Why Your Firm’s Lawyers Should Make Revenue Projections Right Now

At the end of 2021, managing partners will sum up their law firms’ revenues to determine areas of focus for the next fiscal year, but there’s something individual lawyers can be doing now to make this data even more useful.

Right now, halfway through the year, ask your people to project revenues on their own matters for the next three months. You’ll find that some lawyers are better than others at anticipating the amount of money they’ll bring in.

When it comes to budgeting for the future and managing caseloads, it’s extremely valuable for a lawyer to be able to accurately predict their revenues. If a certain attorney keeps going after contingency fee matters with huge payouts but they’re not winning those cases, recognizing that pattern could lead them to prioritize hourly work or pursue contingency cases only when specific prerequisites are met.

Law firm leaders should take this time to gather revenue projections on a lawyer-by-lawyer basis so that when the end of the year rolls around, they have those estimates to compare with the actual results. This skill can be taught, but firms first want to understand who’s in need of that training and how exactly each could improve. For some, they may be wildly overestimating their outcomes, while other lawyers may be unduly pessimistic.

Estimated future revenues also play a huge role in hiring and promotions, and the ability to create an accurate picture of what an individual’s or a firm’s finances will look like in six months or a year is important both for the leaders making these decisions and for the attorneys looking to move up.

The Boutique Firm Business Plan for 2021

As managing partners and practice group leaders weigh the costs and benefits of returning to their offices, they should take advantage of the next six months to modernize their business plans. Three areas in particular are especially ripe for new approaches right now – real estate, practice area mix, and talent acquisition.

Lawyers are creatures of habit steeped in the importance of following precedent. But that doesn’t mean firms should reflexively return to the way they used space pre-pandemic. Surely, the last year has shown that most firms can function with a much smaller real estate footprint. Many lawyers may initially enjoy aspects of a traditional office setting, but this could be a fleeting feeling. Don’t just assume that face-to-face interactions among co-workers boost productivity. Instead, consider how you can downsize and use real estate savings to invest in technology or other innovations.

Boutique firms are well positioned to change their practice area mixes as well. For example, if your practice has been litigation-heavy and that’s left you worried about how courts will be able to handle the backlog of civil cases, this is an unusually good time to explore new practice areas.

The shift away from the physical workplace also opens firms up to more options when it comes to recruiting and retaining talent. You can avoid losing lawyers who relocated during lockdowns and want to stay where they are, however far it may be from the office. You can also bring on additional attorneys with their own books of business who previously were too remote. Moreover, the new world of legal services doesn’t require recruiters who cost a big chunk of a new hire’s first-year salary. Instead, a firm can list an opening on job sites for as little as $20/day and get in front of lawyers who can help the firm expand and diversify.

Simply put, the second half of 2021 will present numerous opportunities for boutique firms that are willing to embrace the changes that the last 16 months have brought.

Should All Your Employees Return to the Office?

With vaccination rates rising and states reducing restrictions around COVID-19, discussion in the legal services industry has turned to whether and to what extent law firms will require their people to return to offices. A lot of media reports have framed this issue as a tug-of-war between managers and their workers. The simplified conclusion is that many white-collar workers want to continue working from home at least some of the time, while decision-makers argue that remote work makes it “difficult to train junior talent and maintain a cohesive culture.”

While the tug-of-war narrative generates good headlines and potential villains, the reality on the ground is more nuanced. For starters, the sources of information about what employees want are questionable. Dan Ciampa, writing for the Harvard Business Review, warns against taking employee surveys as “gospel” and suggests surveying management separately. The types of collaborative and innovative tasks required at higher levels of an organization’s ranks might warrant more in-person time than the work required of other employees. This may, to some extent, account for managing partners’ preference for having lawyers and staff return to the office. This might be more important and helpful for those actually managing the firm or its practice areas than for most attorneys or staff. Firms should think about an approach that considers how much in-person collaboration actually impacts the productivity and efficiency of particular lawyers.

Firms should also be cautious about justifying a wholesale return to the office on a generalized sense that it will increase camaraderie. There is no reason to assume that camaraderie will improve if people are working together in an office. Moreover, it’s possible to improve camaraderie without requiring everyone to return to the same space. For example, the firm could organize in-person meals or get-togethers one or two days a week, or perhaps the firm could host a party or other social event once a month. These options can have the desired effect while still hearing lawyers’ interest in continuing their work remotely.

The question for those advocating for a full return to the office is: how much talent are you willing to lose? If forced to choose between heading back to the office full-time and looking elsewhere, some of your best lawyers and staff will likely walk away. The inclination to push for a return to normalcy is, at some level, about habit and control. While many are reluctant to discuss the latter, a sense of constant supervision certainly plays into leaders wanting their employees to work in the same office.

