Check Clearing Policies
Your bank will not always let you withdraw your money! Ed talks about bank check clearing policies that could affect your law firm.
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Category: Management
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Alternative fees – proportionate refund
An interesting question was raised recently in the discussion about alternative fees. What happens in either of two scenarios: i) When the client terminates the relationship before the legal services are concluded and ii) When the fee is challenged in a dispute between attorney and client.
In the former case, how do you apportion work already done versus work yet to be done, especially when the fee agreement is silent on the subject? This question is set against the backdrop that a lawyer refund any advance payment of fee that has not yet been earned. And, though a fixed fee, the fee must be placed into the client trust account until earned. Does one have to refer back to the time spent (hourly billing)? And if the subject is covered in the fee agreement, are we building into the relationship all kinds of negative vibes between attorney and client?
And, though fixed fees/alternative fees are designed to reduce conflict between attorney and client, should a dispute arise, how do we test the reasonableness of the fee? Again, usually by reference to the hourly billing rate and time spent.
This subject once again points to the need for good client relations and effective, frequent communication between attorney and client to make sure such disputes don’t arise and/or are settled quickly.
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Alternative fees – Redux
The Wall Street Journal seems to focus on fees being charged by large law firms to large clients. It seems almost every other week, there is an article on the subject. In today’s paper, Jennifer Smith writes about the "resetting of legal costs." Her basic premise is that clients who obtained the "upper hand" during the Great Recession" in negotiating fees with law firms are not going back to the old ways of the billable hour despite the more robust economy today.
Alternative fees have become a larger percentage of law firms’ revenue. To use alternative fees, usually meaning fixed fees, requires a trusting relationship between law firm and corporate client. Of course, alternative fees also depends on the practice area. For example, it’s easier for lawyers to quote a fixed fee in areas such as estate planning or a percentage fee in personal injury or debt collection than it is in litigation. But, even litigators are moving to alternative fees when they can work with the client as a trusted adviser … and both sides look out for the interests of the other side.
What Ms. Smith ignores, however, is the real impetus for alternative fees. It is technology. Because of advances in technology,some tasks such as document review that used to take hundreds of lawyers many hours can now be done in a fraction of the time with a fraction of the number of lawyers. Further, when lawyers charge by the hour and see their time reduced, and thus their revenue, there is an impetus to charge a fixed fee. The client gets certainty. The lawyer gets to keep a portion of the savings resulting from the technology. Both sides benefit.
This is classic in every industry where technological innovation occurs. The legal profession is now experiencing the same upheaval. And both clients and lawyers are benefiting.
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Managing dockets of small or solo firms
From time to time, we have guests on our blog.
This week, Erik M. Pelton with Erik M. Pelton & Associates, PLLC is our guest blogger.
Excellent management of calendars and deadlines is critical for all attorneys. Big firms can afford dedicated staff and/or software for these matters, but small or solo law firms must properly and efficiently manage firm calendar and deadlines without such luxuries.
A law firm “docket” consists of calendar items such as meeting schedules, court deadlines, discovery deadlines, client obligations, marketing schedules, hearing dates, and more, for each of the members of the firm. Timely tracking of these matters is critical to increasing the chances for successful outcomes of matters. The key to successful docket management is to develop procedures, routines, checks, and backups so that the docket takes care of itself.
Here are some tips for setting up a docketing system:
– Find what works. There is no magic solution and there are many ways to reach the same goals. Be creative and experiment with different possibilities.
– See the big picture. Use a physical master calendar centrally located in the office. For example, I have a wall filled with four large calendars for the current month and the next three months (see photo below). Deadlines, travel, planned absences, meetings, and more are all labeled on this central calendar. I use dry erase so it can easily be changed, and it is color coded for different types of items. The calendars hang so that they can easily be rotated and updated as one month ends and a new month begins.
– A system for intake and inputting new docket items is key. When a new matter or item with a deadline comes in or is created, do not hesitate. Docket it immediately before any chance to forget is created. For example: when I receive discovery requests in a case, I docket the deadlines for when the responses are due before I even read the requests. I set a reminder of the deadline in Outlook as well.
