August 30, 2007

Role of Realization in the Law Practice Business Model

10:47 am

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February 12, 2007

How to Fix Your Law Firm's Compensation Plan

11:34 am

I need your help as a reader of morepartnerincome.com. A reader sent me the following e-mail:

"I just re-read Why Law Partners Hoard Work? and I wonder if you have clients who have implemented this type of system, and exactly what kind of weight they attribute to each category mentioned, and exactly how this approach has been applied in practice, and with what success. I am particularly interested in the idea of limiting origination to 18 months, and substituting a measure of associate work supervised."

If you are among those firms who have taken steps to fix your compensation plan, let me know by adding a comment or, if you prefer to remain publicly anonymous, send me an e-mail at morepartnerincome@juris.com and I will put you in touch with the above inquiring partner.

Why do compensation plans need to be fixed? Most midsized law firms stuck in a lower per-partner income box are there due to their existing compensation plan. Here is the dilemma:

·         Partners hoard work rather than delegate because they make more money by doing the work themselves.

·         The law firm underutilizes their expensive income-producing assets, associates, by 25-30 percent.

·         The law firm doesn’t have enough associates to create the leverage needed for top per-partner income performance.

·         Because partners are “doing the work,” they are not bringing in sufficient business to use the associates they have or to build leverage by adding more.

·         Because partners are “doing the work,” they don’t take the time to mentor associates in order to increase their capability to handle work independently.

The ABA Law Practice Management Section has just published Jeffrey L. Nischwitz’s new book Think Again!: Innovative Approaches to the Business of Law. In it he details the destructive impact of the “every person for himself or herself” mentality of the typical law firm business plan.

·         “Eat what you kill” plans fail to create or nurture loyalty. Attorneys quickly learn that their success depends on their individual efforts and results, not the firm’s. They are “hired gun slingers” who are inclined to “sell their gun” to the highest bidder. The best people leave.

·         Attorneys are reluctant to follow instructions unless those instruction best fit with the compensation system.

·         There is a lack of team thinking and support where the biggest victims are cross-selling and client service. Attorneys “actually take affirmative steps to keep other partners away from ‘their clients’” with devastating impact on income.

·         Lifetime origination credit isolates clients from effective development and “to the financial detriment of everyone in the firm, most of the work never comes in the door.”

·         The “once my client, always my client” attitude works as an effective bar against any cooperative marketing and business development efforts.

·         Even worse are plans that give a single partner credit for establishing a referral source relationship where all credit for referred business from that source is credit to the initial originator. The protected source becomes a wasting asset, assuring “that the firm will consistently and repeatedly under perform, with countless opportunities being left on the table and likely picked up by other firms.”

·         As for mentoring, Nischwitz reports that he repeatedly hears attorneys say they just do not have the time or incentive to help others. “How unfortunate! The firm’s best source of improved results is not implemented because the compensation system does not value such efforts”.

For Nischwitz, fixing your compensation plan means that it must base the incentive portion of compensation on three components:

o        What you deliver

o        What you brought in

o        Total firm (team) results

Nischwitz would not leave associates out of the process. He wisely notes that associates “come to the table with the same internal drives and ways of thinking. Partners do not develop a ‘what’s in it for me’ thought process upon achieving partnership—it is fundamental in most people.” Thus, the incentive portion of their compensation should similarly be tied to firm overall performance in some fashion as well as rewarding for bringing in business and doing the work.

Of course the devil is always in the details. Frankly, I favor a system where every employee and member of the firm has a base compensation amount together with an incentive portion. Why not base compensation 100 percent on individual performance? As Nischwitz notes, a pure incentive arrangement fosters a shared office mindset devoid of firm loyalty. I also favor keeping the incentive portion as simple as possible.

You can find some ideas about setting base compensation levels in the pervious post titled Law Firm Value, Partner Compensation and Continuity. For other insights on a balanced approach to compensation together with an example plan, read the Managing Partner Advocate article Moving Beyond Eat-What-You-Kill Compensation Plans which begins on Page 7 of the June 2006 edition.

Fixing your compensation plan doesn’t just improve long-term firm results; doing so has an extraordinarily favorable impact on per-partner income and wealth. Firms that build leverage and fully utilize their associates make seven times the per-partner income of firms that do not. Firms that do, survive. Firm that do not, don’t.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

October 19, 2006

Law Firms Shouldn't Settle for "No" When Asking "Why Can't We?"

