Law Firm Administration as a Career

The field of management of legal organizations holds career possibilities for some law students. As firms increase in size and private firms and corporate legal departments recognize the contribution good management can make to their operations and profitability, the number and quality of administrators is increasing. The potential for making this area of work a lifetime career is also increasing.

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For the student who has chosen to go to law school after experience in business, the opportunity is especially inviting. The exposure to the business world, combined with the ability to understand the nature of legal work, can create good credentials. In addition, the advantage is present for a lawyer admitted to practice to become a full-time managing partner, sharing in the profits of the firm. This opportunity is not present to a non-lawyer administrator, since only lawyers can be partners (or shareholders) in law firms.

The younger law graduate who enjoys the business side of practicing law and is willing to give up active practice may wish to follow his JD with an MBA, to enhance his credentials for law firm administration. There is one drawback for the younger lawyer, however. When one is responsible for the management of lawyers who may have ten, twenty, or thirty years of practice behind them, it is generally useful to be nearer to those lawyers in age. If the JD/MBA is willing, however, to enter his management career with a small firm at a salary lower than that generally paid to administrators by the larger firms, and get some on-the-job experience, he may find that by the time he is in his early to mid-thirties, he will have the experience which will allow him to move into management of a large law firm at a very good salary. This career progression may eventually lead to a position as a full-time administrative or managing partner.

There are a number of reasons firms adopt a full-time administrative or managing partner concept. Some firms are simply unable to delegate a high enough level of responsibility to a non-lawyer administrator. The result is a reversion of administrative management to committees of partners. When this occurs, the process of management becomes time-consuming and expensive in terms of lawyer time. When the expense of a committee-management system has become apparent, some firms have moved to a single managing partner concept.

Other firms are unable to find a competent administrator able to handle high-level administrative authority and responsibility within the organization. Other firms find that they have a partner with the desire and ability to function as a business manager or administrator, and find that delegation of management responsibility to an individual with partner status enables effective performance of those functions without interference by other partners, where delegations of those responsibilities and authorities to a non-lawyer would not be effective.

As law firms pay more attention to the management of lawyers, in addition to support staff, it can be expected that the full-time administrative or managing partner concept will become more widely adopted.

Departments and Specialists

We turn now to the other aspect of managing legal organizations, that is, managing the performance of professional services. Too many law firms simply do not attempt to manage the performance of services, but expect each lawyer to manage himself. This type of management should insure that legal services are of proper quality and are on time, the professional resources of the firm are used wisely and the professional staff is provided with training and experience.

Securing these objectives requires the time and attention of an organization's management. A plan must be devised and implemented, and some of the senior professional complement of the organization must continually devote time to it. This is an area of organization in which lawyers in private practice can learn much from attorneys employed by corporations and government agencies.

Certification of legal specialties has been much debated and in some states, adopted. It is not our purpose to review the various proposals since they deal principally with recognition of specialties, a subject that is external to the firm. There is general agreement that many lawyers are, in fact, specialists.

Small Firms

In small law firms, specialties and departments are often indistinguishable. In the simplest situation, the two-lawyer firm, one partner may undertake most of the work in the courts while the other manages the office, and performs the research and documentation.

When a firm grows to five or ten lawyers, a structure of specialization and departmentalization may be more fully developed. This does not mean that the "tax partner" must practice exclusively in taxation, as he may not have enough work to do so. It does mean, however, that he will undertake by himself or supervise any tax problems handled by the firm, and that he will keep current on new developments in tax law. When the "tax partner" works on a real estate matter, he becomes subordinate to the "real estate partner." Thus a law firm with five attorneys may have several "departments" with more than one lawyer in each of them part of the time. Some departments, typically litigation, may require the full time of one or two of the firm's lawyers.

Although some large firms have highly developed departmental organizations, a number do not. Departments are most often organized along lines of legal specialties. However, some departments may be organized along client lines in order to serve specific clients. Where both types of departments coexist in a firm, careful coordination of their work is essential.

In general, departmental structures should not be confused with the assignment of responsibility to a partner for the coordination of all of the affairs of a client. Such client (or account) responsibility may cut across the work of all or many of a firm's departments. It is essentially a coordinating and client relations effort which recognizes that it may be easier for a corporate chief executive to relate to just one partner as "my lawyer" than to a whole law firm.

