riskybiz

Blogging Continues to be Hot for Lawyers . . . and Consultants?

2006-06-01T22:05:00.000-07:00

I have been inspired to try my hand again at blogging after taking about 3 months off. First of all, take note of these statistics. According to The New York Times, 6.1% of all bloggers are lawyers. According to the ABA Litigation Section, 57% of members read at least one blog on a regular basis; 19% of these same members publish their own blog. As a consultant wanting lawyer business, these statistics are quite inspiring.

Why all the lawyer blogging?

Bloggers often feel strongly about a topic and just must get it out to the interested public
To influence public discourse about a particular topic
To develop new business. Recent articles about blogging cite lawyer stories about how blogging has boosted their practice.

Joshua Fruchter's article in the Marketing the Law Firm Newsletter provides "best practices" tips for us reluctant bloggers:

Make sure your blog projects a professional image.
To my objection to feeling I have to write an article for every post, Mr. Fruchter suggests that as long as a post is well written and offers a couple of helpful insights about the subject, a few paragraphs are adequate.
Frequent posting is the key to high search-engine rankings; but who has time to post original content every day? If you notice, the content of most blogs is commentary on content created by someone else . . . which is what I'm doing now, thanks to Mr. Fruchter.
Mr. Fruchter provides sources for content for us novice bloggers to comment on; i.e., Google Alerts, Westlaw/Lexis, other blogs and government sites.
"Search engines will rank a blog higher the more "inbound links" there are to your blog from other Web sites with related content". In lay language that means we need to link to the posts of other (lawyers, consultants, etc.) publishing blogs on related topics to improve our search engine ranking. Adding others' blogs to your "blogroll" is another way to improve your search-engine ranking.
Finally, give your audience as many ways to access your blog as possible; i.e., subscriptions by e-mail or RSS and linking from your e-newsletter and Web site, if you have one.

Keep on blogging!

Revenue Growth Must Cover the Lawyer's Compensation Package Cost

2006-06-01T18:53:00.000-07:00

There is a flip-side to the age-old question of how solos and small firms can compete with larger firms on associate compensation; and that is, what's the on-going cost to the firm going to be of hiring an additional lawyer and will projected revenue growth cover the growth of the new lawyer's compensation package?

In a New York Journal article featured at law.com today, Florence M. Fass reminds small firms to consider the "exponential growth" of an associate's initial base salary (plus employer FICA, Medicare tax contributions, workers compensation and state disability costs) as "time passes and tenure increases" and the cost of benefits such as health insurance and retirement contributions (generally tied to compensation) when determining if the projected growth in firm revenues will cover the growth of the compensation package.

Money is not the only type of compensation that can be used to attract associates to the small firm environment. Ms. Fass points out that firms who can offer flexibility in the types of benefits associates and non-legal staff, for that matter, can select can be very attractive.

I will take issue with one point Ms. Fass makes with respect to paying lawyers to not take vacation time in order to reduce the firm's cost of not having revenue produced during their paid vacation time. In my experience, lawyers typically do not take the vacation time they need to take to rejuvinate, reflect and rest in order to be more effective lawyers and maintain the life/work balance that is needed. And, finally, she mentions bonuses paid for client origination. This practice is becoming suspect in larger firms because it can be so divisive.

The important point in this article which didn't get too much "play" was being sure that revenues produced by the firm or the new revenue producer not only cover their compensation package; but cover their overhead (fixed costs) and add to the firm's profitability. If a new hire does not do the latter, there's no point in hiring him.

A Promise Kept

2006-03-27T10:45:00.000-08:00

How many of you would be willing to spend $25,000 in legal fees to collect a $77.55 judgment for a client?

How many of you would be willing to spend $25,000 in legal fees to collect a $77.55 judgment for a client because one of your firm’s retired founding partners made a promise to a client that the firm would stand behind their representation of the client - a promise that was made 20 years earlier?

How many of you would even make such a promise to your clients, in the first place?

Rex Houston of Wellborn Houston did just that in 1987. The firm kept that very promise to his client 20 years later. Crazy, huh? Or, is it?

When young lawyers join the Young Lawyers Division of the ABA, they take a pledge . . . a pledge of professionalism. The first promise in this pledge is this:

“I will remember that the practice of law is first and foremost a profession, and I will subordinate business concerns to professionalism concerns.”

The third promise is this:

“I will remember my responsibilities to serve as an officer of the court and protector of individual rights.”

Rex Houston, the retired partner who made a promise to a client 20 years earlier and whose firm honored it, not only fulfilled his professional responsibility by making such a promise; he served the profession well by teaching, through his example, his younger partners the importance of keeping theirs.

The article reported in the Texas Lawyer, March 20, 2006, quotes James Homes, one of seven partners in Wellborn Houston:

“’You can’t just select your cases based on money. You’ve got to take care of people,’ Holmes says. ‘And we’ve always believed if you take care of people, fees will take care of themselves. . . .’”

How refreshing it is to see in the current news coverage of the legal community; where law firm profitability, internal eruptions and lawyer movement is too frequently the subject of the news, a story as this reported. It is a reminder of what the practice of law is intended to be.

