisis that reduces repetition of a new skill delays the formation of habit and delays return on investment, adding to the price of gaining knowledge.

Habit leads to higher performance by making the knowledge acquired through attitude and repetition applicable without further direction. It is the impetus for your return on investment.

The keystone that holds the entire process together is shareholder buy-in and commitment. This is the dedication to the skill that is fundamental to the successful implementation of new knowledge. Without commitment by the owners, KASH is hindered and the return on investment is at risk for delay or worse, abandonment.

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Bruce MacEwen (Adam Smith, Esq.) in a recent post notes the negative effects of the Sarbanes/Oxley Act of 2002 (SOX) on the global competitiveness of America (specifically New York City). Some of the complaints regarding SOX:

• It encourages highly risk-averse management, the antithesis of American entrepreneurialism and innovation.
• Ironically enough—along with Regulation FD—it discourages corporate disclosure and communication with analysts and other commentators and observers since the statement not made cannot later be labeled misleading.
• The requirements for independent directors operate to disqualify anyone with actual experience in the industry and, perhaps, judgment, perspective, or insight.
• Worst of all, of course, the potential criminalization of accounting judgments—touching not just the corporation but senior executives—operates, as one managing partner put it to me, to make every publicly US-listed company long for the day when all they had to worry about were the quarterly earnings expectations of Wall Street: "Today, it's not the stock analysts you've got potentially looking over your shoulder, it's the US Attorney."
• Finally, there is universal consensus that had SOX been in place before the parade of the Enron, Tyco, and Worldcom horribles, they still would have happened. Why? Because one cannot legislate common sense or integrity. More than one person pointedly observed that fraud and misrepresentation have always been illegal and we've always known quite well how to deal with them. Piling SOX on top had the same practical effect as "making it illegal to break the law" (that would be zero).

MacEwen argues that the above have created unintended consequences that may "help dislodge New York from its pre-eminent role as a center of global capital formation". There is little question that SOX has reduced the number of firms filing for an Initial Public Offering. The risks involved in going public are worry enough - with SOX, the added costs for compliance plus the potential criminalization of executives is a tipping point in favor of staying closely-held.

It isn't just MacEwen who questions the benefits Sarbanes/Oxley. The negative effects of SOX certainly merit consideration, and perhaps "knee-capping its provisions" might be in order. However, let's go in the other direction for a moment: Could SOX be expanded to include privately-held corporations and find its way into the management of law firms?

Currently, only two provisions apply to closely held corporations: whistleblower protections and prohibition against destroying, altering, or falsifying documents that could be used in a legal proceeding.

As law firms start to restructure and operate more like corporations (ie, hiring C level management, moving from partnerships to limited liability companies or professional corporations, etc) some argue that best practices dictate that companies begin to implement at least the basic mandates of SOX (particularly when revenues approach $50 million). An interesting discussion of this by Stephen Bainbridge (with an alternative view by Jennifer Johnson) can be read here on the Business Associations Blog.

As ridiculous as it sounds on its face, lawyers know that the expansion of Congressional Acts knows no boundaries. Congress has a habit of creating short-sighted Acts that have long-term unintended negative consequences; the application of RICO to abortion protesters - though short-lived - comes to mind. This could be a new area of law - defending law firm managing partners from causes of action brought by non-managing equity partners over the mismanagement of their books! Lawyers suing lawyers requiring lawyers to represent the lawyers sued. A self-sustaining marketplace!

All kidding aside, the purposes of SOX shouldn't be lost to law firm managers. A large purpose of SOX is to ensure fiduciaries are properly overseeing the management of their corporation's books. Managing partners (or their equivalent) are the fiduciaries of their firm and are responsible for the accounting of their firm's finances. Embezzlement is a real concern for law firms. The accounting of the law firm should not be without oversight.

That said, do you think SOX should be cut at the knees? Or, since the purpose overlaps existing law (relative to fraud and misrepresentation), is SOX just reactive bad law that should be repealed altogether? What would be a better way to address the purposes of SOX?

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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Word is finally out. The story we have been fed by the national media targeting the legal community hasn’t been real. It was the Wall Street Journal that broke the story with their front page article, Hard Case: Job Market Wanes for US Lawyers. However, the real story isn’t about a waning job market, it is about the two different worlds in which law firms operate. In the real world (the world outside of AmLaw 100) associates don’t earn, and law firms don’t pay, $135,000 to $160,000 in starting salary. See morepartnerincome prior post, New Associates salaries in Midrange Law Firms.

What the Wall Street journal article disclosed is the distorted, Alice in Wonderland, picture one gets from a national media and from surveys fixated on Big Law. There is another world out there other than the world of Big Law. The largest 100 to 200 law firms play by a different set of rules and a different set of operational metrics.

The real story isn’t that the job market is waning. The story is that the market for $135,000 to $160,000 first year associates isn’t the real market at all. It is the Tiger Woods segment of the market. It is the market for the most talented willing to live in most expensive cities and work the longest hours.

Is it a waning job market or are people just surprised that you don’t walk out of law school and into a $150,000 job?

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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Lately I have deliberately referred to those law firms sandwiched between Big Law on one end and the massive group of law firms with less than five partners on the other end as midrange law firms.

Why? Because there really isn’t another accepted designation for this group. The better term midsize has been co-opted by the press and given a different meaning. The press generally considers anything with less than 50 attorneys as small. Midsized firms in their view are the above-50 partner firms that have not made it into the AmLaw 200 category.

