In this issue
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June 2009, vol. 30, no. 3
In this issue • A soft real estate market creating opportunities to reduce real estate expense • What is keeping lawyers awake at night: Asked and answered I am not asking if you spend your weekends at the Art Institute or can recite La Boheme (in Italian), I am speaking of your law practice and law firm. According to Ellen Wallach, an organization development consultant, speaker, writer and filmmaker, “organization culture is like pornography; it is hard to define, but you know it when you see it.” Intellects who deal with “culture” suggest, or even outwardly state, there is a difference between organizational culture and corporate culture. To a neophyte in such matters, to me the two merge or are synonymous. But, yes, you do have culture—like a marriage, for better or for worse. And if it is for better—it is blissful. And, if it is worse, well, we’ ll not go there. But let us assess what “culture” is, and why it is important to you and to your practice, both internally and externally. Broadly speaking, your culture is a compendium of your values, beliefs and behaviors. When there is a positive culture in a law practice, it is evidenced by the fact that “culture” motivates people within as well as clients, it helps to reward those who are deserving, or punish, as the case may be. And though, in a sense, it’s undesirable, there are the “unspoken rules” that everyone adheres to because of the positive results that inure to the person or firm if those “rules” are followed . A good culture, individually, or within a firm, provides that passion we experience when deeply involved in a case or matter. With the proper culture we have a tremendous sense of pride and satisfaction, and that culture serves as an inspiration. Occasionally one can observe when an organization is “losing” its culture; it is evidenced by the fact that there are no longer shared values among the members, there is a lack of trust, blame is constantly being cast, focus is on problems, not opportunities, diversity is not celebrated, but instead tempered, failures are not tolerated, and people lose confidence in their leaders. A strong and positive culture, with appropriate staff, will align and respond to an organization’s value. And, when that happens, as my former partner used to say, we operate as a “well-oiled” machine. But that “culture” is, many times, difficult to see or define. It is, however, or should be, reflective of the core values, beliefs, ethics and rules of behavior of a practice or office. If the leadership or members of a law firm are openly concerned only about the money they make, at whatever cost, make discriminatory remarks about people’s ethnicity, religious persuasions, or sexual orientation, if not immediately, ultimately, it will impact the staff and other members of the firm. Too, a leader’s work ethic, the work environment itself, the dress code, or the office space or manner or mode in which it is maintained will affect not only other members of the firm, but also staff, and ultimately clients. What defines or molds our individual “cultural” includes our life experiences, our strengths, our weakness, our education, and our rearing. Sometimes consciously, sometimes unconsciously, each experience lends to our individual culture. To foster a better workplace, it is important to encourage and cause to be created a good culture. This necessarily means embracing a deep-seated trust among the members of the firm, staff and clients. It also means concerted and overt acts must demonstrate respect and dignity for fellow attorneys, staff and clients. Extraordinary customer or client care is provided by motivated and productive people. If the culture in your office is lacking, consider: (a) The leader—the best rules of living are set by example. Does the leader have the values and the vision to lead—and does the leader demand respect or command respect by his actions? And remember, even strong management can fail if the culture is not a happy one. (b) Is there a concerted effort to recognize those who excel? (c) Consider “firing” clients that demand too much and prevent your staff, your firm and you from delivering the quality of legal representation you would want, if you were the client. Amending your practice to serve one or a few clients may well foretell losing the rest of your practice if the “other” clients are not well served. (d) Try to adapt and embrace “the best serving the best.” To really see where your culture lies, whether it is good or bad, listen to staff, listen to clients and then, most importantly, respond. Lastly, do not become complacent. Though change for change’s sake is a recipe for disaster, to keep a positive and invigorating work environment, there should be an ongoing interest in change and a curiosity to see if there is a new or different approach. “Complacency” reminds me of the manager that said to his fellow managers, there is too much apathy around here, but who cares. Take a little time from your day-to-day responsibilities, engage in a little introspection, both individually and as a firm—try to define your culture and then, either enhance it or repair it. Commercial real estate markets’ fundamental changes in 2008 will