For those who champion never returning to the office on a full-time basis, the question is: how much career advancement are you willing to risk? When law firm leaders are in the office, there is a non-trivial risk that the better assignments and promotions will disproportionately go to those who are also in the office. COVID-19 has been a huge disrupter, but it hasn’t entirely killed off the concept of face time.

Don’t fall for the narrative that this is a simple dynamic that pits managers against rank-and-file lawyers and staff. Whatever initial conclusions you come to as a firm leader, you should be revisiting the topic, discussing it with your team, and reevaluating regularly. This is a decision that merits an extra-large dose of patience and humility.

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.

The Time Is Now for CA Lawyers to Voice Their Opinions on Nonlawyer Ownership in Law Firms

Members of the State Bar of California’s Closing the Justice Gap working group are split over how broad to make the state’s trial of regulatory changes. The board of trustees approved the working group, which is tasked with considering changes in nonlawyer ownership and fee sharing, in May 2020. Its SCOPE subcommittee is currently debating whether or not the organizations allowed to participate should be limited to those serving low-income individuals.

The program stems from the state bar’s Access Through Innovation of Legal Services (ATILS) task force, with the initial aim of making legal services more affordable and accessible to residents in the low-to-middle income brackets. Some members of the group, including law professor Bridget Gramme, argue that findings from similar regulatory changes in countries like the UK have suggested that “to promote innovation, it makes the most sense to keep the structures as open as possible, ‘especially at the beginning.’” Others counter that allowing nonlawyer ownership in legal entities that serve businesses would not “have as much chance at downward assistance,” as put by OneJustice Volunteer Of Counsel Toby Rothschild.

Depending on how the state bar and ultimately the California Supreme Court decide, ownership and investment in law firms could be shared by organizations including the Big Four accounting firms and venture capital firms, as well as tech companies like Rocket Lawyer, which was among the first entities allowed into a similar regulatory scheme in Utah.

Utah’s situation is instructive. The program was initially created on a two-year basis but recently extended for a total of seven years. Of 22 authorized entities reported so far by the Utah Supreme Court’s Office of Legal Services Innovation, several fall into the categories of “lawyers employed/managed by nonlawyers” or “non-lawyer provider w/ lawyer involvement.” The long-term repercussions of more generous regulatory changes are not yet apparent, with Arizona making one of the more drastic moves just last summer when it completely eliminated the ethics rule barring nonlawyer ownership.

It’s difficult to overestimate the significance of these current and proposed changes, but attorneys in California still have time to make their voices heard. If you are part of the legal services industry in California, now is the time to get involved, attend the meetings, and voice to representatives of the state bar your support for or opposition to these shifts. With the working group due to make recommendations to the State Bar of California’s board of trustees next September, the coming year will have an enormous impact on the future of the legal profession in the state. According to Bloomberg Law, the SCOPE subcommittee will meet again June 4, with the full working group meeting June 18.

ABA Interviews Reveal Combination of Factors That Lead Women to Leave Law Firms

In Their Own Words, a report from the American Bar Association’s Initiative on Long-Term Careers for Women in Law, sheds light on the complex reasons experienced women lawyers leave law firms or legal practice entirely. The document summarizes findings from interviews and focus groups with over one hundred women, each with fifteen or more years in the legal profession.

As the report describes:

“Law practice today is challenging by any measure. The increasing billable hour and fee generation expectations, hyper-competitiveness, and 24/7 availability demanded by clients make law practice a difficult profession for both women and men. For women, however, these challenges are compounded by pay and promotion disparities, sexist and racist behavior, and isolation, which leave many women asking themselves whether the fight is worth it.”

The interviewees shared anecdotes about law firm leadership justifying pay raises for men with comparable or smaller books of business to their women counterparts on the grounds that they had families to support. Minority women in particular described being brought into pitch meetings, presumably to tout the firm’s diversity to potential clients, and then being excluded from the actual work of the matters. These experienced women lawyers recounted cases in which origination credit was inexplicably granted to men who hadn’t worked with any of the current corporate counsel or men who clients requested be removed from their matters. The feeling of unfairness from instances like these ultimately led many of these attorneys to leave their firms for in-house roles or to exit the legal industry permanently. The perceived promotion and pay disparities are supported by data like that included in the NAWL 2019 Survey Report, which found that “men are paid more per year than women…across the Am Law 200 for all attorney types and levels.”

The report highlighted another interesting element that gets at some of the systemic deterrents within law firm culture, namely that so many men at the partner level had wives who did not work outside of the home. At some firms, this contributed to a lack of flexibility around hours, burdening women who often did not have stay-at-home partners and therefore had greater personal obligations. This also led in certain cases to firm leaders assuming their women colleagues would not want to take on matters that involved travel or, conversely, penalizing those who could not spend months in another location due to childcare responsibilities.

