Certain Hours Are More Valuable Than Billable Hours

Many firms continue to act as if billing a particular number of hours is the most valuable use of every attorney’s time. In the grand scheme of things, however, devoting time and resources to strategizing the firm’s positioning in the market can be more lucrative.

Firm leaders, having never been taught to value management time themselves, often bring this perspective to their hiring practices. They make the assumption that what they most need to grow their firms are lawyers who will bill a lot of hours. This approach that focuses only on billing time leads many managing partners to neglect an element that’s especially important now – finding and fostering future leadership.

Successful companies groom personnel for leadership roles over time through the management ladder. Too many law firms, in contrast, wait for a crisis to recognize that they don’t have the skills needed to adapt to market changes or take advantage of industry trends. Firms pay close attention to the legal skills of their attorneys but often don’t prioritize leadership skills or management ability.

This is especially dangerous for smaller firms in today’s market. As the pace of change in the legal industry increases, positioning yourself in the marketplace is more important than ever. And decisions about positioning require leaders who can initiate conversations and reach consensus on a range of thorny issues.

As consultants to law firms, we often see that the time it takes to answer questions about a firm’s positioning and future strategy is often more valuable than billable work.  This includes addressing questions like:

  • Should we expand into other practice areas?
  • Can we grow through succession planning (by taking on the book of a retiring lawyer)?
  • What compensation structure most encourages the behavior we need from our senior partners?
  • Who at the firm has the potential and desire to become a future leader, within the ranks of both lawyers and staff?
  • How do we identify future leaders during our hiring process?

Boutique and mid-sized firms may have an advantage. They should be able to pivot more quickly and precisely than their national competitors. And in today’s market, where large firms have many competitive advantages, the quality and quantity of time devoted to leadership, positioning, and strategy are what increasingly will allow smaller firms to thrive.

Your Most Important Hire in 2021 Might Not Be a Lawyer

The changes that have started to develop this year will manifest themselves more clearly in 2021. This includes the reduced staffing levels we’ve seen as firms became focused on cutting costs, adjusting to remote work, and keeping rainmakers happy during an economic downturn. The pandemic led many to shed practice areas they viewed as more marginal and to cut back on administrative staff, but so far, not enough time has passed for the industry to really see the impact of this trend.

There is, however, a trend that pre-dates the pandemic and is sure to survive it: When corporations hit a certain size, the CEO is no longer on the front lines. Running the place, setting strategy, getting teams to work together, managing finances, and complying with government regulations constitute a big enough job on their own, yet many law firms work on a model that requires equity partners and heads of practice areas to keep billing hours.

This system is becoming increasingly untenable, so firms would be wise to invest more in attracting, cultivating, and supporting managerial talent. In 2021, firms of all sizes will benefit from making managerial talent a top priority. For mid-sized firms, this could mean hiring an office manager or Chief Operating Officer. Having someone who can perform all the important functions of accounting, payroll, IT, and HR for the firm will open up partners to bill hours they would have otherwise spent on administrative tasks. For larger firms, this means challenging the idea that the most powerful people in a firm are necessarily lawyers and, instead, empowering management to make decisions for the strategic growth of the organization.

With so many changes this year to the usual policies and procedures, law firms need to improve the quality of their management. Whether that’s bringing on a professional office manager or even, dare we say, retaining a consultant, the most important hire you make in 2021 might not be a lawyer.

Should You Hire a Graduate of the Law School Class of 2020?

California has joined the ranks of states temporarily allowing law school graduates to practice under the supervision of licensed attorneys without first passing the bar exam. This unprecedented situation gives rise to two related questions: Should you hire a graduate of the class of 2020? And if you do, how should you employ them?

The decision to hire any lawyer, including one fresh out of law school, should be client-centered. Some firms might be tempted to take advantage of the lower cost of a recent graduate. And too many firms hire (or decline to hire) out of habit. Given the economic uncertainties, it is critical to determine what your firm needs to serve its clients.

Too many law firms skip the seemingly bureaucratic step of writing detailed job descriptions that identify what they need from each role. Focus on the first six months.  This analysis might lead you to the conclusion that an experienced paralegal could deliver more for your budget than a freshly graduated lawyer. If you’re looking to delegate some of the workload initially taken on by partners so that they can instead dedicate more time to business development, that role may not require a law school education.

If you do determine that it’s in your firm’s interest to hire a law school graduate with essentially no experience, you need to be prepared to devote much more time and many more resources to training and onboarding than most firms are inclined to. As consultants to law firms, we often hear partners say that they want lawyers to do things in a very specific way and to also work with little supervision. This sentiment is the hallmark of poor management.

One of the biggest and most common mistakes firms make with new hires is failing to give timely and detailed feedback on the work product they turn in. If a new associate prepares a document and then the partner in charge of the case makes changes to it, that associate should have the chance to see what was changed and learn the reasoning behind it. If you want to maximize the impact of such training, don’t wait for a formal performance review.

Given that much, if not all, of the communication with new hires will now take place remotely, it is especially important to carefully select work assignments for new lawyers.  Ideally, you want to train a new lawyer with respect to skills that they will use repeatedly. If you include the time it takes to explain a project to a new lawyer and then to review and correct their work product, it is very likely that you could do it faster yourself. But that becomes less true as that lawyer completes similar tasks. That fact leads back to the question of the need to hire: Do you have enough work of a similar nature that will serve your clients?

If the answer to this question is yes and you are committed to training and communicating virtually, a graduate of the class of 2020 might be a good fit for you.

Sharing Financial Information with Junior Lawyers

When you’re ready to elevate a junior lawyer to the partnership level, you’ll likely have to handle the delicate process of sharing financial information that this employee was not previously aware of. This is happening more often as more small and mid-sized firms are going through the succession planning process. Equity partners will increasingly need to educate an associate or Of Counsel being promoted to partner, for instance, on the organization’s revenues and expenses. This can turn into a sticky situation partly because those expenses include details on payroll and other forms of compensation.

The legal issues are fairly straightforward. If partners are worried about compensation and related data getting out, they should reconsider why they are elevating this person to the partnership. In any event, they can require that the prospective partner sign a non-disclosure agreement.

Many associates have little experience reading financial documents and may need some assistance parsing out the numbers. Law firms therefore need to set aside more time than they initially estimate to get young partners up to speed. This too is largely an issue of planning.

The emotional factors involved in sharing financial information, however, can be trickier. This process often marks the first time the junior lawyer finds out just how little they’ve been paid relative to what the partners have taken in. It also may make clear to them that they’ve been receiving less than some of their peers.

Most of the time, since they’re in the process of moving up the ranks toward higher levels of compensation, the associate overcomes the surprise that may accompany financial disclosures. But this shock can also be avoided in a way that fosters more good will between that employee and the firm.

The best practice is to communicate this kind of information more gradually, starting the transition earlier to allow time for these details to be discussed bit by bit. Verbally letting an associate know roughly how much partners make can give them time to adjust before seeing it on paper. Sharing this kind of information, even in general terms, signals to the more junior lawyer that they are being treating as a future equal. This level of transparency can also prevent valued senior associates and Of Counsel from leaving the firm prematurely.

Sometimes, succession planning forces firms to address issues related to sharing financial information on short notice. This happens, for example, when a partner decides to leave suddenly, announces that they won’t sign the existing lease when it comes up for renewal, or encounters unexpected health issues. In this case, it’s key to remember the importance of educating the person looking to take on a leadership role or equity stake. Establishing an understanding that goes beyond the financial figures is critical if the firm wants to educate more junior lawyers about a shared future that includes transferring equity interests and putting into place new firm leaders.