The legal organization of a large general practice firm consisting of four major departments is similar to those of the small firm previously described. However, now each department is subdivided into sections, each dealing with a generally recognized legal specialty area. A section may contain one or many lawyers, depending on the current needs of the firm. The department head may, from time to time, re-allocate manpower resources among the sections, in addition to any deliberate rotation program the firm may have for lawyers in training. Depending on work flow and needs, some lawyers may divide their time between two sections, generally in the same department.

This type of structure is likely to allow a firm to enhance greatly the effectiveness of its work and the efficient use of its manpower resources. To realize its full potential, management must direct the undertaking of new assignments sufficiently to insure that work is assigned to the proper department. Department chiefs, in turn, generally assume responsibility for assignment of individual lawyers to matters and control of quality and timeliness.

Some law firms have organized into teams rather than departments, each team being responsible for a number of matters for a specified group of clients, and in many instances for one major matter for a particular client. The team is comprised of attorneys with specialties in the different areas of practice necessary to the work of that team, combined with paralegals and secretaries, to function as an integral unit. Workload is distributed among teams by a department manager or by the managing partner. The advantage of the team approach is the multiplicity of specialties that can be included. For example, in a major anti-trust matter, a corporation specialist who is familiar with the inner workings of the client corporation might be combined with one or more litigation attorneys, and a team of litigation paralegals, all supported by word processing and administrative secretaries, may be devoted to a major item of antitrust litigation for however long it takes.

The advantage of the team approach is that attorneys are not constantly thrust into different working relationships within a department, and are not segmented from attorneys working in other areas of the firm's practice, due to departmentalization. In addition, word processing operators and support staff are able to work closely with a group of attorneys, and become intimately involved in the work product, while still enabling the advantages of economies of scale to be achieved. The end result may be the ability to provide better, more responsive client service.

Philosophies of Group Practice

A lawyer who works for a governmental agency or for a corporation has relatively few problems of identity or loyalty. He is part of a legal team which, within the ethical restraints of the profession, works on a defined mission-to serve one client. Lawyers who are in solo practice need not worry about identity. They work for themselves and their clients relate only to them.

Those lawyers who are in private group practice are confronted with a problem in identifying their interests. Is their prime loyalty to their own clientele, like the sole practitioner, or to the firm's clients, like the salaried lawyer? Some law firms have developed along a loose structural format while other's form tightly disciplined units. Few have recognized the underlying philosophical questions which determine their development and style. Organizational decisions are, therefore, often rationalized in a variety of ways.

As management consultants we have had the unique opportunity to work closely with many law firms and to examine and discuss underlying differences between varying organizations not generally recognized by the lawyers involved. Two basically different approaches to group practice have been identified by the authors. We have termed them the confederation style and the team approach to group practice.

In the confederation style, a group of lawyers functioned as a partnership firm or professional corporation hold that (a) the relationship between each client and the individual lawyer of his choice is paramount, and (b) the firm is a vehicle of convenience to enable each member to serve his clients better and to provide such additional amenities as may be possible.

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The team approach holds that (a) the firm is more important than its individual members, (b) clients are best served by the firm, not the individual lawyer, and (c) the firm is responsible for and to clients.

A partner in a large law firm once asked over lunch whether our consulting organization ever does work "on accounts receivable." He explained that his firm did not feel that a full review of its management and economics were in order and wondered if a consulting firm would undertake such a limited assignment. "What's the problem?" we asked. The reply indicated that certain partners' clients had fallen well behind in payment of fees, and these partners were resisting any action by the firm to require payment or to cease doing work for these clients. "A partnership's attitude toward receivables," we explained, "is a fundamental indicator of its operational philosophy." This firm operated in the confederation style to the point that its economic well-being was in jeopardy.

Whether understood and verbalized or not, a firm's practice philosophy will color many of its agreements, policies, and actions. A few examples will illustrate this point.

Ownership of Files

The articles of partnership may indicate that a partner who leaves the firm may take "his files" along, provided that he forwards to the remaining partners their pro-rata interest in fees earned prior to his leaving. This approach conforms to the confederation idea.

Under the team approach, the firm clearly has control of legal files. A typical team partnership agreement might provide as follows:

All partners expressly recognize and agree that all files, papers, records, documents and legal matters are the sole property of the firm, and no partner has any separate property interest therein. Whenever any partner shall become disassociated from the firm for any reason, he shall leave all files, papers, records, documents or legal matters in any way related to law business or the practice of law until such time as they are requested by the client in writing, after which request the file will be delivered to the client.