It seems to me that there needs to be a significant course correction, where practicing law is once again a profession and less of a business. Such a course correction, if undertaken, will not take place by implementing strategic plans or "differentiating" your firm from another; it can only take place with a change of heart, of purpose and of vision.

Imagine if lawyers took back the profession of law; practiced law with the heart and purpose they promised to do as young lawyers and stopped practicing for the sole purpose of the almighty $$; or to "dominate"; or to be listed in AMLAW 200; and stopped tap-dancing for their clients . . . wouldn't firms and their clients be happier and better served? It’s a risky proposition and flies in the face of every legal management consultant out there.

It takes courage to take the “road less traveled.” I hope there are other firms, like Wellborn Houston, who have the courage to remember that the practice of law is first and foremost a profession and that they have a responsibility to subordinate business concerns to professionalism concerns.

Increasing Firm Revenue

2006-03-24T10:50:00.000-08:00

If the burning issue in your firm is how to increase the firm's 2006 revenues, look no further than your timekeepers. No, I'm not talking about ratcheting up their billable hours . .

Working Smarter not Harder

Let's look at an example: Lawyer A spends 9.6 hours per day in the office: 4.8 billable hours and 4.8 non-billable hours. Lawyer B spends 8.5 hours per day in the office: 7.0 on daily billable hours and 1.5 on non-billable hours. The ratios of billable hours to worked hours (billing realization) of the two lawyers are 50% and 82%, respectively, even though they are spending similar amounts of time in the office. Annualized, Lawyer A will have recorded 1600 billable hours while Lawyer B will have recorded just under 1100 hours. Assuming a $200 per hour billable rate, the difference in revenue production between the two is about $100,000. As you can see in this example, the problem is not Lawyer A's work ethic (otherwise known as her commitment to the firm); it is most likely a problem of poor time management and poor timekeeping skills.

Realization is the Key

While this example may illustrate an extreme case, most timekeepers will readily admit that they know they are not capturing all of their billable time on any given day. This loss of billable time could be costing your firm hundreds of thousands of dollars every year. Demanding that timekeepers work more hours without first ensuring that they are accurately capturing all of their time is a disservice to the timekeepers and the firm. Mistakes and errors in judgment are more likely to occur when lawyers grow tired and grumpy from routine 12-hour+ days.

Timekeeper Training

EDGE International, a management consulting firm, has developed a one-hour Timekeeper Training program for law firms. EDGE offers this training to law firms to be conducted in-house for their lawyers, paralegals and staff. I am working in collaboration with EDGE to provide this critical training.

It works like this: We obtain information from the client-firm about its current timekeeping policies, procedures and standards. After reviewing this information, a telephone conference takes place with management to discuss recommended policy and procedural changes that we feel will improve the firm's: 1) amount of billable time captured, 2) the accurate recording of the time worked, 3) the timely entry of recorded time, and 4) firm-wide consistency in time descriptions. We then prepare and submit to the client-firm a draft of the policy language which includes our agreed-upon changes. When the policy language has been given final approval, we customize our presentation in accordance with the firm's new policy and the training sessions with the firm are scheduled. We prefer that the sessions contain a manageable number of attendees and so are prepared to conduct 3 to 4 sessions in a day to achieve that goal and provide everyone the opportunity to receive the training.

Maximizing Billable Hours

The goal of your firm should be to maximize billable hours in a manner that is consistent with your firm's culture. So, before you ask your timekeepers for more hours, take steps to improve their timekeeping skills. Doing so will increase the firm's revenues, maintain the quality of the firm's work product and support the work/life balance your lawyers are trying to maintain.

For more information regarding the Timekeeper Training program, contact Ed Wesemann, Edge International, at Wesemann@edge.ai or 1-912-598-2040, 1-877-922-2040 (toll free from U.S. and Canada). EDGE INTERNATIONAL is a management consulting firm with partners resident in the United States, United Kingdom, South Africa, Germany, Canada and the British West Indies; and an acknowledged leader in providing sophisticated strategic advice to law firms worldwide.

Statistics: What Story Do They Tell?

2005-12-15T18:58:00.000-08:00

I just received my Law Practice magazine and strongly recommend you read every article in it over the Christmas break. Not only does it give great information about how to take charge of your practice, it provides some interesting statistics from a number of recent law firm surveys. I'm not sure what they all mean when put together. I'll have to think about that more. But here are some that may help you think a bit about how your practice is performing in some of these areas.

Revenue & PPP

Over 74% of the law firms recently surveyed believe their 2005 gross revenue on a cash basis will be higher than the past fiscal year (Law Practice Management Reference Guide 2006, IOMA and LOMA).
64% of law firms surveyed anticipate higher distributions to partners for 2005 than in 2004; with 5% expecting to see an improvement of 20% or more!
54% of law firms' gross revenue is now derived from hourly billing, compared to 86% in 2004.

Trends

76% of large companies have negotiated preferred rates with their law firms, with few guaranteeing a specific number of hours or future work. (BTI Consulting Group).