When you consider that 95 percent of all U.S. law firms have 25 or less employees, the prevailing media approach to classification by size makes little sense.

The community of U.S. law firms is best understood as a short, wide pyramid.

The bottom of the pyramid represents approximately 400,000 solo and 2-4 attorney firms. Law firms in the tip of the pyramid account for less than 500 of all U.S. firms. It is that segment in the middle, something in the neighborhood of 20,000 firms, which I view as midrange firms. Few would argue with the premise that once a firm reaches the size of 10 partners (around 25 total employees) that the firm begins to have the complexities and face the same managerial issues as the larger firms in this middle group. Even a 10-attorney firm typically would generate around $3.5 million in annual revenue….that’s real money in anybody’s book. The 10,000 or so firms ranging in size from 5 lawyers to 9 lawyers are going through a transition. I choose to include them in the midrange category because they tend to be firms with intent to grow. They are beginning to implement organizational structures, systems and procedures in common with the larger firms in the middle segment.

Call this middle segment what you will—midsize or midrange—these firms are not small in relation to the large number below them. Yet, they do not fit the definition or have to deal with many of the issues of big law, mega firms or the just plain large law firms.

It is this center segment that morepartnerincome’s message targets. I still use the term midsize at times. Regardless of which term I use, it is this center segment of the U. S. legal community that I am referring to.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

 

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When good times have driven the price of legal services to the point that businesses are starting to complain about fees, “that is the precise moment when clients are most open to the idea of moving work to lower-priced providers.” So says Peter D. Zeughauser in the October American Lawyer.

Zeughauser was writing about the regional law firms, but many of his comments apply to midrange law firms as well—those below the level of AmLaw 200. They, like regional firms, are positioned to take advantage of the business clients deflecting from Big Law high rates and lawyer churn. To take advantage of the opportunity, one needs to understand their appeal and, as Zeughauser says, tout it.

Here is Zeughauser’s advice:

• Build Client and Lawyer intimacy: The ability to do versus the inability of Big Law to do so is the true competitive edge for smaller firms.

• Grow Stronger, Not Necessarily Bigger: Build financial strength and engage in constant improvement. Demand high performance and a uniform culture that translates into outstanding client service.

• Achieve “Known-For” Status In Your Market: “There is no room for roaming off the reservation.” Define the market narrowly by geography, industry or practice area, or a combination of those and move to dominate that market.

Peter D. Zeughauser is the managing member of the Zeughauser Group, LLC.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

 

 

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I spent a good bit of time with 230 law firm management and administrative folks at the annual Juris International Users conference. The Juris user group is unique in that the organization is completely independent. It is financed and run entirely by licensees of Juris software.

I find these annual meetings insightful on two levels. Meeting topics reflect management trends in midrange law firms. Informal group discussions about daily life in the law firm shine the light on the things that motivate and the things that frustrate. Those conversations are often about the relationship between the professional side of the law firm and the non-lawyer people who make it possible for lawyers to concentrate on law.

Reviewing the conference topics for this year, it is pretty clear that those involved in running the business side of the firm are interested in more sophisticated management and operational tools—more user-driven reporting tools, dashboard technology, workflow optimization, pre-billing compliance testing, electronic billing and advanced financial accounting. Business intelligence is a hot topic and Juris has rolled out some extraordinary products and reserves in response to this increasing sophistication in law firm management. One of the interesting new services is Juris Insight, a continuous benchmarking service that not only tracks key performance metrics for the participating law firms but provides comparisons with peer law firms.

As for the informal conversations, I was pleased that more of those were focused on the firm’s objectives—what the law firm was trying to accomplish. There appeared to be fewer dealing with “difficulties of working with attorneys.” There was still some talk about the second-class treatment afforded to non-lawyer members of the law firm team. I ran into one administrator who is trying to do her job and survive under an abusive boss. Abusive bosses don’t get the best out of people, but jerks do get law firms sued. That reason alone warrants a “no jerks allowed” policy. For the most part, however, conversations were upbeat with the interest of the law firm at the center. That is a good sign.

One thing that has become clear over the years is that the administrative and accounting people in a law firm are the gatekeepers when it comes to putting powerful capabilities and features of software to work on behalf of the law firm. That is especially true of capabilities added to software subsequent to the firm’s original purchase. Take automated compliance testing, for example. An increasing number of corporate law firm clients have mandated billing guidelines. Bills that deviate from those guidelines get rejected or adjusted. Juris includes tools for automatically testing billing transactions against those client-mandated requirements and suggesting the corrective action needed to bring the transactions into compliance. At firms where the automatic compliance testing capability is being used, revenue losses due to client adjustments or rejected bills have been eliminated or significantly reduced. Unfortunately, there are other law firms where the accounting people have not taken advantage of the Juris capability. This powerful benefit remains locked away, unused, with firm leaders in the dark, unaware of the available system feature that would improve law firm performance and client service.

Software is unique in that through enhancements and optional additions, the software becomes more valuable and beneficial over time. Newer users of a software product often get more value out of the same software. That is because older users often have not updated their skills for features and capabilities added since the original purchase. So many beneficial capabilities go untapped that I suggest law firms require their administrator or principal accounting person to repeat the training regimen for their business software at least once every two or three years. It is also well worthwhile to engage the consulting arm of your business software vendor to perform a two- or three-day performance review and recommend changes in your procedures or system use for improved financial performance and for increased client satisfaction. Such a review always pays for itself.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

 

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