Assignment of Work and Specialization

When the whole firm mutually serves the client, specialization flourishes. However, a client may have a special relationship with a designated lawyer who, the client understands, coordinates the client's work within the firm. Neither the coordinating lawyer nor the client will be under the misapprehension that one lawyer only does the client's work. Consequently, each particular problem may be assigned to that available lawyer who can accomplish its resolution most efficiently and at the least cost to the client and the firm.

Lawyers who subscribe to the confederation approach generally rationalize that the clients require them personally to perform most services. As a rule, nothing could be further from the truth. The medical profession has long ago trained the public in the matter of professional specialization, and no client worth having will believe that every lawyer can effectively handle every sort of legal problem.

In confederation firms, specialization is held to a minimum and only highly technical matters and trials are shifted within the firm. In team-type firms, on the other hand, the firm establishes a management mechanism to review the assignment of work and workloads and thus insures maximum use of available professional resources.

Associate Assignments

Confederation firms often place great emphasis on having new associates bring in "their own" clients. Also, a usual trend in such firms is to have individual associates who are in training closely identified with specific partners who have surplus work. Thus, a partner may build a team to serve clients, and may assert priority claims on the associate's time to insure that clients are served properly. Typically, the partner is not concerned with the problems of other partners and their clients. As the associate gradually builds "his own practice," he or she naturally gives his or her clients preference over those of the partner, and the partner begins to look for another associate.

Team firms will often establish a training program for associates, and may channel assignments through specific authorities. In at least one New York firm, associates' assignments are routed through the administrator. In highly departmentalized firms, associates may be rotated through departments and supervised by a department head. In some firms, a single partner may coordinate work flow to younger lawyers. The objective in associate assignments is to train a team member, not to create a semi-autonomous unit within the firm.

The new law graduate should try to identify the organizational style of any firm which is seeking to recruit him or her and evaluate various offers in view of the style of the firm with which he or she will be an associate lawyer and perhaps one of the future partners.

Compensation

The influence of operational philosophy on the distribution of profits is not as clear as in the foregoing policy areas, but some overtones will show. In general, a profit-distribution system which assigns interests or establishes salaries in advance will have a unifying effect; a system which divides profit after the fact on the basis of a statistical system will conform more closely to the confederation philosophy.

This does not mean that in a team-type organization the individual contributions of partners should not be measured and taken into consideration. It may again help to draw comparisons with the salaried lawyer who is on the corporate team and how he is regarded monetarily.

In governments and corporations various forms of employee evaluation are almost universally in use. These evaluations attempt to measure each person's contribution to the employer's team; they consider such factors as productivity, leadership, cooperation, and innovation.

Various systems that have been developed for measuring the contributions of law firm partners or shareholders and associates gauge similar attributes, and these may well be considered in arriving at each partner's interest in a team-type law firm. The difference between the team and the confederation firm compensation plan is likely to be one of emphasis.
The confederation firm is likely to place heavy weight on obtaining business, i.e., client "ownership." And it may base part or all of a partner's compensation directly on accounting records of business obtained and work done.

A unified team type of firm will, of course, consider the accounting factors in determining the relative contribution of each partner, but it is far more likely to consider also attributes of leadership, legal reputation and degrees of specialty, management and a number of other relatively subjective factors that contribute in an important way to the success of the team.

Monetary progress in a confederation-style firm generally depends more heavily on a young lawyer's ability to bring in clients than it does in team-style firms.

Continuity of the Firm

Partnerships may be set up to terminate upon any change in the members, or so that the firm will continue despite the death or withdrawal of any individual partner or a minority of partners.

For example, the clause regarding continuation might read:

The parties hereto agree to, and by these presents do, become, and they shall remain, partners in the practice of law in continuation of the firm of Able, Baker and Charlie upon the terms and conditions herein set forth from July 1, 198-, to and including June 30, 198-, and for each year thereafter until this agreement is terminated as to one, several, or all of the parties hereto in accordance with the terms and conditions of this document.

This contrasts with the following provisions of another agreement:

It is further agreed that in the event of the death of any one or more of said partners, the surviving partners may elect within sixty days after such death, or deaths, either to continue or to dissolve the partnership, and if continued, the interest of the deceased partner in said partnership shall be purchased by the partnership from the estate of the deceased partner.
Where the firm is paramount the partnership will frequently continue irrespective of its members. This is at times also true in firms with the confederation approach to practice, but much less often.