Marketing

93% of respondents to a survey conducted by The LawMarketing Portal and Sage Business Development Institute believe that associates must be able to develop business to be successful as a lawyer. (The full report may be viewed here.)
65% of respondents said their firm's partners consider business development capability an important factor.
87% of respondents said associates see business development essential for their success.
57% of firms fail to give associates any training on how to develop new business.

Associates

According to the American Lawyer 2005 Midlevel Associates Survey, the average associate's billable hours in 2004 were 2,072 compared to approximately 1850 hours for associates in 1986.
Sally Schmidt's article, The New Generation of Lawyers: Planting the Marketing Seed, provides additional insights from the survey:
Associates feel they have less opportunity to become partner, and many feel they're viewed as "fungible."
Partner mentoring continues to be neglected by law firms.
Many have dual-career families in which domestic and child rearing duties are shared by both spouses; a different dynamic from years past.
9/11 and the dot.com debacle left associates feeling they wanted to pursue a more balanced life of work, family and giving.
It also found that associates prefer teaming efforts as opposed to the eat-what-you kill cutlture still in many law firms.

Be Intentional: Begin with the End in Mind

2005-12-12T04:09:00.000-08:00

A question lawyers seem to be asking more and more frequently is, "How can I sustain the success I've had in my law practice?" Law firms inevitably reach a point in their "life" when "the way we've always done it" isn't working. And, in some cases, it may just be pure, (I hesitate to say) dumb luck that the firm has stumbled into the success it has had. One day you look up and ask, "how did that happen?" The next question then inevitably is, 'how can I do it again?" There is never a better time than at the end of a year to step back and take a look at what you're doing as a person, lawyer and firm. Where are you? Are you in a different place than you were this time last year? If so, is it a better place - a place you intended to be at the beginning of last year? Were you actively deliberate in your decisions and actions or did you spend another year reacting? Did you envision what the end of this year would look like and use that vision to guide your decision-making throughout the year? If not, I challenge you to plan strategically for where you want to be at the end of 2006 and to act "intentionally" to be sure you get there. As a firm, look at these things:

1. Who are your best clients? Identify the characteristics that your "best" clients share and incorporate those as guides into accepting and firing clients next year.

2. What are your best practice areas? Where is your core expertise; which practice areas have been most profitable for the firm over the past five years; how can you strengthen and market your core expertise in the coming year?

3. Ask your clients what you're doing right and what needs improvement. Find out if there are other services the firm can provide to them. Don't do it by paper or telephone. Go to their office, take them to lunch or dinner and really listen to them. Then implement their suggestions.

4. Look at how you are staffing your most profitable matters and your least profitable matters and be intentional about how you staff your matters in 2006.

5. Review your firm's "model". Is it relationship-driven or "eat-what-you-kill"? How "partner-heavy" is the firm? Will it sustain the firm beyond your generation?

6. Look at your compensation system. What is the distance between the highest and lowest paid partner? Does it cultivate the characteristics of a true partnership or are you in essence sharing space with each other?

7. How well are you prepared for disaster? Would the death of a key partner deal a fatal blow to the firm? Could you survive a natural or man-made disaster that might put you "down" for a few days?

8. How effective is the management of your firm? Is its structure an impediment to effective decision-making and forward movement? Are partners spending too much time on administrative tasks? Is your administrator a "yes" person or does he or she add real value to the administration of the firm?

9. Look at areas of exposure to malpractice and ethics violations. What steps can be taken to reduce the possibility of malpractice?

10. Embrace technology that enables you to best serve your clients.

Have a good year.

Inability to Staff Support Functions is Slowing Recovery Process for N.O. and Gulfport Lawyers and Court Systems

2005-11-10T08:45:00.000-08:00

One of the frustrations we heard from New Orleans and Gulfport lawyers weeks after Hurricanes Katrina and Rita hit was that lawyers outside the two ravaged areas were growing more and more impatient with the time it was taking for affected lawyers and court systems to recover. What’s taking so long? A reality that was not foreseen – staff members who have chosen to not return to the area and the inability to house employees who would like to return but have no house to come back to or school for their children to attend. While law firm and court facilities may be sound and lawyers and judges ready to resume work and preside, there is still little to no infrastructure to support the employees needed to re-open businesses. There was and still is, I’m sure, a disconnect between the day-to-day reality of New Orleans and Gulfport lawyers and the reality of the lawyers (on the other side) who are personally unaffected by these events. As recently as this week law.com reported on the condition of the federal and state court systems in those two areas and the staffing challenges they still face. Remember that just because you have been able to distance yourself from those devastating events, those affected are still much closer to them than they would like to be. Be patient and understanding with those members of “the bar” who continue to attempt to practice under unprecedented circumstances.

Do You "Do Marketing"?

2005-11-09T22:33:00.000-08:00

I am frequently asked if I "do marketing" for law firms. Frankly, marketing is not an area of focus in my consulting practice. I typically refer my clients to my preferred legal marketing vendor when they are looking for help in marketing their firm. However, for those who may not feel they can afford a consultant to help them market, let me put you on to a free source I have recently discovered: Tom Kane's blog, legalmarketingblog.com. I highly recommend it to solo and small firm practitioners who want to market their practice but don't know where to start. Of particular interest are his recent posts which summarize a recent Martindale-Hubble small firm marketing survey. I would recommend you read the survey and then Tom's summary to understand the marketing activities other practitioners have found most effective and to do some benchmarking against your own marketing efforts.