10:28 am

I ran into two situations last week that illustrate why you should not settle for “no” when asking “Why can’t I?” questions about your law firm’s enterprise system. If the software is not working the way you think it should or not giving you what you want, do not accept an unsatisfactory answer from the firm’s staff. Insist that the staff member go to the software vendor and that they explain to the vendor what you want and why—what you are trying to accomplish. If the answer is still unsatisfactory, you should personally go directly to the software vendor. If you have to, go to the top—the COO or CEO. What will surprise you is that the right answer is almost always “Yes!”

When it comes to software, most of us only use a small portion of the product’s capability, and that goes for individual attorney use of the enterprise business software for the law firm. Training is front-loaded—it occurs when law firms first install systems. Unfortunately, skills are not always updated with refresher training. It gets worse. Updates to software add new capabilities and features that, without training or self-paced study, go unused. Law firms experience turnover among accounting and administrative staff, and before long, the people in the law firm with primary responsibility for the system only know what has been handed down from their predecessors.

Today’s systems have options and defaults that will change how the software works to fit individual preferences and patterns of work. What works for one person’s work pattern can be cumbersome and frustrating for another. Unchanged, those hand-me-down settings become frustrating to the attorney.

Almost all enterprise software provides the capabilities for custom reports and views. The leading software vendors offer services to design these custom capabilities for you and most include optional tools to equip the firm to do their own.

Chances are that your firm is not using all of the vendor’s products. If there is something you need, you can pretty well assume others do as well, and the vendors may have optional products or services that fill that need.

At two different firms last week with two different issues, we ran into attorneys that were upset because their system would not do what they wanted and they had been putting up with this adverse condition for months. We showed them how their existing system already does exactly what they wanted exactly the way they wanted it done. It was a simple matter of changing built-in options and defaults. The problem was the law firm’s staff only knew what had been handed down and the attorneys had accepted “No” as the answer.

There are two morals to this story. The first is, do not accept “No” as the answer. The second is that there is material value in continuing training to update and refresh staff knowledge and skill regarding the firm’s enterprise systems. The Juris team reminded me the other day that the newest Juris law firms have a more valuable system than long-term Juris customers. It is the same software, but the newer firms have been recently trained on the system’s full and powerful capabilities. The long-term clients only have hand-me-down knowledge.

It doesn’t have to be that way. Companies like Juris will go to the law firm site to conduct refresher training. They offer off-site classroom training. Training CDs are available and online supplemental training is available over the Internet. Juris, Inc. recently put in place a certification program and will take responsibility for continuing certification of key staff members in your firm. Other vendors may offer a similar program. Ask your staff for the ongoing training options offered by your vendor and put in place a regimen of ongoing training to keep their knowledge and skills updated. It will pay off. What they learn will increase per-partner income.

ASK, don’t settle, and demand the best… Several years ago the folks at Juris coined the phrase “The Power of Yes” to convey to all Juris team members and Juris law firms that saying “Yes” is the company's objective.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

April 3, 2006

Billable Hour's Death has Been Greatly Exaggerated

10:42 am

Daniel Lee Jacobson, a practicing attorney and professor at Pacific West College of Law, writes a scholarly and surprisingly objective review of the history of the billable hour in April issue of the California Layer. He notes that the billable hour may yet prove to be a transitory convention but objectively reports that the available statistics suggest it is not likely to disappear soon.

Lawyers understand the income-limiting nature of the billable hour. They understand that removing this income-limiting governor on earnings capability means unlocking law firm revenues from the billable time of the owners and partners, either through contingency work, fixed fee agreements, or through the prevailing method of leverage off of others. So why is the billable hour so entrenched?

There are two important influences at work. First, law firms are doing pretty well as is. Yes, they have greater potential, but things may just be good enough the way they are. Why risk a good thing for something that might or might not produce a better result? Sometimes “good” is just good enough!

Second, there is no significant counterinfluence from the legal consumer. The Law Office Management & Administration Report (LOMAR) for March noted that almost ninety percent of all fees are still based on hourly rates. Businesses have invested significantly in systems and procedures for tracking and managing the traditional hourly bill. The corporate world has too much invested sunk cost to move in a different direction at this time.

Not only are hourly rates still the prevailing norm, they are on the increase. An Am Law survey of managing partners found that firms have raised rates for 2006 by an average of six percent. According to LOMAR, midsized firms averaged a five percent increase nationally.

