Law Firms & Changing Structural Needs

The needs of a law firm for structure and organization change at various periods of its existence and depend upon its size, clients, location, and the interpersonal relationship of the "movers and shakers" of the firm.

An illustration is the firm of "Swan & Silver." The consultants were first engaged to review the organizational structure and needs of the firm a few months following the merger of two predecessor firms. As a result of pre-merger negotiations, the management of the firm was the responsibility of two senior partners, Messrs. Silver and Swan, who had delegated some authority and responsibility for day-to-day administration to several other partners, resulting in an organization administrative chart. Provisions were made in the merger agreement for re-evaluation of the structure after a year of operation. Further, the merger agreement virtually gave the managing partners dictatorial control of the business aspects of the firm, including division of profits and the admission and retention of partners.


The organizational structure worked surprisingly well on an interim basis. One of the two managing partners rapidly became the dominant partner of the two. Being a wise administrator, however, he was able effectively to delegate authority to the various partners in charge of specific functions. Since both of the managing partners were over 65 years of age at the time of the merger, the involvement of younger lawyers in the management process was an important consideration.

One of the questions which arose in this first review was the introduction of a non-lawyer administrator into the firm. The success of this innovation was problematic because such a manager would have to report to both Messrs. Silver and Swan for broad policy matters and to several other lawyers who assisted the managing partners with respect to specific functions. It was considered unlikely that one individual could please so many masters. The consultants advised against creating the position.

An alternative at that time would have been to substitute a lay administrator in place of the two attorneys in charge of the accounting, secretarial, and office functions. However, Miss Knoll, who assisted substantially in the administration of office services, and Mrs. Brill, who was functioning as head secretary, were both very capable. The lawyers supervising these women were obtaining valuable experience in office management, which was considered desirable in view of the age of the managing partners. Further, the consultant felt that the merged firm should mature before attempting to integrate a legal administrator.

It was, therefore, concluded that at that particular time, the organizational structure of the recently merged firm should continue unchanged.

A review of the situation was undertaken three years later. By that time the firm had changed considerably.

Mr. Silver had now virtually abandoned participation in management because of failing health, leaving the job almost entirely to Mr. Swan. Under the terms of the partnership agreement, Mr. Swan (with the support of Mr. Silver) had virtually unlimited authority; in reality, his authority was shared by a number of other partners and at least one associate. Each of these lawyers continued to report individually to the managing partner.

A review of the partners’ records showed that their time devoted to office management, had it been billed to clients, would have exceeded $265,000 in the prior year. It was further decided that the management training objectives of the firm had now been largely accomplished. A change in structure was in order. With the assistance of the consultant, the management organization of the firm was revised and a business manager recruited.

The firm established an Executive Committee, headed by Mr. Swan, as Senior Partner. The committee device enabled the firm to involve a number of other partners in policy-setting decisions and formalized a de facto organization which had previously existed.

The Senior Partner became head of the Executive Committee, acting as its leader and chairman. He alone continued to have authority to determine the interests of each partner in the firm and his or her annual compensation, a process at which he was very competent. Other members of the Committee included a vice-chairman, who acted for the Senior Partner in his absence, and three other members who served two-year overlapping terms. Representation from among the youngest partners of the firm was specifically provided. Meetings of the Executive Committee were scheduled monthly.

Today the Committee functions as the policy-making body of the firm, except with respect to those matters reserved exclusively for the Senior Partner. Acting on its initiative or on the recommendation of others, the Committee controls:
 

• Admission, retention, and retirement of partners
• Approval of budgets, for income and expenses, including the setting of hourly and per diem and other charges
• Creation of new positions or abolition of existing positions (except for minor positions which are handled as a budgetary matter)
• Personnel policies with regard to general starting rates for lawyers, benefits, insurance
• Approval of major contractual relationships, such as leases for space or other arrangements with a value of $100,000 or more
• Other matters of policy nature

One partner of the firm, formerly the partner in charge of accounting, was designated as Controller. In this capacity, he reports to the Senior Partner and derives authority from him.