You can download the file containing the survey.

Fundamental to a Successful Practice: Communication

2005-11-09T08:42:00.000-08:00

I have a client who readily admits that she does not return phone calls from clients in a timely manner or have a procedure in place for responding to unhappy clients, of which she has many, according to her receptionist. Her reasoning is that most of the calls are initiated by pesky clients who are unnecessarily concerned about their case. This same lawyer does not review files or talk with clients on any regular basis; does not always copy the client with correspondence and documents relating to a client’s case; nor does she bother to educate her clients at the beginning of their representation about the legal process involved in representing them. It is my experience that lawyers who practice in this way will not be able to improve the quality of their client base – their reputation precedes them. They cannot hire or retain talent who are embarrassed and demoralized by their behavior. They are unprofitable, as a result, and unhappy.

Lawyers who do not acknowledge the importance of building strong client relationships as a key to building and sustaining their practice in this day and age are not ignorant – how many times must this subject be addressed – they are simply wrongly motivated. They have clearly chosen the wrong profession. Practicing law requires building healthy and effective relationships with clients, colleagues and staff. Relationships are either sustained or destroyed by the level and quality of communication between the parties to the relationship. Communication is a salve to many a wrong-doing in practice and in life and should never be underestimated in its importance to the management of both.

Managing Change: Do You have the Collective Will to Change?

2005-11-08T08:14:00.000-08:00

I am being asked more and more often to help lawyers implement change in their firms. Most lawyers typically know what needs changing; they simply lack the collective will to take the steps necessary to accomplish the desired change. According to an article entitled The Psychology of Change Management, The Mckinsey Quarterly, psychologists in the fields of child and adult development have made four signficant discoveries about the conditions that have to be met before people will change their behavior.

People must see the point of the change and agree with it, at least enough to give it a try.
Then the surrounding structures—reward and recognition
systems, for example—must be in tune with the new behavior.
People must also see colleagues they admire modeling it; and
People need to have the skills to do what is required of them.

It is my experience that these same conditions must be in place to affect change in a law firm. First, people must see the need for or purpose of change and agree with it. Such consensus building requires strong leadership within the firm and the collective will to make potentially hard choices.

Second, the reward system must reward the behavior necessary to bring about the change. Lawyers, to their detriment, tend to be short-term thinkers; and, therefore, are typically motivated to behave in ways that benefit them NOW rather than later. The firm’s “change strategy” must incorporate rewards for the behavior needed to implement change.

Third, you must not only talk the talk, you must walk the talk. Modeling the desired behavior you expect your employees to model is essential to successfully bringing about real change. Maverick lawyers who refuse to comply, cooperate or follow will undermine a firm’s ability to affect change and may render the effort pointless. Before you start, find out if your firm has one or more of those; and, if it does, determine if the firm has the “collective will” to address this non-compliance, even if doing so means removing the lawyers from the firm permanently.

Finally, you must train your leaders, lawyers and staff in the skill sets required to support change. The “sink-or-swim” model of lawyer development does not serve the long-term viability of a firm. Just because that’s the way you were brought up in the practice of law, doesn’t mean it was the most effective way. The firm must also invest in the technology needed to support the new environment.

When was the last time you looked at the rules of professional conduct?

2005-10-15T04:09:00.000-07:00

Based on a survey of 41 randomly selected small firm and solo practitioners in the NYC area, their “ever-present concern” was related to bringing in new clients and producing fees, which according to the professor conducting the survey, has a broad influence on the lawyer’s ethical decision-making process. Most surveyed rarely consult the applicable rules of professional conduct; rather, they rely on their own sense of ethics, the norms of their local bar and the expectations and practices of their supervising lawyers. In another survey, research showed that in cases where large verdicts were awarded against law firms, no one consulted with the firm’s loss-prevention partner or in-house counsel. The conclusion of these two studies was that 1) steps should be taken to alleviate the situations where lawyers are overwhelmed with cash flow concerns and caseload; 2) supervising lawyers must be knowledgeable of and comply with the rules of professional conduct and ensure that their legal and non-legal staff do likewise; 3) lawyers should strive to keep their judgment autonomous from that of their supervising partners and have an understanding of the rules; and 4) firms and local bars should provide on-going CLE ethics programming. (The Professional Lawyer, Volume 16, 2005 – Professor Leslie Levin of Univ Connecticut School of Law and Kimberly Kirkland of the Franklin Pierce Law Center)

Being "pushy" works . . .

2005-10-14T09:03:00.000-07:00

Pushing work down to the lowest level that is competent to do the work is the key to improving law firm productivity – yet, it is one of the hardest concepts for law firms to successfully implement. Why? Intra-firm competition for fee dollars is a significant obstacle to implementing profitable delegation of work. Competition within the law firm is typically the result of the firm’s compensation system. Other typical objections include partners claiming that the client only wants them and a fear of malpractice by junior lawyers. The compensation issue is a legitimate one that must be addressed. In the end, partners must be able to act in the long-term best interest of the firm, regardless of how it may impact their pocket at the moment. If a partner cannot do that, he is probably over-extended and unable to bring to bear good, sound business principles to the management of the firm. This is a highly volatile and divisive situation. The other issues are not legitimate concerns; they are excuses. If a senior partner became incapacitated today, would the firm necessarily lose her clients because they only wanted her?