significantly impact owners and users for some time. The disruption of the capital markets essentially halted financing and investment sales declined an incredible 75 percent during the latter half of the year. Many assets are now likely valued at or below current debt levels. This instability within the marketplace, combined with new pricing models, will create opportunities for users to renegotiate their leases and reduce real estate expense in return for minimizing landlord exposure to rental loss and rollover risk. Due to these fundamental changes, there will be significant impact for tenants across the marketplace. In the past, with credit readily available, large tenant improvement packages, free rent and concessions were the rule. Currently, lenders are extremely restrictive on funding large concession packages and only the most well-capitalized owners will be in a position to offer significant capital to fund tenant moves. Accordingly, many companies will not be able to relocate without significant out-of-pocket costs. The vast majority of tenants will structure short- and medium-term renewals with little or no tenant improvement requirements. We anticipate free rent packages will increase to offset the limited capital available from owners. For tenants that are currently paying over market rents, the ability to extend term without significant landlord expense offers opportunities to lower current rates. The model for landlords is to survive the next 24 months in the hope that the market will stabilize. This presents an opportunity on the user side for occupiers who are significant tenants within an asset and have one to three years remaining on their current obligation. The common phrase associated with this exercise is “blend and extend,” a blending of a client’s existing rental obligation in return for an extension in term. There are five major objectives of this exercise including: • Establishing leverage for renegotiation; • Reducing operating expense cost over the current lease term; • Locking in today’s lower market rental rates on a long-term basis; • Negotiating the proper amount of rental abatement; • Addressing any tenant improvements issues, if any. The key to a successful renegotiation will be understanding the value of your tenancy to your existing landlord. The larger percentage of space a firm occupies within the building, the more leverage a user has for renegotiation. __________ A successful law firm competitive strategy requires effective law firm management. Managing Partners and Administrators must keep updated on all aspects of law firm management. In order to assist in this effort we are pleased to share our insights and thoughts. We have been asked the following questions pertaining to a variety of management topics by clients and non-clients clients alike. Some of these questions are posted on our Web site in our Asked and Answered Section – <www.olmsteadassoc.com/Resource/oacforum.asp>. We encourage our readers to use this section as a resource. Please contact me via e-mail at jolmstead@olmsteadassoc.com with your question. I will answer your question and share with our readers as well. Q. We are a two-partner law firm with no associates. Our firm has been getting by for 18 months since start-up. We are starting to get some repeat business and I think we are on our way. However, my partner looked at the numbers for 2008 and realized that she made about a third more money last year, both in terms of actual dollars for her work and in terms of origination. Our actual hours were roughly even, but there might have been some slighter disparity. Now we are having that first talk about changing from the straight 50-50 split to perhaps the other extreme of “each woman for herself” (after jointly paying basic expenses). What are your suggestions? A. I have reviewed your comments. In small firms the best systems are those that are simple, easy to understand, and easy to implement. Often two partners start out on a 50 percent-50 percent arrangement and the arrangement eventually has to be changed when and if their situations change that has a major impact upon their overall contributions to the firm. (Notice I used the word contributions—not necessarily—fees collected). However, until level of contributions change—I have often seen 50 percent arrangements work well in small firms that are looking to build a Firm—rather than simply their own practice and earn as much money as they can for themselves. When level of contributions change—in a healthy partner culture—the partners will be able to talk to each other and sit down and discuss an alternative arrangement that makes sense for them. I encourage firms to look beyond single year timeframes—typically three to five year cycles. Sometimes in healthy firm cultures one partner may need to carry the other partner for awhile. For example, an attorney with a PI plaintiff practice may have wide swings and may need to be carried in lean times—but when the big fee comes in both share in the benefits. In other situations, billing cycles mandated by clients, etc. can impact timing of collections. In your firm—it may be a little early yet to have a true picture concerning contribution. Sounds like you are both putting in about the same time investment in the firm and