Some of the study’s participants found greater satisfaction through in-house counsel positions after leaving their firms. Citing the team spirit of that work in contrast to the cutthroat nature of many law firms, one said, “I’d rather stick needles in my eyes [than go back to a law firm because of] the billable hours, the sharp elbows, and the very competitive environment.” After being denied opportunities within law firms, women lawyers explained that they found the kinds of professional challenges they sought via in-house roles.

As the authors put it, “When experienced women leave, they take with them the substantial investments made by their organizations over the years, as well as the strong relationships with the clients they serve.” While some issues like the competitive environment may be baked in due to the levels of compensation at stake, other factors cited as causes of high attrition among women lawyers can be more effectively addressed. The report’s authors conclude with a set of recommendations, including the use of gender metrics to monitor and correct pay inequities, the provision of resources to support firm attorneys with their family obligations, and the fostering of talent’s expansion into new practice areas. The legal services sector “cannot expect to have a broad and robust base of talent when women are far less likely than men to advance into senior positions,” so the authors suggest that law firms consider attending to these issues “a business imperative.”

There is another perspective that the authors of this report fail to consider adequately: practicing at a large law firm is an overrated job. Once you look at the burnout rates, the mental health issues, and the amounts of money some lawyers could make outside of these firms, a much more measured approach seems warranted when it comes to evaluating people who leave the law. That doesn’t mean we should excuse racism or sexism at law firms, but let’s stop assuming that large law firm jobs are anything but very mixed blessings for most who choose that path.

Beyond Facebook and LinkedIn: 5 Digital Marketing Platforms for Law Firms

The past year has only fueled the move toward a more digital world. By now, many law firms have made use of Facebook or LinkedIn to bolster their online presence, but the utility of any online platform can wane quickly as potential clients and referral sources move on to other alternatives.

There’s a lot of room in the legal services space for attorneys who serve businesses and other institutions to build up the kind of personal branding more often done by consumer-facing lawyers. The largest firms have established names, but most boutiques and smaller firms are letting digital marketing opportunities slip through their fingers. Below is a list of suggestions to open your mind to the possibilities and to help you get started making your expertise known in an expanding digital world.

  1. Podcasts/Radio: Maryland-based attorney Andrew Torrez teamed up with a non-lawyer host to cover legal issues on their podcast, Opening Arguments, and it has attracted a significant audience. If a project like that seems beyond your current bandwidth, start by pursuing guest spots on programs that are relevant to your audience.
  2. TikTok: Social media platforms often start with teens and 20-somethings but over time attract an older, more affluent audience. That happened with Facebook and is starting to happen now on TikTok. Consider the American teen who reached hundreds of thousands of users with a video describing the “culture shocks” she experienced after starting school in Australia. Law firms could use a similar approach to educate their potential clients, including businesses.
  3. Clubhouse: If the idea of creating video content is daunting, you might prefer an audio-based platform like Clubhouse. This can serve as an inexpensive way to reach people with a common interest in the kinds of problems your firm addresses.
  4. Patreon: Get audiences invested through a membership service like Patreon. You can use it to garner financial support for a podcast, as the creators of Opening Arguments do, or you could follow the lead of Florida public defender Beth Bourdon, who raises funds through the site for her work assisting activists with Freedom of Information Act requests.
  5. Substack: When it comes to written content, your firm might benefit from monetizing its blog or newsletter through a channel like Substack. Well-known journalists and bloggers, including Andrew Sullivan and Matt Taibbi, have published to the platform, which, like Patreon, allows subscribers to pay for exclusive content from creators they like.

As our professional interactions continue to shift online, becoming an early adapter may be invaluable. With new apps always popping up, it’s understandable that many lawyers are hesitant to put time into additional marketing initiatives on top of already-full workloads. But as the industry changes, lawyers will benefit from communicating their expertise via a variety of platforms.

Writing Content That Reaches Business Clients

As more and more of our professional interactions move online and the number of emails we receive on our smartphones continues to mushroom, law firms that serve businesses and other entities need to devote more resources to creating engaging content. The bar is higher now than ever before as law firms, HR and accounting firms, and all sorts of trade publications compete to grab the attention of the same audiences with the same sophisticated explanations of developments in the law.

News that once seemed noteworthy, such as an attorney being recognized by Super Lawyers or a woman being promoted to partner, has now become commonplace and unlikely to cut through the noise of similar announcements from other firms. Mentioning these developments is appropriate, but it’s not going to establish your firm as a thought leader.

Neither is merely summarizing the latest bill in your area of the law. Just about every one of your competitors is probably working on the same description of what a certain new law says. To create content worth sharing, you’ll need to go a step further.

Educate your audience about what matters most from the perspective of an expert. Stand out from the constant flood of emails by creating strategic content that informs people about where they should be putting their attention and the steps they may need to take. Go beyond the law itself and connect the dots for your potential clients and referral sources in a way that allows them to prioritize.