– Err on the side of caution. I docket even potential deadlines and items. If I have to cross them out or erase them, it becomes one less thing to do. Proactively docketing saves having to scramble at the last minute if a “maybe” becomes a “yes.” (Example: a tentative deposition date in a case that might be settled first.)
– Document the office docket procedures and make sure everyone understands how to use and access them.
– Mistakes inevitably will happen when a new system is set up. Learn from them, and tweak the system to make sure that type of mistake will not happen again in the future.
– Have a backup. Even better, have two! (Example: I have a software-based docket, with backups in Outlook and on the dry erase boards.)
A solid docket with a backup does more than help you work efficiently and manage your time – it may reduce potential liability for malpractice and can also reduce malpractice insurance rates.
Managing a docket can certainly be stressful. The time and money invested into a great docket that works for your particular situation will not only serve clients and attorneys well, it will reduce an enormous source of stress and worry.
© 2012 Erik M. Pelton. All Rights Reserved.
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Stress can be a killer
Dr. Oz, the popular television medic, recently said that high blood pressure is the "silent killer." Stress, he said, is one of the major causes of high blood pressure.
Lawyers I talk with almost universally tell me about the stress under which they labor. Because of this, I am on the lookout for ways that my advice about improving the lawyer’s operations may also have the impact of reducing his/her stress level. Thus, I am always viewing the practice from a holistic perspective, addressing revenue improvement, operations changes that impact profit, and stress reduction that improves both the professional and personal life of the lawyer. Just knowing that you now have an accountability partner (me as the coach) goes a long way to reduce the stress. For the first time, you really have someone to talk with who can be objective and with whom you can show vulnerability.
In the February 13th edition of the L.A. Times, an article featured a lawyer who clearly is a workaholic. But, she has a marvelous and somewhat unusual perspective of her workload. As the headline says, "stress can hinge on attitudes about work." In other words, if you love what you’re doing, it’s not work; if it’s not work, you may be exhausted at the end of the day, but you won’t be stressed out and unable to cope with your environment. Clearly, this lawyer enjoys what she does. Of course, the feature article didn’t hurt her publicity efforts either.
With this article, came a new word or label, at least for me: "engaged workaholic." Said differently, if you are engaged with what you’re doing, if you love what you do, then it’s not "work." It’s play … and how can you get too stressed when you’re playing.
Or, as my father used to say about his work, "… This is my hobby. This is what I love to do."
My hope for you (and therefore your clients) is that you love what you do … and enthusiastically show your clients how to successfully address the challenges they bring to you.
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Internal financial controls
One would think that lawyers could keep their eye on the ball. But, somehow, despite the importance of cash and cash flow to the very survival of the law firm, lawyers tend to focus their attention elsewhere. I find this to be true not only in the small firm, but also in some of our larger brethren as well.
Recently, I was asked to consult about "missing cash." The bottom line is that it’s easy, for even a longtime and trusted staff person, to lose his or her moral compass … when money is readily available … and not regularly monitored! Establish policies for handling cash and for paying bills, the two easiest areas of manipulation by one so inclined. Be persistent in the application of these policies. Ask for an external review of these policies periodically … and their application. Insist that there be no shortcuts in handling the finances of the firm.
Nothing less than the firm’s reputation and standing is at stake! … And the lawyer’s license to practice law.
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Non-lawyers running the law firm
In 1995, the U.S. Government recognized my service mark, The Business of Law®. At that time, no one used the word “business” in the same sentence as “profession” when talking about the legal profession. Since then, more lawyers recognize that they are in a service business, but a business nevertheless. And the principles of business are now being reviewed and considered by more lawyers than before. Years ago, I wrote a piece that suggested that even sole practitioners would be well-advised to engage an executive director. The cost-benefits favor the lawyer many fold, though too few sole practitioners recognize this.
Today, large firms are engaging professionals to run their practice, their business. For example, Pepper Hamilton recently engaged a non-lawyer to be the CEO; this isn’t the first firm, though still only a select few, have moved in this direction. They are beginning to understand that it is the lawyer who can set the strategy … and it is the lawyer who must do what only the lawyer can do, get the business (marketing) and do the work (production). But, others – professionally trained and skilled as support for the law firm – can take the law firm to higher levels of success than would otherwise be the case.