commitment even though one’s numbers are higher. Is one of you managing the firm or doing other activity that still benefits the firm? You must ask yourselves what kind of firm you want to be—team-based firm or group of space sharers or partnership of individual firms. Eat-what-you kill compensation systems are not appropriate for law firms that want to build a firm and create a team-based practice since such compensation systems typically reinforce “lone ranger” behavior resulting in a “me first vs. firm-first” orientation. It is hard to build a team-based firm with such an orientation. However, some firms do not want to practice as team-based firms—they want to practice as groups of individuals. For these firms such a system may be appropriate. The challenge will be to nail down a method of allocation revenue and overhead that is fair and equitable to both of you. Compensation systems should do more than simply allocate the pie—they should reinforce the behaviors and efforts that the firm seeks from its attorneys. Many firms are discovering that desired behaviors and results must go beyond short term fee production and must include contributions in areas such as marketing, mentoring, firm management, etc. to ensure the long term viability of the firm. Eat-what-you-kill systems discourage these behaviors. In the long term the highly successful law firms will be those that are team based that where the partners look beyond their own self interests and have a “firm first” attitude. I think you need to have an open exchange about what kind of firm you want to build and the commitments each of you are willing to make to achieve that. You need to decide what you consider to be contribution and value to the firm—fees generated, fees originated, primary attorney fees, marketing, firm management, etc. If those commitments are in general alignment—they maybe you should stay on the 50-50 split for awhile longer. Another option would be to stay on the same split—but create a special bonus pool—say 25 percent of income that could be allocated on a discretionary basic for unusual accomplishments, etc. Of course you would have to agree on who gets how much. Another option would be to have a base draw and then either a formula or discretionary bonus pool for distribution of the excess. The general trend in compensation systems in larger firms is toward more subjective based system rather than formula. However, many smaller firms do still use objective or formula based systems. Q As we head toward what appears to be a deep recession, what should we be doing to counter the downturn? A. As the U.S. and global economy continues to head toward what appears to be a major recession businesses and individuals are struggling and are searching for ways to cope. Law firms are also facing economic uncertainty as well and looking for strategies to help keep them afloat during these times. If we could only make one recommendation it would be: Stay closer to your clients that you ever have before and look for ways to enhance your relationship and improve service! An effective client service improvement program is one of the most important marketing initiatives that a firm can undertake. National studies demonstrate that approximately 70 percent of clients who stop using a particular attorney do so because they feel they were treated poorly or indifferently and 30 percent changed attorneys because their previous attorneys weren’t available. Clearly, from what law firms’ clients are telling us in our telephone interviews with them—attorneys and law firms need to improve client service by integrating a client-first service focus into everyday practice. We have written an article series on this topic. Click here to review <http://www.olmsteadassoc.com/Resource/articles.asp?section=rsc> Q. Our firm is a five-attorney firm and has decided that we need a bookkeeper. What should we look for in such a person? A. Many law firms in the six attorney and under size have shared with us their frustration in staffing the billing and accounting function. Often their investment in computerized billing and accounting systems fails to yield desired results due to poor accounting and management skills. Many small law firms assume that legal secretaries also have requisite accounting and management skills. This author’s experience has been that often this is not the case. Training, skills, and work behaviors are often different. Bookkeepers/accountants and secretaries are different animals. Many small firms are better off creating a accounting/bookkeeping position and staffing the position with a qualified bookkeeper/accountant. For many firms under six attorneys that have fully automated the billing and accounting function and have distributed time entry, this is not a full time position. In such instances many firms have either recruited a part-time bookkeeper/accountant solely for the accounting function or have created a combined position of office manager/bookkeeper. This justified a full-time position. Look for the following skills when evaluating candidates. Professional training in bookkeeping and accounting fundamentals as well as management principles. • A basic bookkeeping class should be a minimum requirement. • While a college degree should not be a requirement for the