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Sometimes a Carrot is Better than a Stick

We as lawyers are an interesting lot. Because many of us record our time in increments of 6-15 minutes and bill at generally fixed rates, we often come to measure the value of everything in minutes and dollars. We become focused on the Dollar; a trait for which we are often much maligned by the public. I happen to believe that this trait is more a symptom of our daily lives as lawyers than a somehow innately negative trait. Regardless, if we recognize such traits, we can sometimes harness them to our firm’s advantage.

Many years ago while in private practice, our firm struggled to get all of our attorneys to enter their time on a daily basis. Some of the attorneys were always timely and some where chronically slow to enter their time. With so many client matters requiring multiple lawyers to enter their time before an invoice could be sent out, this situation brought the circulation of our firm’s revenue cycle to its knees at the end of each month.

After what felt like years of consternation, one day we implemented a beautifully simple solution. We announced a system of monthly “mini bonuses” where each lawyer was awarded an equal and fixed dollar amount for every day that his or her time was entered by a set time the following business day. At the end of the month, these “mini bonuses” were paid out to each of the firm’s lawyers. Not wanting to miss out on such an easy monthly bonus, even the worst offenders started entering their time daily. Virtually overnight, our firm’s ability to more promptly process invoices skyrocketed. The best part of this solution is that it cost the firm nothing. After many years, that system is still in place although I would guess that habit and culture no longer require it.

Hire Successors Not Underlings

Several years ago I heard Wolverine World Wide’s CEO, Blake Krueger, give a speech at an Association for Corporate Growth event. During his speech he touched on a hiring philosophy that started at his former law firm, Warner Norcross & Judd, LLP and continues at Wolverine World Wide. It was premised on the theory of hiring people smarter than you are. Too often law firms hire underlings – individuals who do not demonstrate the potential to blossom into successors. If you hire individuals who demonstrate so much promise that those immediately above them in seniority feel threatened, you are doing it right. Young talent benefits everyone in a firm. It ensures that senior partners will have a viable exit strategy and associates talented enough to perform quality work for the firm’s best clients. It sharpens younger attorneys through healthy competition and it promotes a more vibrant work environment. So the next time you are considering a candidate, ask yourself “Will anyone feel threatened by this hire?” If the answer is “yes” you are on the right track.

If a Tree Falls in the Woods…

Out of private practice now for over two years, I find that my mind drifts now and then to thoughts of whether or not I will ever return to the profession that I enjoyed and that influenced so many facets of my life. Naturally, when I consider this question, I often think about whether I would change any aspect of my practice. Recently, these musings lead me to a very definite conclusion. I would speak and publish more.

Most of us have expertise in several specialized areas. We gain this expertise through research on a topic that is of interest or in order to take on a matter for which we did not possess prior expertise. A thirst for continuing intellectual challenge drives us. But how good are we at letting the world know how or even whether we can help them? How likely are we to receive a referral or a call from a new client if only a handful of others are aware that we even possess such knowledge.

This seems so elemental yet I was always astounded as I sat around the partnership table at how I often we learned for the first time what skills even our partners possessed. Imagine what little the bar and the general public know of us.

The options available today to aid us in getting our word out are greater than ever and effectively eliminate the excuses we give ourselves for not doing more. We can still take traditional routes like speaking engagements, publishing articles or, for the academically inclined, authoring treatises. But we can also now pursue such a staggering variety of modern methods of publication and speaking that we are seemingly limited only by our imaginations. We can write blog articles, tweet thoughts or references, publish an online newsletter, keep our website, LinkedIn or Facebook pages up to date and current, record YouTube videos and tweet them out or publish them to our social media sites, we can keep our electronic referral profiles up to date. Truly, there is no need for a tree to fall in the woods without someone hearing it.

Not convinced? Try this exercise. On a sheet of paper (or several of them) draw out three columns. In the first, using a stream of consciousness approach, write out an itemized list of all the areas of legal expertise you possess that you feel are of value. These are the “goods” that you have to sell. Then, next to each, describe who or what groups of people you are confident are aware that you possess this expertise. These are your potential customers or referral sources. Finally, in the third column, again for each item estimate the total number of people who fall within the groups you described. This number has a profound impact on your statistical probability of landing your next new client. Humbled? So was I.

ROYAL JELLY

I keep two beehives as a hobby. Late one evening early in the fall, well after dark, I went out to check on how they were faring in the cooler weather. I found that one of the hives had just been abandoned. The colony had for some unknown reason lost its most productive and important bee: the queen. I quickly pulled off three of the honey supers that I had intended on leaving for them to get them through the winter. I would retrieve the rest of the honey stores in the brood boxes and the remaining honey super when I returned from a two-day trip I was leaving for the next day. When I returned from my trip however, I found the rest of the hive being raided by the other hive and several other species of bees. There was no honey left to harvest.

