Knowing the RULES of Law Firm Management and Profitability is Key to Career Success

Learning the rules of law firms is critical to your success there.  I have included a lot of material about how law firms work in my book, Best Friends at the Bar:  The New Balance for Today’s Woman Lawyer (Wolters Kluwer/Aspen Publishers 2012), and it is important information.  You cannot possibly be successful in a law firm unless you know the ropes and understand how the business works.  As a cog in a much larger wheel, you need to understand what makes that wheel go around and what your role is in producing the desired result.

I was interested by another approach to this subject matter that I read on Above the Law recently.   The concept is “RULES,” a simplistic approach to a complicated subject matter about law firm management and profitability, and here is how it works.

R stands for Realization. It stands for how much you are worth as a cog in the law firm machine. The formula is “fees collected divided by the value of time billed,” and the concept is how much you received as fees compared to how much you were supposed to get for the number of billable hours multiplied by the billable hour rate.  Clients often are able to negotiate preferred rates, and the benefit for that negotiation is known as a discount.  Attorneys also initiate discounts as ways of demonstrating good will and encouraging follow-up business from clients.

U stands  for Utilization. This is all about billed hours divided by the number of billable hours targeted for individual lawyers.  It is typical for law firms to project a 2000 hour per year mark for their individual lawyers, and some firms include pro bono, marketing activities, etc, in those projected hours.  Some do not, however, so look out for it.

L is for Leverage.  You have heard of the legendary law firm pyramid model, and that is what leverage is all about.  In other words, the ratio of how many non-partner attorneys there are for every partner affects profitability.  Because associates bill out at rates much lower than partners, it is possible to keep a lot of associate lawyers busy generating fees on an account.  And, don’t feel sorry for the partners.  There is another thing called “generation credits” that allows them to cash in on the associates hours also.  See, a great big pyramid.

E is for Expenses. There is a simple formula for this:  1/3, 1/3, and 1/3.  The three categories of expenses for law firms are people, rent, and everything else, as in salaries, the cost of physical space (owned or leased) and miscellaneous expenses, which includes things as insignificant as the cost of envelopes to things as significant as technology software and hardware.

Finally, S is for Speed in terms of the date charges for legal services are incurred and the date that payment for those services is received. The most “speed effective” clients are the ones that pay shortly after being billed.  However, they can be few and far between, and clients usually need a little encouragement on the speed issue.  Law firms can be a frenzied place at the end of the fiscal year when billing attorneys are running around like crazy to get clients to pay up before the partners close the books for the year and divide up the profits pie.  That should make you better understand why all lawyers need to get their billable time recorded according to deadlines and why submission of billing logs is not just an arbitrary requirement.  What has not been recorded cannot be billed.  It is simple.

So, there you have it.  File this away.  When you are feeling overworked, used and ready to jump ship, read it again first before you act impetuously.  It is much more logical than you like to think, and you may not feel as compelled to leave one firm for another one where the RULES will be the same.

RULES are important.  Pay attention!

 

Career Counselors, Law Firm Managers, Law School Educators, Law Students, Practice Advice, Young Lawyer | 5 Comments

Thought For The Day

“Find joy in everything you choose to do. Every job, relationship, home… it’s your responsibility to love it, or change it.”

Chuck Palahniuk

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“Never give someone the opportunity to waste your time twice.”

Unknown

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Orrick Makes News with Generous Parental Leave Policies

Progress — significant progress — was made yesterday when one American law firm leaped far ahead of the others in terms of paid time off for maternity leave.  That law firm, Orrick , Herrington & Sutcliffe, announced that it has increased its parental leave benefit and will now offer 22 paid weeks off for both its male and female attorneys.  And, lawyers also will have the option of taking a total of nine months off of work without the risk of losing their jobs.

That’s big, and it was “the buzz” at the Polsinelli law firm reception I attended last night in DC.  I was very pleased to be asked about it and to applaud Orrick.  One of the leaders behind the generous family-focused policies at Orrick is a friend of mine who works hard on behalf of all women lawyers.  Patricia Gillette, a partner at Orrick, is a major force for women in our profession, and I can see her influence all over this ground-breaking announcement.

As described in this article, the new policy adds four weeks of paid leave and two months of unpaid leave to the prior policy at Orrick.  It is reported to be the most generous policy offered among large U.S. law firms and includes provisions for non-attorney staff for up to 14 weeks of paid leave and seven months of unpaid leave.  The firm is also adding a “Leave Liaison” to help parents transition back to work as well as training for those in leadership for how to support parents. These new programs are in addition to existing law firm programs addressing onramping for parents and flexible work programs.

The most significant part of the announcement for me was the explanation by Orrick CEO, Mitch Zuklie, about the compelling reasons behind the new policies.  Those reasons center on a combination of what is right for the women and what is in the best business interests of the law firm. Here is how Mr. Zuklie stated it: ““Women are thriving in U.S. law schools at the same rates as men. But they are not thriving—in the right numbers—in law firms. … At Orrick, one way we’re seeking to attract women, and inspire them to stay and lead, is by expanding our parental leave policy.”