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Tips for Hiring and Managing Staff at Small/Solo Law Firms
From time to time, we have guests on our blog.
This week, Erik M. Pelton with Erik M. Pelton & Associates, PLLC is our guest blogger.
Unless you are truly a solo practitioner, you will experience hiring and managing a staff (even a ‘virtual assistant’) at some point. In fact, unless you are super-efficient or already established, some form of staff is likely necessary to manage a growing firm and the marketing needs. For example, in my 12 years of practice (starting and managing a small firm), I have hired and supervised numerous associate attorneys, paralegals, and interns, as well as a variety of subcontractors.
Hiring and managing is no easy task – especially when you have no relevant training or experience. Law school gives most of us the experience of being interviewed, not interviewing others; of writing resumes, not reviewing them; of taking instructions, not giving them.
Use the following keys for making successful hires in a law firm, and you should fare well:
– Personality and character are at least as important as experience and skills. Skills can be taught, but bad character or clashing personalities cannot be overcome.
– Reward staff that are trusted and hard working. When financial raises or bonuses are not available, provide additional vacation time. While this represents and increase in expenses, the financial and other costs (time, risk, productivity) of replacing someone good who leaves for another job and training a new hire are generally far greater.
– Let employees develop their own “brand.” Encourage them to participate in associations, chambers of commerce, or other activities that are good for the firm and good for their professional development.
– Provide occasional non-work opportunities to socialize with employees and their families and significant others. Take them out to dinner, sporting events, or the like.
– Lead by example. Actions speak louder than words. These clichés are generally true and can have a big impact. If you expect your staff to do something in a certain manner or act a certain way, you must lead by example.
– Don’t micro-manage. Delegate and provide support to your staff, but allow staff the room to grow and to figure things out on their own.
– Provide periodic reviews. Offer constructive criticism and positive reinforcement. Provide a steady stream of feedback to your staff and encourage them to provide the same to you.
– When staff members do not work out, cut your losses and move on. Letting someone go is difficult, uncomfortable, and creates short-term stress and additional work. However, it is worth it. Bad situations only become worse over time, and the lost time and stress produced by bad or unproductive relationships can never be replaced.
The only way to get experience in a position of authority is to do it! Hiring and supervising can be great fun and lead to great successes by training and mentoring staff persons that blossom.
© 2012 Erik M. Pelton. All Rights Reserved.
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Are you worrying about your competition?
There is much talk about how competitive the legal market has become. And this reminds me of an old Chinese proverb: “He who doesn’t turn runs far. “
In track and field events, the coach tells you to look at the tape in front of you, not who is behind you. Likewise, in running your law practice, do the best you can, focus on your skills (and improve them), on the efficiency and cost of delivering your legal services (use technology to improve your efficiency) … and, of course, on your clients and their needs (and wants). Then, you will have given it (your profession) your best shot.
John Wooden said, “The scoreboard? Championships? A sales quota? The bottom line? As goals, predictions, hopes, or dreams to be sealed up (in an envelope) and filed away, fine. But, as a day to day preoccupation they’re a waste of time, stealing attention and effort from the present and squandering it on the future. You control the former, not the latter.
“An organization – a team – that’s always looking up at the scoreboard will find a worthy opponent stealing the ball right out from under you….” Coach seldom scouted the opposition, focusing instead on what needed to be done to improve his team and prepare them to be the best they could be.
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Can you afford to retire: Succession may be a luxury
More elderly find they cannot afford to retire … they must continue to work. The recent economic woes have taken a big bite out of the retirement hopes and plans of the Baby Boomers. And this includes lawyers.
Just today, a lawyer in his late 60’s called me to talk about selling his practice and retiring. But, he said, he enjoys what he does and financially cannot see his way to retiring. For interesting tax reasons, he turned away from selling his practice. Of course, he didn’t consult me before he made this decision.
But, I find it interesting that the prediction made by the ABA only a few years ago that by 2020 (or perhaps sooner), 400,000 lawyers would retire. As evidenced by the phone conversation today, I believe the numbers are correct, but the timing is not. Succession planning, whether a solo or large firm practitioner, will require more thought than we anticipated. And experts should be consulted to determine sales potential, tax planning (both estate and consequences of a sale) and future personal life planning.
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