I was struck by the similarity between my beehives and so many small to mid sized law firms that are reliant on one or a few big producers. When a hive loses its queen, the bees have a narrow window of 24-48 hours to replace their queen by feeding a substance known as royal jelly to new eggs. This causes the young eggs to develop into queens. The worker bees themselves cannot carry on a hive without a queen. They must instead rear some of their young to become queens. If successful, a new queen will emerge and the colony will continue under new leadership.

Unlike a beehive, a law firm has the ability to cultivate the development of its new leaders over a longer period of time. However, if a firm is not taking the appropriate actions for succession planning, it too is at jeopardy of losing its honey. The worker bees cannot become producers if the firm waits too long to develop its new leaders.

My former law firm is currently going through this same process as most of the strongest client relationships are concentrated in a small number of senior attorneys who are now retiring. In some instances the firm has been successful in transitioning client relationships to junior partners. In other cases, the firm may be at risk. Only time will tell how successful it will be at the conclusion of this transition.

As we wrote in an earlier blog entry, in order to ensure their continued prosperity, law firms need to hire lawyers with the characteristics to become successors to senior attorneys. Proper development begins with hiring the right people then continues with the development of these lawyers into leaders. It takes hard work, proper planning and focus. If your top producers leave the firm next year, are you prepared to save the honey? Have you been feeding the royal jelly to your associates and junior partners or are they just worker bees?

ASSESSING THE ABC’S

One of the first things I learned as a ski patroller was to assess a patient’s ABC’s: Airway, Breathing and Circulation. These are not high-level functions but they are vital to survival. In a healthy individual, they happen automatically and regularly. When they are disrupted, they must be treated immediately. Until the patient is handed off to a higher level of care, the ABC’s must be continually re-evaluated to ensure the patient’s health and safety.

Recording time and billing are not high-level functions, but they are vital to the survival of a law firm. A law firm’s revenue system must function automatically and regularly. When this system gets disrupted, as when time does not get entered or invoices are not sent out after the end of each month, the health of the firm is compromised.

When is the last time you stopped and checked your firm’s ABC’s? Is time entered daily? Do bills go out promptly after the end of each month? Is revenue steadily flowing in? Is the pulse of the law firm strong and regular or is it weak and irregular?

The Flaws of the Typical Law Firm Management Model

Often to their own detriment, most small to mid sized law firms follow some variation of two basic management models. Under the first model, one lawyer serves as Managing Partner and under the second model the management is run by a small committee of lawyers. Both systems are flawed but yet these models still account for a majority of firms.

The flaw in the first model is that the Managing Partner often tends to be the most or one of the most successful lawyers in the firm. Rather than keeping this lawyer actively engaged in the practice of law and the development of new clients, this model drags the Managing Partner into the administration of the firm. The Managing Partner must manage employee turnover, training, compensation, benefits and retention, associate recruitment and mentorship, partnership mergers and strategic referral relationships, partnership compensation, accounting and tax returns, the firm’s trust account, 401k and profit sharing plans, succession planning, budgeting and spending, firm functions, billing practices, malpractice lawsuits, filing systems, new software evaluation and implementation, the firm’s IT provider, website, marketing initiatives, sponsorships, charitable giving in addition to presiding over partnership meetings, employee meetings and firm meetings. Too often, the Managing Partner’s involvement in these matters can consume 50% or more of the Managing Partner’s time leaving the Managing Partner with little time for client representation and client development.

Often this model will include support staff beyond merely secretarial support. Firms often have an office manager who assists with a variety of management tasks but rare is the office manager who can attend to a meaningful amount of this work without the in-depth involvement of the Managing Partner. In addition, the office manager has to be a Jack-of-all-Trades, a generalist who is not afforded the ability to concentrate most or all of the office manager’s time in areas of greatest strength.

The Managing Partner may also employ various ad hoc or standing committees to assist with the workload. IT Committees, Marketing Committees, Holiday and Summer Party Committees and similar committees are commonly seen.
Even through the employment of such committees however, the Managing Partner must still spend time overseeing the committees and often the net drain on the firm’s economic engine can be greater than if the Managing Partner performed these functions independently.

Compounding the flaws of this system, the Managing Partner is often not compensated at a level that makes up for the sacrificed time. The Managing Partner’s book of business often declines during his or her term of office and can take years to build back up. The overall negative financial impact of this system on the firm is astounding. Yet it is the model that many, if not most, firms choose.

The second firm management model is that of a Management Committee. Instead of one attorney dedicating time to the management of the firm, the task is divided up between a small committee of lawyers. This model brings with it a tremendous amount of overlap as members of the Management Committee attend many of the same meetings and spend significant amounts of time conferring on various firm issues on an ad hoc basis throughout each day. In the end, it carries the same negative consequences as the Managing Partner model but spreads the negatives across three lawyers instead of one.

