Tuesday, May 3rd, 2016
By Gideon Grunfeld
There are two scenarios in which law firm leaders mismanage how they interact with family members who are in a direct business relationship with the firm. On is when a family member becomes a client of the firm on something other than the normal arrangement that the firm has with other clients. The other is when the firm reaches out to a family member to provide a service to the firm on terms that are different from the firm’s normal relationship with vendors or employees.
In my experience consulting with law firms, small law firms often underestimate the risks associated with providing discounted services to family members. This is particularly likely to be problematic when the family member seeks ongoing representation in litigation or in areas of law that are outside the lawyer’s primary expertise. In one extreme case, a solo practitioner devoted one third of his time over the course of a year representing for free a family member in protracted litigation. When I questioned the wisdom of this course of action, the lawyer said that “family comes first.” And in this case the family member insisted on taking a case to trial—a case that the lawyer flatly admitted would have been settled on behalf of a paying client.
Working on the cheap for family members –or representing them at all—also poses a non-trivial risk of harming the client. When lawyers work for free and personal dynamics make it hard to fire the client, there is a substantial risk that lawyers will lose their professional objectivity.
Law firm leaders also err by asking family members to provide services to the firm on special terms. For example, an estate planning firm hired the sister in law of the firm’s managing partner to provide billing services to the firm. The firm’s bills rarely went out on time. When I discussed this problem with the managing partner, he said that he didn’t want to be confrontational for fear that his sister-in-law would complain to her sister and the managing partner would end up sleeping on the couch. In another example, the head of a small but growing law firm that generated about 15% of its business from internet-based inquiries asked her sibling to add pages to the firm’s website. The sibling was a web designer and graphic artist who possessed the necessary skills to help the law firm. But he didn’t have the time. Three months later the website had yet to be updated. Given how much business the website generated for the firm, this turned out to be fairly expensive “free” help.
However you value the importance of family relationships, at some point you have to decide whether you are running a business or a family concession. A vast majority of the time the prudent course of action for both the law firm and the family member is to avoid working together on terms that are materially different from what you would do for a paying client in an arms-length negotiation. That is often the best way to manage your business while simultaneously maintaining the quality of your family connection.