Question:
Our firm is a twelve lawyer business law firm in San Antonio, Texas. We handle business transactions as well as ligation. Three of us partners started the firm seven years ago and the firm has grown since then. Currently there are seven equity partners and five associates in the firm as well as six legal assistants/paralegals and a bookkeeper. One partner serves as managing partner. The managing partner handles all of the administration except for the basic bookkeeping. Many management decisions require the approval of all of the partners. We are beginning to feel that we have outgrown our management structure. Excessive time is spent by the managing partner. He is spending 40 percent of his time on firm administration. His practice is suffering as well as revenues. An inordinate amount of time is spent by the rest of the partners on administrative and management decisions. We have monthly firm meetings and virtually all of the time is spent on administrative matters. It takes us forever to reach consensus. Recently it took us six months to reach a decision on getting the carpet cleaned.
We would appreciate any thoughts or suggestions that you might have.
Response:
While the firm’s management structure worked for the firm in the past when the firm was smaller, more structure will be required if the firm hopes to grow and be more profitable in the future. Growth will require structure at the partnership and administrative level. The managing partner is spending way too much time on administration as well as the other partners.
The partners should consider hiring a firm administrator to handle all administrative matters and the managing partner or a three partner management committee should focus on higher level management matters. The full partnership should weight in only on matters reserved for their vote and approval. As the firm grows the partners should involve others in management without micro-managing.
A problem facing most firms is lack of long-range focus and the amount of partner time that is being spent on administrative matters as opposed to higher level management issues.
Partners in many law firms spend more time on administrative management matters rather than higher level management/leadership concerns such as lawyer management, attorney compensation, process, business development, mentoring, and long-range planning.
Management deals with those issues that relate to overall control of the firm, including those decisions that should be made by equity partners and the selection of an individual or individuals who will manage and administer the firm. The clear trend today is for centralized management, with substantial authority being delegated to whoever is selected for management and administration.
Specific policy matters that might be reserved for full equity partner vote include:
- Non-equity partner/member and equity partner/member admission
- Practice composition
- Type of practice
- Size of firm
- Long range planning
- Firm goals, mission, and vision
- Merger or dissolution
Specific policy matters that might be the domain of managing partner or management committee might include:
- Equity partner compensation
- Non-Equity partner compensation
- Associate compensation
- Lawyer and paralegal recruiting
- Legal staff compensation
- Budget approval
- Practice management
- Billing practices
A firm administrator appointed by the managing member or co-managing members would direct the business/operational affairs of the firm and would report directly to the managing member/partner or co-managing members/partners.
Administration
When we discuss administration, we are referring to the everyday management of the firm as it relates to finance, staff, and systems. Clearly, today’s trend in administration is to hire competent professionals at the level that suits the firm. Administration is the execution of management policies established by the equity-members and the managing member/partner, co-managing members/partners, or executive/management committee.
At your size I believe that you are ready for a firm administrator. The firm revenues presently being lost will more than pay the salary of an administrator and still leave additional profit to pay additional compensation to the partners.
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John W. Olmstead, MBA, Ph.D, CMC
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