Increasingly, law firms are seeing the wisdom in hiring a non-lawyer business person to manage or consultants to assist in the management of the firm. Turning to those whose education and experience qualifies them to run or manage a business makes sense. There exist enough non-lawyer management solutions that a better managed law firm with higher net profits is achievable for a firm of any size. Allowing those who may have otherwise been managing the firm to concentrate on serving existing clients, mentoring younger lawyers and developing new clients is the better choice.

LAW FIRM DRESS CODES – ANCIENT RELICS OF THE PAST OR AS IMPORTANT AS EVER?

I recently had lunch with a business acquaintance and the subject of his company’s legal counsel came up. His attorney had recently changed law firms and my friend recounted how at the new firm “all of the attorneys wore suits and ties and seemed to be higher caliber.” His comment prompted me to reflect on the current trend away from formal business wear to casual attire. His attorney’s former firm is certainly regarded in the legal community as a very respectable firm. Could it be that some firms are becoming too lax on proper business attire? His perception certainly indicates that for some clients the answer is yes.

Incidentally, my friend came to lunch in jeans on a Wednesday. It would have been easy to infer from his casual dress that to him formal business attire for a lawyer was not only unnecessary but might even be viewed as up tight or out of touch with today’s business world. The reality was quite the opposite – at least in his view.

So, how should we dress as lawyers? The answer is apparently not as clear as some might think. I tend to believe that most business clients will still view us as more professional and therefore more competent if we dress professionally regardless of the prevailing trends in the business community. Does your firm have a dress code? If so, is it in keeping with the perceptions of your client base? Might you be losing business to the competition? This question, it seems, remains worthy of discussion even today.

OUTSOURCING CAN BRING HEALTH AND HAPPINESS

In 2011, a friend of mine named Mike Hughes started a business called Doorganics. Doorganics delivers organic foods to your doorstep. It is fantastic. I get fruits, vegetables, coffee, cheese, eggs, meats, bread, cereals and even prepared foods delivered right to my door like clockwork. I can let Doorganics decide what to send me or I can choose for myself. I can even program it so that some items come only once every 2nd, 3rd or 4th week.

Yes I could buy my food at the local supermarket but there is no chance that I will go back to the old system. Doorganics makes sense for too many reasons. First, I do not like to shop. I avoid it like the plague. I don’t like leaving the house to go to the store, I don’t like parking so far away from the door, I don’t like walking so far between items to get what I need, I don’t like checkout lines, I don’t like the displays to sell me things I don’t need and I don’t like feeling like I’ve lost another hour of my life at the supermarket. I just have better things I’d like to do with my time.

Doorganics has also changed my eating habits for the better. I eat more fruits and vegetables now than when I shopped myself. I also cook more. The bin comes with a weekly pamphlet that offers recipe ideas and other information.

Its convenient and its regular. I know I’m going to have food that is fresh when I want it and I don’t need to plan my day around the grocery store. I like knowing that the food is organic but organic has little to do with it for me. To me its all about time and regularity. It is so much easier and efficient to know that my food is going to be on my doorstep at a certain time each day. And its there – every time! I’ve never had them miss a delivery. Ever. And we live in Michigan! The bin has an icepack in it so it can stay cold if I’m not home when it arrives. If I’m going on vacation, I jump online and in two minutes I’m all set. No shipment this week and it will resume next week. Payments are automated so I don’t even have to swipe a card or write a check – let alone stand in a checkout line.

I get my food regularly and on time. I’m eating better and I’m not wasting as much food. I also don’t need to work this task into my schedule which usually varies week to week.

Outsourcing mundane tasks like billing can bring similar results to a law firm. Bills get processed and go out on time and with regularity. In turn, fees come in with greater regularity. Attorneys can focus on practicing law, networking or simply spending more time with family.

Who wants to go grocery shopping after practicing law all day? There is an easier and more effective way to run a practice.

What Happened in July – Michigan’s Abysmal Bar Results

Michigan’s legal community was shocked by the low pass rate on the July 2012 bar examination results which were released on October 26, 2012.  Overall, only 55% of the test takers passed.  First time takers did marginally better; but not as well as they had in previous years.  What happened this term that is different from previous years?