Starting Over

2005-09-27T18:53:00.000-07:00

As I have thought about the lawyers we will be addressing in LA and MS on 10/7 and 10/8; how devastated they are; how frustrating it must be to be trying to find a place to live and their clients at the same time; how fearful they most likely are that they are committing malpractice even as they pull the remains of what was their home from its site - it must be inexpressively overwhelming. Then, I thought . . . they get to start over. They get a second chance to build the life and the practice they wanted to build in the first place but didn't have the wisdom then that they have now to do so. If you had a Katrina or Rita experience and your practice was literally blown away and you had to start over, what would you do differently? What have you learned up to now that would change the way you would build your practice. If you were starting from a clean slate, what would you build?

If you are in the middle of your life, as I am, I recommend a book to you, "Where to Go from Here, Discovering Your Own Life's Wisdom in the Second Half of Your Life" by James E. Birren and Linda Feldman, Simon and Shuster. It encourages those of us who have lived through the first half of our lives to use the knowledge we have gained to build a better second half. We don't have to have a Katrina experience to heed that advice. But the displaced lawyers of Katrina and Rita have a unique opportunity - to use what they've learned to build a more satisfying and successful practice. The silver lining in the destruction we have seen these past few weeks may be that what will be built in the place of what was will be better and that those affected will be more content with their practice and with their life.

Volunteers Help Katrina and Rita Displaced Lawyers

2005-09-27T18:25:00.000-07:00

Several good folks are volunteering their time to assist the displaced lawyers in Louisiana and Mississippi. Practice management advisors from Florida, Oklahoma, and Texas; attorneys from various states who have experienced similar displacement in previous disasters and 9/11, LSBA and MSBAR LAP staff and myself will be heading to Lafayette, LA on 10/7 to present a 6-hour seminar entitled: Rebuilding Your Practice after Disaster Strikes. We will then be transported to Gulfport, MS where we will present the same program to the displaced lawyers in Mississippi. The LA and MS state bars, along with CNA and the Lawyer Assistance Programs from both states will be sponsoring and picking up the cost of the seminar. Carol Wilson and Mike Long from the Oregon State Bar and Oregon Law Assistance program, respectively, have worked hard in putting the seminar together. The speakers and their respective state bar associations are donating their time to bring much needed information to the lawyers in the affected areas. Please get the word out to any LA or MS lawyer that would benefit from this seminar. Contact Vanessa Duplessis at the Louisiana bar (337-272-0366) or Betty Daugherty at the Mississippi bar at (601) 960-9573 for additional information.

The Games People Play

2005-09-27T17:36:00.000-07:00

Fiscal responsibility (or rather lack of it) in your personal life will impact how you practice law. One of the first clients I had as a new consultant was a disciplinary case referred to me by our state disciplinary board. The lawyer was a well known personal injury lawyer in her town; advertised heavily in the yellow pages and on television with success. But she lived an extravagant lifestyle that her practice could not support. The result was she mis-managed her practice: she took cases she should not have taken; pushed her associates to settle cases - sometimes took cases away from them to settle herself. And she "borrowed" money from her clients to make payroll. She was investigated; the hearing panel recommended disbarment. She blamed her predicament on the disciplinary board's harrassment; on the ineffectiveness of her staff; of being so soft-hearted she found it hard to turn a prospective client away.

Small Firm Business reports a similar story as mine - that a Pennsylvania (already disbarred for sexual harrassment) personal-injury lawyer and his lawyer son stole $1.1 million from clients to pay payroll taxes. Prosecuters reported that 59 alleged victims have so far been identified, including eight children, one of whom is deceased. One victim who is owed $80,000 from a 2003 settlement ran out of money and ended up living in a shelter.

Clients in both cases were harmed as a result of the mis-management of the personal and professional lives of these lawyers. And, sadly, in the end, I don't think the lawyers "got it." My lawyer is appealing her recommended disbarment and continues to practice law. The PA lawyer-son in the SFB news story stated before his arraignment that "everyone will be paid every dime they are entitled to." That'll be hard for him to do behind bar.

What? It can't happen to you? It is the underbelly of the Bar that lives in that world? It may be closer than you think. Think about the lawyers in your firm - any of them struggling financially? And, personally - be certain that the decisions you are making with regard to your own life are not jeapordizing your practice; or are not, even indirectly, posing harm to the best interests of your clients. Be smart out there.

