5 Reasons Why Law Firm Practice Management Processes Don’t Work

Management

Managing law firms in an increasingly challenging, complex and competitive legal marketplace presents many potential obstacles.  LawVision principle Susan R Lambreth wrote this piece on how to fix issues relating to law firm practice managemnt structures.

I recently got a call from a firm that wanted to talk about changing their practice management structure.  They had questions about how to improve the selection and accountability of the practice group leaders (PGLs) and whether their current structure was working and other models to consider.   While those can be valid issues to address, in most cases, that is not the real cause of an ineffective practice management structure.  Here are the most common reasons:

1. Failure to get partner buy-in and to communicate clear roles and responsibilities – To have a functioning practice management system means significant cultural changes in most firms. It means that partners need to commit significant time to group activities, not just focus on their individual practices. 

They need to be willing to work toward group goals and put the group and firm goals above their own individual interests.  They have to be willing to “be managed” in some ways, i.e., giving up some of their individual partner autonomy.  However, partners cannot be expected to fully buy in to practice management if they do not know what will be expected of them, the practice leaders, and firm management under the new structure.  In most firms, effective practice management is critical to the firm’s strategy, profitability and overall success.  Thus, most partners are willing, even excited, to buy in when they fully understand the connection and believe the firm strategy is compelling – not to mention that it is a more rewarding (financially and in terms of collaboration) way to practice. 

Many of the firms I have been brought in to help improve their practice management operating over the past 25 years had rolled out a structure, new leaders and roles, but never really gotten partner buy-in.  In those cases, in a few years (could be 3 to 10), when they realize it and try again, the best people for the leadership roles have often either burned out or burned bridges (a subject for a future blog all its own).

2. Rolling out a new practice management system without aligning the compensation incentives to support group goals and performance, rather than “lone cowboy” activities – The compensation system must reward the activities involved in practice management such as working toward the group’s goals, sharing work and resources, working on group projects and targets, etc. If all partners see is an emphasis on individual performance (production and business generation — “personal numbers”), there is no incentive for them to participate and, in fact, there can be a significant disincentive to spend time on group activities if it takes away from the time for their individual practice.

3. Starting the practice management structure with only the marketing and business development functions and hoping to evolve to the other critical functions like intake, work assignment and financial management – While BD and marketing are critical functions of any practice structure, trying to have practice groups focus on marketing or BD without the other related functions that affect it is a prescription for failure. Literally dozens of law firms in the U.S. tried this, particularly between the early ‘80s and late ‘90s and failed.  Practice groups were expected to develop marketing plans and implement them – without authority over the other critical areas that affect success in bringing in clients – its differentiation through recruiting, training, workload management and lawyer development, innovation, research and development, and more.

4. Thinking the firm can evolve slowly to an effective practice management structure – While all firms should carefully implement practice management with planned and measured steps that fit their strategy and culture, a common mantra in some firms is “evolution, not revolution” What they really mean is that they have been unable or unwilling to deal with the tough issues of achieving partner buy-in so they are going to take baby steps toward implementing practice management. 

Usually this means that they are unable or unwilling to vest any authority in the practice leader to deal with the critical aspects of running a practice group such as intake decisions, financial performance of group members, work assignment and staffing. Basically, the practice leaders do not have the authority to deal with the issues which threaten the individual autonomy of the firm’s partners.  In every firm I have seen that did this, they never achieved the benefits of practice management until they fully empowered the groups and their leaders to function like business units.

5. Reluctance of firm management to hold lawyers accountable – Practice management only works if the lawyers are held accountable for their commitments, including helping to build the practice. If some practice groups are performing well and making strong contributions to the firm’s success and others are not – and management does not deal with the underperformers – morale can drop dramatically, as will long term commitment to practice group activities.  The same goes for underperforming partners. 

All practice groups and all lawyers need to be held accountable for contributing to implementation of the firm’s strategy and to the firm’s performance standards.  When practice groups work well in firms, the practice group leaders help firm management by holding the lawyers within their groups accountable.  Practice leader roles are not ones where the leader is primarily an advocate or cheerleader for the group with firm management at compensation or other times – that is one of the best ways to fail as a practice leader.  When firm management has established a culture of holding partners accountable, then a practice group leader who is accountable for the financial performance of the group, as well as other measures of success, will typically hold his or her group members accountable.

Naturally, there are some people who are better practice leaders than others but many more can be effective in these roles when there is partner buy-in across the firm to the practice group structure and to working toward group goals.  Few can be effective in a firm that does not have that buy-in (usually only those who control a lot of business so can affect people through that power).  Also, while there are more optimal structures for practice management, there is no “one size fits all” structure that is suitable for every firm.  There are almost as many models as there are firms.  Almost any model will work if you have three things:

  • High levels of partner buy-in to practice management functions and “being managed” (vs. complete autonomy – particularly over areas like intake and associates they use)
  • Strong accountability, and
  • Clearly defined roles and responsibilities – for leaders and partners.

First publishedby LawVision


Why Elon Musk’s New Lawyers Have Some Heavy Duty Work on Their Hands

Musk
AP Photo/John Raoux

Elon Musk recently hired a couple of lawyers with some solid experience in Securities Law, but may well be set to keep them and a whole team of others busy as his legal woes continue to mount.