 

  1. The Board of Law Examiners (BLE) stopped scaling scores.  Scaling (i.e. curving) was a method designed to equalize scores over a period of time.  The experience the BLE had led them to see that it was still essentially subsidizing low essay scores in order to promote pass rates in the state.  In 2009, the BLE eliminated the automatic pass at 150 points on the MBE.  Previous to that time, a bar examinee would take the bar exam, and if scoring above 150 points on the MBE, would have their essay scores review for effort, but not formally graded.  This guaranteed a pass for those who did well on the multiple choice test.  This was eliminated so that the examinees would be tested on their writing skills as well as their knowledge of Michigan law.  The scaling of the essays was designed to build predictability into the scoring and have it even out over time.

 

What happened instead is that the problem that elimination of the automatic MBE pass of 150 points shifted the writing problem onto the essay scoring.  In other words, the essay scores were subsidized by the scaling and that increased par passage to the scores seen over the last five years.  This fall, the Board decided the quality of writing and knowledge of MI law was not being given enough emphasis.  Thus, the BLE’s decision

 

2.         The quality of writing has decreased.  The bar examiners found that once they had began to grade this year’s tests, the answers we not being responded to in a meaningful and productive way.  My office reviewed approximately 75 tests results and found that the scores were representative of what the bar examiners were presented from the applicants.  On questions where there was some ambiguity, my office found a number of scores were graded upward in light of that ambiguity.  In other words, applicants received the benefit of doubt in close call questions.  Some of this year’s questions were difficult, such as the evidence question, constitutional law question and the criminal procedure question.  However, those issues have been tested in the past and could have been reviewed as part of any applicant’s study program.  It appears that applicants did not review older tests where the same or similar issues had been tested.

 

3.         The quality of the answers seemed to have suffered for a lack of ability to analyze the facts based upon the law of the question.  The core measure of any law student/attorney to be is the ability of the applicant to analyze the facts of the question.  The MBE tests that in a finite manner.  It gives you the facts and and possible analyses.  The skill set tested is the ability to know the rule and identify the correct analysis that best matches the facts from the question.  In an essay exam, the skill set is expressing the analysis in concrete written terms.  This is a rather dry, technical form of writing which requires the applicant to be somewhat repetitive at times.  However, this is the only way to have certainty that the applicant knows the law and can apply it.  Time pressure forces the applicant to manage his or her time while taking the test and to bring a high degree of focus to a 2 to 3 hour period of time during the morning and afternoon sessions.  Under this pressure, some applicants present conclusory answers failing to analyze the facts.  The analysis part of the question is usually where the most points are awarded.

I do not believe the applicants are any less prepared than they were in previous years.  The only problem that I could cite the BLE for is not communicating their expectations more clearly to the applicants.  I do not believe there was unfair testing involved or a concerted effort to limit the number of lawyers practicing in this state.  Rather it was a combination of a change in grading systems coupled with expectations that simply were not met.

Tim Dinan runs a solo practice focusing on Criminal and Civil Litigation. The firm also specializes in matters applications to the Michigan State Bar and character and fitness hearings. Mr. Dinan has successfully represented over 100 clients now licensed to practice law in Michigan.

 

Fatal Fascination of the Familiar

There’s a common disease that plagues many of today’s law firms, it’s referred to as the Fatal Fascination of the Familiar (FFF). The signs of the disease are:  inability to grow the practice, practices more interested in exploring  possible exceptions rather than focusing on being exceptional, each attorney acting as its own law firm (silo-ite- is),  minimal use of technology, lack of strategy, focus on the billable hour vs. focusing on effective and realization rates.

The inability to accept or embrace change is the root cause of the FFF.  The FFF becomes a barrier to dialogue; it creates walls between the older and younger attorneys in a firm.  It generates power through individual agendas vs. firm objectives. It prohibits efficiency and effectiveness and it can ultimately cause the death of a practice.

There’s not one thing that can cure the FFF.  Recovery takes commitment, planning and patience.  The first step is one of a reality check, and it starts by asking the following questions: What’s the makeup of your firm?  Is there a gap between the older and younger generation of attorneys?  Has the firm committed to growth but has been unable to do so? Are practice meetings more about who can deliver the best argument vs. discussing solutions or best practice?  Is there an over arching strategic plan that encompasses business and marketing plans for the firm or are the plans specific only to the individual attorneys?  Does the firm abide by certain standards?  What does the firm measure in order to determine if it is successful?

Consider the following treatment:

  • Confirm you firm’s mission and vision
  • Create time to discuss strategy, make sure the discussion includes a blended group of attorneys; various specialties and age.
  • Have the assigned managing partner or managing committee determine what measureables the firm should focus on, make sure they connect with the firms mission, vision and strategic plan.
  • Look for ways to market the firm as one – website, newsletters, community outreach, events, etc.
  • Create a technology committee and assign them with establishing small ways of incorporating IT into the firm.
  • Create a finance committee to evaluate the revenue cycle of the firm, remember cash is king.

These are merely ideas on potentially cure FFF.  Don’t let the past get in the way of your future.