The duties of the Controller are to exercise financial responsibility over the affairs of the firm within the policies established by the Executive Committee.

Mrs. Gelb, a partner, continues to be responsible for the recruiting and training of lawyers and for the development of paralegal programs. She functions with a committee consisting of one senior associate and a second partner. When the recruiting effort is heavy, other lawyers assist the committee in the interviewing process.

The firm already had a head secretary and an office services supervisor, as well as a bookkeeper. These functions were now brought into the Administrative Department to be headed by the Business Manager. The Services Supervisor doubles as librarian.

The Business Manager reports exclusively to the Senior Partner or, in his absence, to the Vice Chairman of the Executive Committee. His authority is derived entirely from the Senior Partner. He has only one boss.

In status, the Business Manager is recognized as a professional member of a professional organization. Consequently, he has the status and prerequisites of a partner of the firm, including similar office space and secretarial support. Although hired at a fixed salary, he receives a bonus based on his contribution to the firm's operation.

Within budgetary limits, the Business Manager has authority to engage, discipline, promote, and discharge nonprofessional personnel, to purchase supplies and equipment and to sign payroll checks, to experiment in systems changes and installations, and otherwise to make routine administrative changes which do not affect directly the service performed for clients. He is expected to make appropriate policy recommendations to the Senior Partner and to the Executive Committee, and is an ex-officio member of the Executive Committee.

Professional Legal Administrators

In the last few decades, the trend toward bigger firms and the increasing hourly value of experienced senior lawyers working on client matters rather than on firm administration created a new demand parallel to the need for hospital and clinic administrators to serve the medical profession. The number of non-lawyer administrators has increased rapidly in these decades. It is estimated that, in the mid-80s, four-thousand law firms employ some kind of administrator or manager. A few of these persons are attorneys who have chosen not to practice law, but most of them are not lawyers.

The duties of administrators vary greatly among offices, as do their titles. In a few firms, administrators are responsible for the work assignments to associates and for maintaining the balance of work flow to lawyers. More commonly, administrative personnel are in charge of or supervise someone who is in charge of secretarial personnel, accounting, housekeeping, office services, and internal systems.

In many firms, the office manager position has evolved from the need to assist the busy managing partner. Often the person filling this opening is a senior secretary who has some managerial ability. There is a distinction in terms of job responsibility between such personnel and the full-fledged "office administrator" or "business manager" who operates relatively free of restraints as a member of the firm management organization. There is also an infinite number of variations and combinations of responsibilities between these two extremes that occurs in firms employing administrators.

Causes of Failure with Administrators

Law firms experience a high degree of failure with professional administrators. Quite often, the first few administrators stay on the job for only short periods of time and either leave voluntarily or are terminated. A feeling of mutual frustration may be present. The partners feel that the administrator "is not doing the job he was hired to do." The administrator, in turn, feels hemmed in and frustrated every time he or she makes a move. Any one of several factors may cause such failure:
 

• Improper selection of the legal administrator hired
• Failure to understand the required working relationship between an administrator and the several components of the firm
• Lack of a clear understanding as to the authority, duties, and reporting relationship of the administrator
• Failure to bring the administrator into the "inner circle" of decision making with regard to matters affecting his or her province; related to this is failure to give the administrator sufficient authority and backing
• Inadequate compensation and /or status

The scenario of many law office administrators' problems may be characterized as follows:
 

• A manager from industry, where there are clear lines of managerial authority, is hired by a law firm where generally the ability to produce client business provides recognition or status.
• The manager is told to "run the firm," but, at the same time, told, "Don't do anything which will affect my secretary, my department, or my way of practicing."
• He has no authority of his own and, in effect, must respond daily to all of the partners. After six to nine months of trying to accomplish changes in personnel, financial management or the like, he is nowhere. The firm then decides that the administrator doesn't know his job well enough, and they ask him to leave.After a few attempts of this type, some firms realize that they must provide a chain of command and authority commensurate with responsibility, and must offer some measure of cooperation to the administrator. They then hire a qualified person and finally realize the benefits which good administration can provide.