So while morepartnerincome.com is a proponent for taking advantage of every opportunity for fixed fee pricing at the matter and portfolio levels, you need not think you are out of synch if you depend on the billable hour in combination with leverage to drive the majority of your law firm revenues. The billable hour is well and quite healthy, thank you!

PS: Just because things are doing pretty well, doesn’t mean you shouldn’t kick them up another notch. A copy of the Law Firm Business Survey results for the business year of 2005 will give you benchmark information to compare to your own results. The comparison will indicate areas to change for “More Partner Income”. Participate in the survey today to receive your copy of survey results.

Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.

February 1, 2006

E-billing Can Increase Law Firm Partner Incomes

9:15 am

In the January 3, 2006, edition of Law.com’s LegalTechnology, Michael Kraft and Robert Enholm ask the question "How long will it be before all lawyers undertake e-billing?” Michael stopped by the Juris booth at New York LegalTech yesterday and we talked a little more about the subject.

Just about every mid-sized law firm doing defense work has at least one client who requires e-billing. Most law firms consider that requirement to be a burden. That is understandable. Any exception to the normal and customary procedures followed by a business is disruptive and expensive.

What if e-billing was the norm and mailed paper copies were the exception? You might be surprised to learn that your present billing software has automatic electronic billing built in. I know that this is true for Juris software, and I would expect to see that capability in most full-feature law office business systems.

In the Juris system, law firms have the option at the client and matter level to indicate that the bill, after editing and approval, is to be automatically e-mailed to the law firm’s client in the format preferred by the client—PDF, html, rich text, etc. Copies of the electronic bills are retained in the Juris system so that the need for paper file copies of bills is eliminated, and the people-intensive process of printing, folding, envelope inserting and filing is eliminated. Postage and paper costs go away. The delay between when the bills are printed and the mailman delivers the bill is eliminated. It is faster, cleaner and cheaper, and the firm gets paid quicker.

For those firms who aren’t ready to make the plunge, consider using the built-in multiple copy features to automatically e-mail an information copy to the case or matter contact while sending a paper bill copy directly to the client’s accounts payable department for processing

E-billing is another tool for increasing per-partner income. Why not experiment by giving your new engagements the option to choose between e-mail and paper? In addition, discuss with that new client procedures to help your client process the firm’s bill for prompt payment. Explain that payment doesn’t eliminate their right to dispute charges. If the client is a business or organization, ask if you can send the payment copy of the bill directly to an accounting contact for immediate processing while providing an information copy for the legal contact’s review.

August 15, 2005

Law Firm Corporate E-Billing

12:12 pm

The August 2005 Corporate Legal Times publication includes the following quote in large and bold font, “Nothing provides such a clear return on investment as e-billing”. While 90%+ of corporate 1000 firms haven’t moved to e-billing, Corporate Legal Times reminds its readers that “it is only a matter of time before e-billing becomes the norm”. What does that mean to you? If you are already dealing with e-billing, expect more. If you are not and want to keep your corporate clients, you need to upgrade your systems to add corporate e-billing capability.

In spite of industry standards, most corporate clients require some deviation from those standards or even a completely custom format. When you do add e-billing capability, make sure it has the flexibility built into it to meet unique and custom formats.

June 23, 2005

Sub-Optimization

12:33 pm

A leader’s role is to get everyone moving in the same direction. Sub-optimization has everyone pulling in a different direction — their own.

I’m in Los Angeles at the 2005 West Coast edition of Legal Tech. Down on the exhibit floor, vendors get to see examples of sub-optimization every day. For software vendors, it goes something like this. An attorney stops in their booth to complain about something important to them that they have been told the program doesn’t do. Usually the software does it and has been doing it for years. You show the attorney and they ask when you added that capability? That is when the attorney realizes he has met the enemy and it resides within his or her own firm.

I hesitate to tell you how often I have spoken before groups of administrative and accounting managers and had someone in the audience remark, “We don’t want the lawyers to know that". That confession is followed by a chorus of support from the rest of the audience.

Sub-optimization is when the interest of individual departments or chieftains drives actions and decisions rather than the goals and objectives of the organization. In this case, the accounting and administrative area didn’t want any complications disrupting their routine or making their job more difficult or complex.