Firm Name

An unchanging firm name, where local custom permits, is a great help in achieving a unified practice. This is true not only in the practice of law, but in other professions as well. Consider these well-known institutionalized names:

Arthur Andersen and Company
Hale and Dorr
White & Case
O'Melveney & Myers
Merrill Lynch, Pierce, Fenner & Smith, Inc.

Some state laws once required that only living partner names appear in a firm's name. These laws generally do not exist today and many firms now elect to institutionalize their firm's name for better public recognition. If, as a law graduate, you are interviewed by a firm which has had frequent changes of name as partners have come and gone, the chances are good that the firm operates under a confederation style. Law firms must drop the names of former partners who leave to enter practice elsewhere or who are elected or appointed to office. Hence, frequent name changes can also be a sign of instability.

Other Policies

Other policy areas affected by the underlying philosophy of the firm are secretarial assignments to individual lawyers as opposed to central supervision of secretaries, location of files under the control of individuals or centralization, disposition of old files,allocation of office space, acceptance of paid and unpaid assignments, and the setting of fees.

The unified team firm must have leadership, discipline and control of its parts. Individual members of the firm must be willing at times to subordinate their ego needs to the common good and to undergo peer review and control. They must be willing to operate in tandem with others, just like the members of a football squad. This calls for an atmosphere of trust, good relations and striving for common goals. There are law firms which operate completely in this style. It can be a professionally satisfying as well as an economically rewarding way to practice a profession.

Other lawyers groups prefer the greater freedom and lack of accountability which are common in the confederation style. Many confederation-type firms fare as well financially as the more organized groups.

One confederation firm has a unique way of making partners cope with old files. After they have been stored a certain length of time, the partner is required actually to take them home-or throw them out. Several partners have garages and basements filled with paper.

Whichever approach a group of lawyers wishes to follow, it will have better and more consistent internal policies if it will examine its goals and shape policies accordingly.

Choosing a Philosophy

It is important that a law student being interviewed for employment try to determine whether the prospective employer represents a term or a confederation-style firm. If the student wants to work in an organization where compensation and advancement will result primarily from his or her own ability to attract clients and produce income, the student will choose the confederation-style operation. If, on the other hand, the student wishes to practice with a group of professionals who approach individual advancement from the viewpoint of the advancement of the whole, the team-style firm will be preferred. Many prospective employers have not thought of themselves in these terms, and the student will have to phrase questions which indirectly evoke knowledge of the style of the firm.

If the employment decision is looked upon as a means of getting a few years of post-graduate training, the identification of the prospective employing firm's style may be equally important. It may be that being assigned to one highly skilled specialist in a confederation-style firm may provide the specialty education desired. On the other hand, a rotation-type training program in a team-style firm might provide a broader-based experience.

Some questions which can be asked to bring out the style of the firm involved might be, "Do associates share in fees from clients they bring in? What factors are considered in determining associate bonuses? How will training be provided during the first few years of practice?" If associates share in fees, if bringing in clients is weighted heavily in the bonus determination, and if training may be in only one area of law, the firm is likely to be a confederation-style firm.

During the job interview it is also useful to listen for phrases like "my clients" as opposed to "our clients," and "my files" as opposed to "our files." The "my" firms are likely to be confederation-style organizations.

“Of Counsel”

The term "of counsel" has come to mean many different things in the legal profession. Law firms have used other terms to define this position, including "special counsel," "counsel," and others. Because of the many different arrangements, the only thing common to "counsel" lawyers is that they do not fit neatly into the "partner" or "associate" category.

The traditional and most common use of the term applies to partners who have retired. In some cases, however, the term has been used to label lawyers who wish to practice with their firms on a part-time basis. Some firms have "of counsel" who are specialists in a field for which the firm has occasional use but which probably will not require a full-time member of the firm.

Some firms have "of counsel" whose names on the letterhead, it is felt, will lend prestige to the firm. Some sole practitioners nearing retirement have sought out younger lawyers to take over the practice, and for a period of several years immediately prior to retiring will stay with the firm as "of counsel," hoping to transfer the loyalties of the clientele to the new firm.

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"Of counsel" are paid in many different ways. Some collect a flat salary, while others are paid on the basis of time worked or business generated.