small firm, some college courses in accounting and management is desirable. • Two years+ prior experience in a bookkeeping/accounting position in a professional services firm such as law, accounting, consulting, etc. • Prior experience in a law firm bookkeeping/accounting position is desirable. • Experience with computers and accounting software as well as spreadsheets. On hands experience with the accounting software that the law firm uses is a plus. However, this is often not possible. • Prior office management experience in a law or other professional services firm if this is to be a combined position. • Detail orientated • Professional and able to deal with multiple demands, multiple masters, and the politics of a law office. Q. We are a 17-attorney IP firm in the Southwest and I am the managing partner. We are having a lot of problems with poor attitude in the office, inadequate production, employee turnover, and we have recently lost a few key institutional clients. I believe that the core of our problem may be poor communication skills on the part of our attorneys? What recommendations do you have? A. Poor interpersonal communications is often the root cause of many of the management problems that arise in law firms. Here are a few ideas for improving interpersonal communication skills: 1. Develop a series—a repertoire—of oral communications styles as well as languages to use in various situations with clients, colleagues, and employees. 2. Understand and manage your clients expectations—(1) clients true objectives for the engagement, (2) the boundaries of your role, (3) kind of information you will use, (4) your role in the engagement and the role of your staff, (5) the product/service you will deliver, (6) what support and involvement you will need from the client, (7) time schedule, and (8) frequency and form of communication. 3. Employ effective listening techniques with your clients—(1) client face-to-face engagement debriefings, (2) client satisfaction interviews—third party, (3) client site visits, (4) opinion surveys, (5) feedback questionnaires, and (6) client panels/focus groups. 4. Employ effective office communications systems to facilitate communications with your employees—(1) weekly/monthly staff meetings with agendas and minutes, (2) satisfaction surveys, (3) daily meeting with your assistant, (4) performance reviews tied to a performance management approach. 5. Match communications complexity to appropriate communications vehicles (face-to-face, telephone, e-mail, memo, letter, voice mail, etc.) Example: Use face-to-face to counsel or critique employees—not e-mail. 6. Reduce communications noise—(1) setup MS Outlook not to automatically download e-mail, (2) put cell phones on silent, (3) develop cell phone protocols, and (4) use voice mail effectively. 7. Incorporate the six client service principles into your daily behavior—(1) feel good about yourself, (2) practice habits of courtesy, (3) use positive communication, (4) listen and ask questions, (5) perform professionally, and (6) under promise and over deliver. 8. Develop written job descriptions and office policy and procedural manuals. Q. I am sole owner of an eight-attorney firm in the Northwest. Two other attorneys are income partners—no equity—and the other five attorneys are associates. I am just turning 50 and am beginning to think about future retirement. What questions/issues should I be thinking about? A. Fifty seems to be the point at which attorneys being thinking about their retirement and their future. Some even consider and in fact make complete career changes at this point in their lives. Here are a few questions to begin thinking about: 1. Have you decided when you want to retire and leave your firm? Or do you want to work forever? 2. What amount of cash or annual cash flow do you need when you exit? 3. Do you presently have a retirement plan and how much income to you project that it will provide at different exit times? 4. To whom do you want to transfer your interest? Family members in law school, other attorneys in the firm, another firm, etc? 5. Based on future cash flow, do you know how much the firm is worth today? 6. Do you know how to best maximize the income stream generated by the firm—in the years ahead while you are still with the firm and after you leave the firm? 7. Have you been able to institutionalize the firm—or is it uniquely you? 8. Is the firm even marketable? 9. Do you have a succession/exit plan? 10 Do you have a plan for your business if the unexpected happens to you? 11. Have you taken steps to protect your family’s wealth? __________ Becoming a new attorney in a firm where the business worked on belongs to the firm and is controlled by a supervising attorney is an experience different from opening a law office as a sole practitioner to render legal services. Hiring on as an associate is more than employment. It is further training and experience that grows legal skills to be used for a lifetime as the attorney’s career progresses. From the very beginning there are guidelines/principles that need to be observed/followed in order to serve the clients efficiently and skillfully to accomplish tasks to generate fees as matters are handled to conclusion. The guidelines/principles are seldom communicated to the new associates in written form, and often the associate is simply expected to know without having been specifically told what to do, not do, how to act, or not act. This article is intended to fill some of the voids that exist as associates gain experience through the years. Learning the system In the beginning, there is no substitute for learning the ropes. The ropes are those of the firm, and finding a friend with knowledge of the ropes will shorten the learning curve. For starters, do the following: 1. Ask about the firm’s docketing system. 