Business Continuation: Change the Equation

2005-09-25T21:44:00.000-07:00

We have the technology to see a storm hundreds of miles from our shores, giving us time to prepare to evacuate and to secure property. And still, many don't heed the warnings. We know of thousands of lawyers that have been displaced in New Orleans, alone, by Hurricane Katrina and still no one is jumping to develop their own business continuity plan or update the one they have, now years old. We know that documents and evidence have been destroyed creating a mess for the courts to have to sort out. If these catastrophic events and their impact on the legal community alone do not shake the Bar and motivate action to improve our preparedness, I'm not sure what will. Why are firms so resistant to investing time and funds to ensure that despite what may happen, the firm will be able and ready to continue the type of service their clients have come to expect? It just makes good business sense. Business continuity planning isn't just about bracing for the most likely catastrophic event that can possibly happen to the firm - it is about changing the equation: E + R = O (event + response = outcome). It is about looking at vulnerabilities in all areas of your practice and processes and designing a plan to eliminate or control the impact that those vulnerabilities may present to the firm.

What most firms find is that the risk assessment and impact analysis, which are two of the steps in the BCP process, stimulate improved processes and controls that benefit the firm every day - not just when a disaster occurs. The ultimate objective of a BCB is to ensure that no matter what happens, it will be an operational incident, handled at the operational level, rather than a disaster to be recovered from.

Profitability Factors: Matter Staffing

2005-09-19T20:08:00.000-07:00

We've talked about the importance of selecting good cases/matters both for improved profitability and for risk management. The next step in determining why a firm is not as profitable as it could be is to look at matter management; and, specifically, matter staffing.

Take a minute and think about 1) whether work is delegated in your practice and 2) on what basis. I have never worked with a firm that delegated work too much. I have never worked with a firm where the associates were fully employed and the partners were working on more sophisticated work, developing a higher-end practice or actually proactively managing their firm. Why? Because if the firm is doing these things, it most likely won't need much of my services or any other consultant's services. The firm is doing it right. Firms that are not doing it right are most likely having a difficult time improving or maintaining their profitability. So, if your profitability is flat or declining, look at how you are staffing your matters. Here's some research for you to do. Find out the following:

Are your timekeepers' billed fees less than 95% of the standard $$ value of their hours billed for the past 12 months? What about of standard $$ value of hours worked? If yes to either, find out why.
Are your partners' average hours billed significantly greater than the average hours billed by your associates? In other words, are some of your associates under-employed while some partners are over-burdened with work; specifically with non-paying or low rate work? If so, in which practice areas is this occurring or on what client work is it occurring?
Does any particular timekeeper or practice group have a large number/amount of pre-billing fee adjustments? If so, why?
Compare timekeeper standard billing rates to timekeeper effective billing and collection rates. Are they 95% or greater than standard rates? If not, why?

If you are not monitoring these types of performance benchmarks, it is important that you begin to do so. Why? So that you can make the most effective adjustments to your practice to improve your profitability.

A second point is that by effectively delegating work to the most appropriate level, the firm will have a better opportunity to improve the caliber of its practice through the development of higer-end work; which, in turn, will continue to yield dividends in the long term.

Client Selection: Riskybiz

2005-09-15T07:27:00.000-07:00

Poor client selection not only impacts profitability; it creates an exposure to ethics complaints and malpractice. I commend to you the September, 2005 issue of Law Practice Today where a good friend of mine, Dan Pinnington, has a timely article, "Family Law: Increasingly a Risky Business" , that addresses the most freqent reasons family law practitioners find themselves before a disciplinary hearing panel or talking to their malpractice provider. He mentions client selection as one of the areas lawyers should be more attentative to: Here's an excerpt from his article:

Learn to say no

Unreasonable clients will have unreasonable expectations, which no lawyer can ever satisfy. If your instincts tell you that a potential client is going to be difficult, stop and pay attention. Too often we hear lawyers say: "I knew this client was going to be trouble the first time I met him."Some of the warning signs of a problem client include:

The client has changed lawyers more than two or three times;
The client owes money to his or her previous lawyers;
The client expresses dissatisfaction with all of his or her previous lawyers;
The client has unreasonable and unrealistic expectations about his or her case;
The client places unreasonable demands on you and your staff;
Every aspect of the client's case is urgent and requires instant attention;
The client either will not or cannot provide proper financial disclosure; and
The client instructs you to advance positions which you believe to be without merit.

If you see some of these warning signs when dealing with a new client, ask yourself if you should accept the retainer.

Sometimes it is best to just say "no."

In that same issue, Dee Crocker, has another great article on

"Getting Paid for what You Do". She, too includes improving client selection as a way to improve your revenue. Client selection is the first opportunity a lawyer has to make a good or bad decision; a good decision will reward you . . . a bad decision will haunt you long after the representation is over.

Profitability Factors: Client Selection II

2005-09-15T05:56:00.000-07:00

Continuing the discussion in my previous post regarding client selection , I highly recommend John Day's Day on Torts Law Blog . He has two sort-of recent posts that are on point regarding the importance of client selection in practice profitability. Here is one of them and here is the other.

Profitability Factors: Client Selection

2005-09-12T19:49:00.000-07:00

Client Selection -- lawyers, particularly in small firms, struggle with this area of the management of their practice. Yet, the selection process is a critical step in a successful representation and should not be approached in a haphazard manner. This is the first area I look at when evaluating a firm's financial health. So, how do you get this critical first step right? Here are some tips for employing a successful client selection process:

Step 1: Determine what type of practice you want to have: Ask yourself these questions, among others.