In today’s world, you need to create curated content. That’s the kind of content that counts.

Determining Compensation Levels for Law Firm Staff

Law firm leaders too often rely on precedent when making managerial decisions for their firms. A prime example of this is how they decide how much to pay staff members (and to a lesser extent junior lawyers). The most common mistake is to set compensation levels based on historical experience. For example, a law firm that previously paid a paralegal $20 an hour or a contact attorney $35 an hour five years ago will offer to pay that much now. In contrast to large corporations, law firms rarely conduct compensation surveys to determine what their competitors are paying. Thus, law firms are predisposed to miss changes in market wages. This is true for staff members who get paid by the hour as well as those who receive an annual salary.

There is a no-cost and efficient way to get a good sense of the current market for a specific position. Ask the candidates to provide their salary demands as part of the initial phase of the hiring process. In addition to asking for a resume, require candidates to specify how they want to be paid. Most candidates won’t provide salary information, and that is usually not disqualifying. It makes sense to interview qualified candidates even if they haven’t provided their salary requirements. In my experience, however, enough applicants do to provide such information to give the employer a rough sense of current market conditions.

For example, I recently worked with a law firm to hire a part-time paralegal. The firm received several dozen responses through Craigslist. Approximately ten candidates provided salary information. The responses fell into a typical pattern—the marginally qualified, the qualified, and the very experienced/over qualified. In this particular case, candidates without law firm experience were asked for $10-$14 an hour, those who possessed most of the requirements set forth in the job posting asked for $15-$25, and the most experienced/over qualified, which included several folks who had graduated from law school, sought more than $30 an hour. The advantage of this approach is that it allows the employer to see how much additional skill and experience is available at higher price points.

Over the past few years the market for lawyers with less than four years of experience who are applying for part-time or other non-partnership positions has changed dramatically. The market is such that lawyers will respond to jobs paying $20 and hour and sometimes even less. By contrast, paralegals continue to command the same hourly rates that they did a few years ago.

To be clear, the fact that it is possible to pay less for junior lawyers and staff members doesn’t mean that it is wise to do so. Paying low wages can be counterproductive because it increases turnover. Overall, however, there is no question that the ratio of available talent and what it costs has never been more favorable for law firms. It is therefore critical that law firms obtain current wage information and not guess or rely on precedent when setting compensation levels for staff and junior lawyers.

Changes in Law Firm Staffing Structure

The organizational structure of law firms is changing rapidly. The traditional structure was pyramid shaped, with equity partners on the top, followed by a few of counsel, a select number of senior associates, more mid-level associates, and a generous smattering of junior associates, many of whom came from the firm’s summer associate program.

Now law firms that serve corporations and other institutional clients are taking on a hodgepodge shape that is more akin to a diamond shape. The ranks of equity partners often dwarfs the number of non-equity partners. Of Counsel may never even be considered for partnership. And since the financial crisis of 2008, the number of junior associates being hired has declined significantly. Thus, the base of the organizational chart is narrower than it used to be.

 

One of the most recent and underappreciated trends involves associates and the increasing number of sub-categories that they may occupy. Some associates continue to be on a traditional partner track. But an increasing percentage of associates are not. They may be subject to lower billable hours requirements. And some firms are beginning to experiment with a medical-residency approach, in which law school graduates are hired for a year or two, are paid less than their counterparts, and are expected to leave the firm at the end of a predetermined time.

In addition, firms are creating classes of staff attorneys who, for example, may specialize in handling e-discovery. These staff attorneys can stay at the firm for an indefinite period, but there is a mutual and explicit understanding that they won’t be considered for partnership and that they will command a lower salary than partnership-track associates. And firms are using contract lawyers for assignments well beyond the traditional document review. Together these changes are fragmenting the structure of law firms while allowing them to scale up and down based on their variable staffing needs.

It would be a mistake, however, to assume that these changes are entirely the result of the law firms’ desire to reduce staffing costs. Much to their chagrin, an increasing percentage of law firm partners are realizing that even the most accomplished associates have no desire to put in the amount of work necessary to achieve partnership status. To some extent, this is an issue that is impacting many professions, not just lawyers. For example, while doctors historically aspired to start their own practices, younger doctors are more likely to seek out working for Kaiser Permanente and other organizations in which they don’t have to deal with business development and management issues.

On some level, this is a generational indictment of the lives of law firm partners. Lawyers who have graduated from law school in the last ten years or so are looking at what partners do, what they earn, and the personal and professional toll required to make partner and stay there, and they want something different for themselves.

Can you blame them?

Law firms have more staffing options than ever, but their workforce is also more dynamic and mobile than ever. That is the essence of the current situation, and it’s not likely to change anytime soon.