2. Get a calendar/diary and find out how to make entries that tie into the system the firm utilizes. 3. Learn the firm’s filing system. Get training in how the firm opens files, gets materials filed in files, and closes files. Prior files are a huge resource. Utilizing prior work to keep from reinventing the wheel makes your work more efficient. 4. Get trained upon arrival in the firm on the billing system utilized by the firm. Form a habit of making immediate partial entries in the system to track your efforts on every matter being worked on. Complete the entry at the first opportunity and make sure the entry is absolutely accurate. At the end of the day, be sure your time is in the system or is in the hands of the person to enter your time in the system. Time entries are the lifeblood of law firms. Successful associates are judged on how well this activity is performed. Getting organized 1. Start a “To Do” list and keep it religiously. Include even small detail items as a reminder that nothing can be overlooked. 2. Prioritize your projects. Get help with prioritizing work. Have your supervising attorneys tell you which projects are needed before others and use small time periods to get the small detail items off the list when large projects require larger blocks of uninterrupted time. 3. Budget your time and be stingy with wasted time. Learn to say “No” when your time budget is running behind schedule. Don’t make excuses. Simply state your time doesn’t permit the less important activity. 4. Log your telephone calls. Some need to be billed. Some need further attention. Some need to be answered now. Review your calendar/diary and “To Do” list when dealing with calls. Telephone calls need attention as soon as possible, and in all events within 24 hours. Get your secretary to help. Sometimes a client needs only a small amount of attention that a secretary can provide, and will appreciate a timely return call that won’t show up on the bill. Above all, keep in mind that 24 hours is not an optional time period, it is a must. Better yet, get the call answered before the end of the business day. 5. E-mail organization is similar to telephone call organization. It has become the preferred method of communication for many clients and, like telephone voicemail messages, should be responded to as soon as possible. Responding within 24 hours can be a challenge when calendar/diary time is filled and overflowing. The trick there is to budget 5 minutes every hour to at least do a cursory review of the message screen. Having e-mail be a constant distraction must be avoided, and when working on a project budgeted for a large block of time, the 5 minute every hour practice may need to yield to more than 5 minutes twice a day. The urgency of the e-mail is always a factor, and associates are expected to juggle many matters when necessary. Short e-mail acknowledgements, with an indication of when a longer response can be made, are also useful as time management requires. 6. Advance planning is the umbrella the five prior organization items are covered under. Nothing takes the place of advance planning. To be well organized is to be prepared because of advance planning. The firm docketing system and the calendar/diary previously discussed are an integral part of the planning every associate and lawyer must deal with as a life long practice. If only one thing is gleaned from this article, it should be that advance planning is the most important key to success. Overriding factors 1. Accountability is important. Being available to take new assignments and discuss existing work is part of the job. Having a secretary know where you are serves a number of purposes. If nothing else, it makes unavailability known. Associates time is their own; however, meeting billable hour expectations and minimum billable hour requirements is a condition of employment in most firms. At the same time, having supervising attorneys informed about the progress of work and the availability of time to take on additional work is part of the accountability process. Having the supervising attorney informed of progress along the way, also provides the opportunity for input that insures the work project is on track and progressing in the desired direction. When a supervising attorney sets a deadline for a project, it doesn’t mean he shouldn’t hear about the project until the deadline. Interim discussions of research progress, outline progress and drafting progress permit additional input and exchange of ideas that result in a better product or result. 