What type of people do you want to work with; i.e., elderly, criminals, plaintiffs, suits?
What kind of work do you most enjoy doing; i.e., preparing for and going to trial, negotiating a contract, mediating between a husband and wife?
Do you have the expertise and/or experience to do the work you think you'll enjoy?
Can you make a living at it?
Will it provide you the life/work balance you need/want?

Step 2: Write a client selection policy and put the following lists in them.

Make a list of character traits a client you select must have; i.e., honest, cooperative, reasonable expectations, able to pay your fees.
Make a list of the character traits you wish to avoid; i.e., the opposite of the above.
Make a list of the case facts that must be in place for the client/matter to be selected.
Establish a policy for allowing associates to select clients. (I would discourage this unless prior approval from one or more partners has been obtained.)
Determine what client selection decisions have to be made by the partnership vs the partner to whom the engagement has come.

Step 3: The interview

Check for conflicts
Check list of requirements for client selection against interview findings
Has the prospective client sought and been turned down by other counsel?
Observe and note your impressions of the client, strengths and weaknesses of their matter.

Step 4: The decision

Does the client's matter meet all qualifications outlined in the client selection policy?
Does the client meet all qualifications outlined in the client selection policy?
Will handling the matter be profitabile or does it offer some other value to the firm that will support the cost of the representation?
Does the firm have the resources at hand (cash and labor) to profitably and competently handle the matter?

Step 5: Document the decision in either an engagement letter or a non-engagement letter.

If you will incorporate and comply with these simple steps in your client selection process, your practice will become more profitable and more enjoyable.

Sexual Harrassment without the Sex?

2005-09-08T14:26:00.000-07:00

law.com reports that the 9th Circuit Court of Appeals may have taken the sex out of sexual harrassment. " The opinion, in a case originating at an Alaska teachers union, said that Thomas Harvey, a manager accused of 'shouting, screaming, foul language, invading employees' personal space and [making] threatening gestures" may be sued for gender-based discrimination under Title VII of the Civil Rights Act of 1964, even though his acts were not overtly motivated by the victims' gender." This could be scary for some law firm environments! Check it out - this may be a good time for that anger-management class you've wanted to send some of your lawyers to. Christopher v. National Education Association, 05 C.D.O.S. 7999.

Cyberinsurance: Is Your Data Insured?

2005-09-08T14:03:00.000-07:00

The September 2005 issue of Law Practice contains an interesting article - Cyberinsurance: It's Like Singing in the Rain. The piece points out that there are 4 ways to deal with risk: you can accept it, reduce it, ignore it or transfer it. Cyberinsurance allows a firm to transfer the risk associated with the loss of a firm's data from the firm to the insurance provider. Note: Your typical business insurance does not provide this type of coverage. According to the authors there are 6 types of coverage available: 1) first-party business interruption; 2) first-party electronic data damage; 3) first-party extortion; 4) third-party network security liability, 5) third-party (downstream) network liability; 6) and third-party media liability. Familiar insurance providers that offer the coverage are St. Paul Companies, Zurich Northern America, Chubb, CAN and Media-pro. It sounds like the application for this type of coverage is as burdensome to complete as one is for E&O coverage. Small firms who may not have adequate security systems to be eligible for coverage may want to perform their own security assessment or outsource the assessment to companies that provide those services so that they are "insurable".

Business Interruption Insurance

2005-09-07T21:23:00.000-07:00

I am hearing that Mississippi lawyers who have been displaced or impacted by Katrina are most concerned about how to recreate client files and financial records to continue their practice. There are a number of resources to be found on the ABA website (www.abanet.org/katrina) that provide information for file recreation and starting over that will be helpful to displaced lawyers to do just that . . . start over. There hasn't been much said about the importance of re-establishing cash flow. Cash flow is key to survival when disaster hits. Coverage for building, contents, computers and office equipment will provide funds to replace these assets. But what about the revenue being lost each day the displaced lawyer is unable to work; or the fees that have been billed but can't be accounted for because there is no A/R report; or the work in process that can't be billed because those records are gone. How will a firm impacted by Katrina survive without cash? The short answer is that it won't. Hopefully, the lawyers affected by Katrina have business interruption insurance. Do you? Business interruption insurance or business income coverage covers the financial losses that result from a business suspension or interruption. If an adequate policy is obtained, it can restore the firm to the same position it was in before the loss occurred. Check your policy; call your insurance agent and obtain the correct coverage before you need it.

Outsourcing as a Way to Improve Leverage

2005-09-07T16:43:00.000-07:00

There are four components that influence the financial success of a law practice. Leverage is one of those factors; and, some would say, the most important factor. One form of leverage is delegation - pushing work down to the level where it can be completed competently and at the least cost to the firm and/or the client. I find in my work with firms of any size that the principle of delegation is one that is unanimously understood but rarely implemented in law practice. It's hard to let go. Of the four financial factors in law firm profitability, leverage may be the most important one. Leverage is the degree to which a firm is successful in using technology, expertise, legal and non-legal staff and other resources to produce work for and provide value to the client. In the solo and small firm practice, there is not always an apparent way to delegate - there may not be anyone to delegate to, which is where technology is so vital to the practice. Delegation of administrative and management functions is probably the most difficult to do because it is there that the lawyer feels most vulnerable. The lawyer who is trying to balance the management of her practice with her practice more often than not will neglect practice management so that client needs can be met. At some point, her failure to adequately manage the business side of law will begin to affect the practice side. This is the point where the firm is most vulnerable to malpractice and most likely to neglect a client. Outsourcing logical business or back-office functions makes sense when there is no one in-house to perform these functions, other than the lawyer. Outsourcing allows you to focus on your core competencies while others (in-house or outside the firm) focus, on your behalf, on their core competencies. The end result is that the client work will be get done and the management work will get done and both wlll be done well.