Unfortunately, sub-optimization is a naturally occurring tendency in any organization. It is most intense when the organization fails to communicate effectively the goals and objectives of the entire organization. It is lowest when the organization has given each department or functional area its own role in pursuing those objectives. People need to know where the organization is going and how they are expected to contribute to that journey.

June 13, 2005

Quality Service and Fee Expectations

10:46 am

One of our consultants had been talking to an attorney the other day about a new capability for the use of managing attorneys. It provides managing and supervising attorneys with a command and control dashboard view of activity in the area for which they are responsible. Rather than analyzing information after the fact, it provides the manager with information in time to change the outcome. The consultant said something like, “So, if you see that work for a particular matter is exceeding a client’s sensitivity for the current month, you might want to back off and push some work into the next month." The attorney was incredulous and replied that he would never do that!

There are matters or cases where backing off a bit to defer work would be inappropriate, but there are plenty of others where the client would consider it a service. Certainly, you want to pick up the phone and call the client to let them know about the accumulating charges. Consulting with the client, letting them participate in the pace of work and avoiding a surprise when the bill is opened, are the kind of steps that retain clients and result in referrals of new ones. The issue the attorney’s reaction raises is the issue of good lawyering versus good service. They just aren’t the same. I am reminded of the quote by Richard Reed: “Anyone with a law degree can practice law. To succeed, you must offer more than a law degree.”

March 22, 2005

If it isn't broke, it is in the process of breaking.

4:48 pm

Yesterday, it happened again! I was talking to a partner involved in the management of his law firm on some subject and he proudly echoed the old refrain, “If it isn’t broke, don’t fix it”.

Everything in this world has finite life. As it ages, as time passes, it wears out, becomes obsolete, or gets so watered down that it doesn't do the job any more. Management’s job is to “fix things before they break”. That is true even when it comes to procedures or work flow in a law firm. Take something as simple as the reports prepared for management every month. Over time, new reports, analysis and schedules are added. But, we never seem to eliminate reports that aren’t needed any more. After a while, the accounting staff is spending much of its time preparing reports that no one wants or looks at. The same is true with any procedure. Take a look at how the firm handles the issue of file copies of bills. Most firms print at least one copy of the bill that is mailed to the customer, filing it for future reference, if needed. Over time, you find that firms may have even added one or two more copies. One maintained by the billing attorney and maybe another by accounting, filed by month. Just think about the cost and effort that goes into providing the file space, doing the filing, retrieving and refiling. Yet, there are a lot of managers happy with that process “if it isn’t broke; don’t fix it”.

Your business system should be powerful enough to print reports upon demand even for prior periods. It should have a powerful and rich drill-down inquiry capability that eliminates the need to print reports just because they might be needed later. Management should be able to get the information they need from their own workstation without the need to pick up the phone and mobilize the “back office” to prepare a special analysis. When it comes to bill copies, your business system should automatically maintain an image of the bill that any authorized person can retrieve from their workstation and reprint or e-mail it to the client if needed. Those paper file copies are no longer needed! Technology has changed what is doable. Unfortunately, many of us have not changed what we do. We hold on to ineffective and inefficient practices behind a proud flag that reads, “If it isn’t broke, don’t fix it”. That is wrong because, if it isn’t broke, it is in the process of breaking.

March 19, 2005

What is leverage?

4:11 pm

Leverage refers to the use of non-equity partners fee earners, usually associates and paralegals, to expand the capability of the firm and increase the personal income that can be earned by the equity partners. Without leverage, a Partner’s income is limited to what the partner can bill for his or her own work. Leverage is achieved by using non partner fee earners working under the Partner’s supervision. A partner and three associates, for example, can do more work and generate more fees than the Partner alone. Leverage is normally expressed as a ratio– for example, if there are three associates or paralegals for each Partner, the ratio is 3 to 1.

August 30, 2007

Role of Realization in the Law Practice Business Model

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February 12, 2007

How to Fix Your Law Firm's Compensation Plan

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October 19, 2006

Law Firms Shouldn't Settle for "No" When Asking "Why Can't We?"

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April 3, 2006

Billable Hour's Death has Been Greatly Exaggerated

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February 1, 2006

E-billing Can Increase Law Firm Partner Incomes

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August 15, 2005

Law Firm Corporate E-Billing

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June 23, 2005

Sub-Optimization

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June 13, 2005

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March 22, 2005

If it isn't broke, it is in the process of breaking.

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March 19, 2005

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