2. Self-motivation plays a large part in the success of associates. Approaching work projects as a member of the team requires enthusiasm that must come from within. Inner drive makes it possible to demonstrate dependability and sound judgment results when commitment to the project causes all of the pieces of the work to come together. While approaching deadlines and supervisor coaching provide some degree of motivation, personal drive is the single element that gets the work done. 3. Reputation development follows all lawyers, and associates are no exceptions. Developing a reputation for honesty and fairness takes time and performance. Word travels fast. Be more than courteous with opposing counsel. Be cordial. It is possible to be an outstanding advocate and hard fighter while remaining courteous. A fair fighter is respected. A fair fighter doesn’t do it at a personal level. Being professional requires calm and firm action. Anger is no part of legal argument. Honest, logical, and direct language is understood in the transactional world as well as the court room. Good reputations are made that way. It is more than the associate’s reputation that is at stake. A firm’s reputation is on the line every time an associate’s work product or performance is evaluated. Dirty tricks are remembered for longer than fair hard blows. Hard blows from all directions, including judges, are allowed. Everyone learns from hard blows. Transactions are completed. Cases are won. Reputations are made. Reputations stand out. Reputations are remembered. Reputations follow associates careers into non-equity and ultimately equity partner, shareholder or member positions. Whether playing golf, at a social function, in court, or at a meting, a lawyer’s demeanor and reputation send signals and messages that last forever. Conclusion New and old associates alike are on a ladder of development leading to a higher level in a professional career practicing law. The information in this article is intended to be helpful to all levels of associates whether they aspire to be partners, judges, or go onto other professional endeavors. __________ To register, go to www.isba.org/cle or call the ISBA registrar at 800-252-8908 or 217-525-1760. June 2009 Thursday – Saturday, 6/18/09 – 6/20/09, Chicago, ISBA Regional Office—CLE Fest Classic. Presented by the Illinois State Bar Association. Thursday, 6/25/09 – webcast—Ethical Considerations in Estate Planning and Trust Administration. Presented by the Illinois State Bar Association. 12-1:30 Friday, 6/26/09 - Lake Geneva, WI—LESSONS IN PROFESSIONAL RESPONSIBILITY. Learned from the Illinois Law Practice of Abraham Lincoln. A Master Series Video Production Presented by the Illinois State Bar Association. July 2009 Wednesday, 7/01/09 – Webinar—Conducting Legal Research on Fastcase. Presented by the Illinois State Bar Association. *An exclusive member benefit provided by ISBA and ISBA Mutual. Register at: https://www1.gotomeeting.com/register/960228025. August 2009 Monday, 8/03/09 – Webinar—Conducting Legal Research on Fastcase. Presented by the Illinois State Bar Association. *An exclusive member benefit provided by ISBA and ISBA Mutual. Register at: https://www1.gotomeeting.com/register/648690400. Monday, 8/24/09 – Chicago, ISBA Regional Office—Distributions from Qualified Retirement Plans. Presented by the ISBA Employee Benefits Section. September 2009 Tuesday, 9/01/09 – Tinley Park, Odyssey Country Club—Day-to-Day Ethical Dilemmas, What Every Attorney Should Know About Ethics and ARDC Complaints. Presented by the ISBA Young Lawyers Division Section. Thursday, 9/03/09 – Chicago, ISBA Regional Office—Mentor Training. Presented by the ISBA Standing Committee on Mentoring. Thursday, 9/10/09– Chicago, ISBA Regional Office—Franchising Issues under New State and Federal Requirements. Disclosure, Laws, Rules and Forms. Presented by the ISBA Corporation, Securities, and Business Law Section. Friday, 9/11/09 – Chicago, Kirkland & Ellis LLP—Rambus is Final: Where do we go From Here? Presented by the ISBA Antitrust & Unfair Competition Law Section, Co-Sponsored by the ISBA Intellectual Property Section. 11-1:15. Friday, 9/11/09 – Chicago, ISBA Regional Office—Tackling Family Law Conundrums. Presented by the ISBA Family Law Section. Tuesday, 9/29/09 – Chicago, ISBA Regional Office—Recent Developments in State and Local Tax 2009. Presented by the ISBA State & Local Tax Section. 9-12. October 2009 Friday, 10/02/09 – Champaign, I Hotel and Conference Center—Divorce Basics for Pro Bono Attorneys - 2009. Presented by the ISBA Standing Committee Delivery of Legal Services. 12-5. Friday, 10/16/09 – Fairview Heights, Four Points Sheraton—Tackling Family Law Conundrums. Presented by the ISBA Family Law Section. Thursday - Saturday, 10/22/09 - 10/24/09 – Springfield, President Abraham Lincoln Hotel—5th Annual Solo & Small Firm Conference. Presented by the Illinois State Bar Association. Monday - Friday, 10/26/09 – 10/30/09 – Chicago, ISBA Regional Office—40 hour Mediation/Arbitration Training. Master Series Presented by the Illinois State Bar Association and the ISBA Alternative Dispute Resolution Section. 8:30 – 5:45 daily. November 2009 Monday - Friday, 11/09/09 - 11/13/09 – Grafton, Pere Marquette Lodge and Conference Center—40 hour Mediation/Arbitration Training. Master Series Presented by the Illinois State Bar Association and the ISBA Alternative Dispute Resolution Section. 8:30-5:30 each day.
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