Tennessee to Receive in Excess of 13,000 evacuees from the Katrina Disaster

2005-09-05T21:48:00.000-07:00

It is reported that the state of Tennessee has or will receive several thousand refugees who are coming here to start over or just to settle until they can return to their own state, their own neighborhoods and homes. Memphis will receive 13,000 refugees alone. The Tennessee legal communities of Memphis, Clarksville, Jackson and Nashville are keenly aware of how devastating it is to lose both your home and your livlihood as many in our own state have suffered similar losses due to tornadoes in the past six years. Please know that you come to a state who understands your pain and is ready to assist you in any way we can. The Memphis Bar Association (http://www.memphisbar.org/), Tennessee Bar Association (http://www.tba.org/) and Mississippi Bar Association (http://www.msbar.org/) are offering resources to those lawyers who have been displaced as well as legal services to the general public who have been displaced. There are other sites with resources that provide information about how to set up a practice, how to begin recovering financially and how to assess damage and safely re-enter your home or office once you are able to return. It has been my experience that when disaster strikes a particular legal community, communication is vitally important to connect those who need help with those who have help to give. Local bar associations can be the conduit for such communication. Bringing displaced judges and lawyers together to share contact information, an update on the recovery effort, court news, education on how to begin to recovery and the opportunity to be with others who are suffering the same fate is essential to maintaining lawyer morale. Other efforts are being mounted by the technology community to bring assistance to you as well. I will try to provide information as I come to know it here and hope that it will be helpful to those who are in such need of help.

Risk Management: Is Your Firm Culture Exposing You?

2005-08-17T09:32:00.000-07:00

The financial health of your firm, its leadership and management, the quality of your relationships with your clients and staff and even the way a firm compensates its partners are as critical to avoiding malpractice as are procedures and systems. That is the premise of my most recent article, Risk Management: Is the Culture of Your Firm Inviting Malpractice or Ethics Violations? which appeared in the July, 2005 issue of the Tennessee Bar Journal. The five risky "cultural" factors that I find most frequenty when conducting a practice review are 1) short-term view; 2)they say they're partners, but they're really solos practicing in the same office; 3) personal fiscal irresponsibility; 4) an "eat-what-you-kill" philosophy; and 5) an absence of trust among the lawyers and staff. There are no questions on the malpractice application that address these issues; but they are in many ways more risky than a lack of systems. Take a moment to read the article and think about whether you have created a culture that exposes your firm.

Welcome to riskybiz

2005-08-14T12:00:00.000-07:00

I am new to the legal blogger community. So bear with me while I learn how to do this. I am a law practice management consultant working with lawyers and small to mid-size law firms in the areas of business, practice and risk management. I reside in Tennessee and mostly practice in Tennessee but am looking to expand my practice a bit into the Southeast, mostly.

My "riskybiz" blog name is reflective of what I find in my consulting practice. Practicing law is a risky business . . . in a number of ways. Lawyers are more and more at risk for malpractice claims due to both substantive and administrative errors. The competitive (internal and external) environment in which lawyers practice and the seemingly universal need lawyers have to make more and more money is creating, in my view, a crisis of significant proportions in the stability of law firms, the quality of life for lawyers and; as a result, the quality of the expertise and service they are delivering to their clients (which creates more malpractice claims and ethics violations - it's circular).

I see a need for a change in thinking about how to build and maintain a successful, effective, viable law practice - whether it be a solo practitioner or a mega-firm. I have been a small voice for the "practicing law is a business" philosophy. I am now wondering if lawyers and legal consultants have taken that too much to heart and find that the sensitive balance between law as an "art form" and as a business has tipped too far to the business side, leaving in its wake unhappy lawyers, fragile law firms and dis-satisfied clients.

We all also see the practice drastically changing with the increased use of the internet and the availability of on-line legal services. As lawyers try to take advantage of these new technologies, the professionalism and ethics guidelines are lagging in providing guidance to lawyers about how to "practice" ethically. Some might say that the ethics rules require a drastic overhaul; that the basis of some of the rules are no longer valid.<>
It's an interesting time for lawyers. I am not an academic on this subject and I'm not a lawyer. But I do see first-hand how all of these stresssors are in combination impacting lawyers - how difficult it is becoming for them to know what to do. I'm not so sure that legal consultants are really helping them find real, long-term solutions. These times certainly do not call for "cookie-cutter" solutions - advising lawyers is not a "commodity" practice - none of them are the same - all of them need customized attention and advice.

I'm also not quite sure how my blog will develop. However, I welcome your comments and thoughts.