Hear, hear.  Read the entire article for more background on how law firm parental policies compare to other industries in America and how the US compares to other countries on these issues.  You may be very surprised at what you read.

And, for your additional reading pleasure and a bit of entertainment after a hard day at the office, enjoy this piece, which posits that men getting pregnant is the sure-fire route to women having it all!

 

Career Counselors, Law Firm Managers, Law School Educators, Law Students, Lifestyle, Practice Advice, Young Lawyer | 3 Comments

Thought For The Day

“If someone offers you an amazing opportunity and you don’t know whether you can do it, say yes — then learn how to do it later.”

Sir Richard Branson

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Is This Alternative Law Firm Model For You?

Imagine a world where most women lawyers could function like the lawyers in this recent article in the NY Times about a women-owned law firm that allows parents to be parents.    Imagine a world where women lawyers could have schedules that allow work from remote offices in their homes and time to prioritize the needs of their personal lives and their children without being judged and without the necessity to answer to a higher authority about their choices.  Yes, just imagine.  It is very innovative and entrepreneurial, and I applaud the women of the Geller Law Group in Virginia who have put together a model that appears to work well for them.

The New York Times article struck a chord with many of my readers.  In all the years that I have been writing for women lawyers, I never have received more enthusiastic mail about a single article or report than I did after this article was published.   At first read, the law firm model described in the article can appear to be a kind of panacea for the work-life struggle experienced by so many women lawyers, and I am sure that is why it is getting such positive reviews.

But, we need to be careful in assigning too much importance to this new practice model as it relates to all women lawyers.   The New York Times article leaves many open questions, and you need to think about them before you make a major career decision that could easily change the direction of your practice for years to come and long after the childcare days are behind you.  It is not the answer for every woman lawyer.  Here’s some background.

The reality is that most women lawyers practice in law firms that are not “all in” on the parenting priority for lawyers –men and women alike — and that, in the traditional law firm setting, we are far from experiencing what this article has us imagining.  However, that does not mean that we have not made great progress on these issues in traditional law firms, because we have.  There are more part-time women partners than ever before, and the availability of alternative work schedules is de rigueur in most large law firms today.  However, we still have a long way to go.

So, if women lawyers facing work-life challenges are swimming against the current in most traditional law firms, the question is whether women should start leaving those traditional settings in droves and jumping into models like the Geller Law Group.  Emphatically, I say no — not without a great deal of prior thought.

Start by asking yourself why this model doesn’t work in most law firms today.  Part of the reason is  demanding areas of practice and challenging work.   But, many women lawyers want to continue to work in their practice areas of choice and continue to do challenging and interesting work.  They do not want to change practice areas and concentrate on work that does not interest them as a trade-off for flexible schedules and telecommuting.   It is too much of a sacrifice for them, and maybe it also is too great a sacrifice for you.

As the article points out, most litigation is not conducive to the law firm model described because of the scheduling demands alone.  The same is likely true of merger and acquisition work, antitrust practice, immigration practice, tax law and other practice areas that are especially complicated and outcome sensitive and can quickly morph into unexpected demands that are deal breakers for parenting responsibilities.  Sure, there are areas of practice that can and do work under the model of the Geller law firm, but those practice areas may not be of interest to you and may leave you hankering for more.

That’s the rub, and it is why this alternative to traditional law practice is not enough.  We need more.  We should be working toward a solution that has increased general application in the profession, and traditional law firms need to address the issues and make a broader array of professional choices available to women lawyers during the critical childcare years.

This is a theme very close to my heart and soul as a woman lawyer, and I do not want to see the women in our profession shortchanged by solutions that require all of the giving and sacrifice from the women and let the law firms off scot free.  That is why I challenge law firm leaders to prioritize retaining and advancing the considerable talent that women lawyers represent in my new book, Best Friends at the Bar:  Top-Down Leadership for Women Lawyers, to be released soon.  It is time that the law firms participated with the women lawyers in these critical solutions.

And there are other things to think about.  What about compensation?  From the New York Times article, we learn that the women at the Geller firm are compromising a lot of salary for their more “manageable” situations — a lot of salary.  Should women have to make sacrifices of that magnitude?  And what about the isolation that results from no actual offices and little interaction with colleagues?  At least one of the members of the Geller firm left over this issue.

Do these things matter to you?  Think about it before you leap into radical career change.  Ask yourself what your long term goals are as a lawyer and whether those goals can be met in a model like the Geller firm.   The time you take to thoroughly evaluate your situation and circumstances will be time well spent.

 

 

 

 

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“It is not really drinking alone … if the dog is home.”

Unknown Sage

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“Responsibility walks hand in hand with capacity and power.”

Josiah G. Holland

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