As the US Department of Justice opens its criminal investigation into his tweets about taking his company Tesla private, he also faces a defamation from the cave rescue engineer who he referred to as a “pedo”, plus additional legal  issues that are set to keep his lawyers busy.

Securities issues involving Musk and Tesla have been handled by a team at Fenwick & West, but Musk has recently made two, key hires to fight the pending battles.

The two lawyers most recently hired include Washington power firm Connolly & Williams’ securities and regulatory investigations specialist Steven Farina (left) and securities law expert and former SEC Commissioner Raol Campos, (pictured below)a partner in Hughes Hubbard & Reed.

The Tesla board have also retained Paul Weiss lawyer Daniel Kramer to help with the securities and related legal issues that erupted since Musk’s tweets hit the business world.

So just what are the legal issues facing the multi-billionaire?

DOJ Criminal Probe 

Bloomberg reported that the Department of Justice has now decided to investigate whether the Musk tweets created criminal law issues:  

Tesla is under investigation by the Justice Department over public statements made by the company and Chief Executive Officer Elon Musk, according to two people familiar with the matter, Bloomberg News’ Tom Schoenberg and Matt Robinson report. The criminal probe is running alongside a previously reported civil inquiry by securities regulators.

[Bloomberg]

The news sent Tesla stock into decline on the news, but it was not to end there.

SEC probe

Last month the New York Times examined what might occur regarding the SEC investigation which stem from Musk’s role as both a director and officer of the company, thus permitting his statements to be attributed to the company: 

The most likely focus of the investigation of the tweet is whether Tesla and Mr. Musk violated Rule 10b-5, the primary antifraud rule, by misleading investors. Because Mr. Musk is a director and an officer of Tesla, his statements can be attributed to the company, especially when it did not immediately issue any corrective disclosure after the Twitter post appeared. (The rule) prohibits any scheme to defraud, which includes misstatements or omissions of material information that affect the market value of shares. Given how erratic Tesla’s stock has been, and how it responded so quickly to Mr. Musk’s tweet, showing that the information was material and might have harmed investors if it was misleading does not appear to be difficult.

[The New York Times]

There have also been reports that major investors in Tesla have been spoken to by the SEC, reflecting upon Musk’s “psychological” issues as much as his legal woes:

Tesla Inc’s biggest institutional investor said on Wednesday it had spoken to U.S. securities regulators about Elon Musk’s plans to take the electric car maker private and that the chief executive needs help running the company. “He needs help, and I mean that psychologically as much as practically,” said asset manager Baillie Gifford’s James Anderson.

[CNBC]

Class Action Lawsuit Risks

Apart from DoJ and SEC legal investigations, there are also pending lawsuits from investors, including. some filed by Musk’s much-hated Tesla short sellers which indicate legal storm clouds ahead on the class action front:

By Tuesday, three Tesla shareholders had filed proposed class action lawsuits against Musk and Tesla, alleging the CEO tweeted to squeeze Tesla short sellers and goose its stock price. (If that was the plot, it worked for a spell—the stock spiked, then settled back to its previous price.) To win their cases (which may be combined), the plaintiffs will have to prove Musk meant to screw with the stock price. That means they’ll have to find a paper trail, or be able to string together enough compelling evidence to convince a jury or judge of what Musk was thinking when he tweeted.

[Wired]

The ‘Pedo’ Libel Lawsuit

And then there is the ‘Pedo’ libel lawsuit, from British expat Vern Unsworth (right)— the man who assisted in the Thai football team cave rescue and crossed swords with Musk over Musk’s mini-submarine plan — calling him a “pedo” in July and a few weeks after rehashing the accusation and a little over a week after essentially daring Unsworth to sue him, which is exactly what Unsworth is now doing via profile defamation attorney L Lin Wood.

Beyond alleging Musk’s statements are false, Wood accuses him of knowingly making those false statements, a requisite for any defamation case. Pointing to a previous apology tweet, where Musk claimed he made his original accusation about Unsworth in anger, the suit paints the Tesla CEO as a vindictive billionaire “apparently angered by his efforts being rejected or not be recognized.” “The False and Defamatory Accusations include accusations by Musk that are the product of intentional misrepresentation of comments by third parties,” the lawsuit reads. “Musk published the False and Defamatory Accusations without any reliable or credible sources of information.”

[Buzzfeed News]

Union Trouble, Too

Efforts by Musk to reduce the role of unions has created ire among the United Auto Workers who are claiming he violated labor laws. 

The United Auto Workers union has been trying to organize workers at the company’s main factory in Fremont, California, for years. It’s filed numerous complaints about Tesla’s tactics to fend off its efforts. Some of UAW’s concerns have been echoed in complaints filed by the National Labor Relations Board, the federal agency that enforces labor laws. The NLRB filed a new complaint last week accusing Musk of violating labor laws with a tweet on May 20 that threatened to strip employees of their stock options should they vote for the union.It said the tweet could be seen as interfering with employees’ rights to freely decide whether to join a union.

[CNN Money]

There will be a lot of legal action coming for the Musk/Tesla lawsuits, which seem to mount as the publicity gains ground on everything from the Tweet-related securities issues to accusations of racist behavior allegations at his workplace.

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