Structuring and Managing Practice Groups

One of the ways to manage the delivery of legal services is through the development of practice groups.

There is no question that today's sophisticated clientele is placing more emphasis on the full service concept. Multi-disciplinary practices are a good example of how clients want all or most of their outside services handled by the same organization. The Walmart one-stop shopping idea has become part of the legal profession. Thus, the firm needs to determine how it can best deliver its legal services with this full service concept in mind.

Generally, a firm will either establish structured practice groups that encompass the major practice areas of the firm, will structure the group based on specific clients, or a combination of both.

For example, a firm may identify its structured practice groups into specific areas, such as: Bankruptcy; Business/Tax; Commercial Litigation; Wills, Trusts and Estates and Administration; Health Care; Insurance Defense; etc. There may be other practices as well, but they are outside the structured group. These could include the other more minor practice areas such as Personal Injury, Criminal Defense, Immigration, etc.

Criteria for Establishing A Structured Group

Generally, the firm will establish criteria as to when a practice area will fall into the Structured Group category. Usually, the criteria include a combination of cash receipts and profits from either the prior year or the prior two or three years or volume of work.

Under each of the structured groups will be various sub-groups. These subgroups generally evolve based on how the group's activities are going to be monitored. For example, under the Bankruptcy Group there may be subgroups for Chapter 7, Chapter 11, Chapter 13 and Individual Creditors. Under Wills, Trusts and Estates a firm may have Wills, Trusts and Estate Planning separate from Estate Administration.

The objectives of these subgroups, in most firms that have this organizational structure, are to insure that the client work is being allocated and performed in a high-quality, timely manner, to train the attorneys and paralegals working in that practice group, to systematize the practice to the extent possible, and to be able to identify profitability of different areas within a major structured group and then make a determination as to whether or not that practice area should be expanded, discontinued or simply kept in its current form.

The second method of classifying practice groups, in addition to practice area, is by client. It is important to recognize that when a firm has practice groups by client, there will frequently be a crossover of disciplines. In other words, the XYZ client group could have litigators, business attorneys, etc. In the practice groups formed by practice area, most of the attorneys in those groups provide the same type of service.

Managing the Practice Groups

Once the structured practice groups have been identified, it is essential to determine how they will be managed and evaluated, and the roles they will have in the firm's organizational structure and management.

Notwithstanding the fact that the practice group model is the most common structure for organizing and managing the delivery of legal services in mid-size and larger law firms, there are some impediments to having the system work properly.

1. The Management Problem

Generally, the most senior attorney within a practice group automatically becomes its chairperson. However, what do you do when that person has poor organizational abilities or is not a good manager? Younger partners have a problem assuming this role because they now have to ride herd on someone senior to them with respect to assignments, intake of new clients, staffing, etc. The firm has to be prepared to make changes in the practice group leadership if in fact the most obvious person to be in charge is not the one who will carry out firm policies and make the group successful. Further, time constraints caused by heavy practice or outside responsibilities of the chairperson may limit his or her ability to function as an effective practice group leader.

2. Partner Time Commitment

Someone in the group, generally the chairperson, must spend a considerable amount of time planning meetings, setting marketing strategy, allocating attorney resources, reviewing financial information, resolving conflicts, etc. The question is how will this non-billable time be accounted for? If the firm's partner compensation system heavily weights billable hours, then there will be a reluctance to manage a practice group unless that person is prepared to spend hours normally devoted to other pursuits doing so. What I have seen in some firms is awarding the chairperson so many hours credit for what they must do in this management capacity.

3. Less Than Full Commitment on the Part of the Partners

Less than full commitment on the part of the partners to adhere to and participate in the firm's practice management initiatives and/or policies will inhibit the successful implementation of the practice management concept. Hence, the need for the practice group chairperson to provide frequent and meaningful reports to members of the leadership team so that they can take corrective action, as required, and contribute substantively and on an informed basis.

4. Reporting Process

The firm needs to have some type of reporting process that identifies what the practice group is doing to make certain that it is coordinating its efforts in concert with the overall firm efforts. Generally, each chairperson will be asked to provide both a written and oral report to the partners at various intervals throughout the year, normally on a quarterly basis, outlining the activities of the group, successes, etc.

5. Profitability Analysis

Is the issue whether or not some type of profitability analysis is going to be prepared at the group level? If so, are there going to be any financial incentives as a result of exceptional performance? Most firms are doing the analysis for several reasons. One is to ascertain whether certain practice areas should continue. Another is to change the behavior of the individuals within that group; whether it will be bringing in non-profitable work, not billing and collecting on time, not putting in billable hours, heavily staffing in relation to the work performed, etc. Keep in mind that the fact that a group is not profitable is not necessarily bad. Many firms have an insurance defense practice and recognize that it may not be extremely profitable. However, it provides many other benefits to the firm — it gets young attorneys into the courtroom very early on in their career, it becomes a feeder to more profitable insurance work, i.e., coverage work, etc., it creates great cash flow since the insurance carriers pay regularly, and it consumes a large amount of overhead. So when reviewing your practice groups, look at the other benefits that the group may provide other than just profits.

*****
Joel A. Rose is President of Joel A. Rose & Associates, Inc., a firm of management consultants based in Cherry Hill, NJ. A member of this newsletter's Board of Editors, he may be contacted at 856-427-0050 or [email protected].

One of the ways to manage the delivery of legal services is through the development of practice groups.

There is no question that today's sophisticated clientele is placing more emphasis on the full service concept. Multi-disciplinary practices are a good example of how clients want all or most of their outside services handled by the same organization. The Walmart one-stop shopping idea has become part of the legal profession. Thus, the firm needs to determine how it can best deliver its legal services with this full service concept in mind.

Generally, a firm will either establish structured practice groups that encompass the major practice areas of the firm, will structure the group based on specific clients, or a combination of both.

For example, a firm may identify its structured practice groups into specific areas, such as: Bankruptcy; Business/Tax; Commercial Litigation; Wills, Trusts and Estates and Administration; Health Care; Insurance Defense; etc. There may be other practices as well, but they are outside the structured group. These could include the other more minor practice areas such as Personal Injury, Criminal Defense, Immigration, etc.

Criteria for Establishing A Structured Group

Generally, the firm will establish criteria as to when a practice area will fall into the Structured Group category. Usually, the criteria include a combination of cash receipts and profits from either the prior year or the prior two or three years or volume of work.

Under each of the structured groups will be various sub-groups. These subgroups generally evolve based on how the group's activities are going to be monitored. For example, under the Bankruptcy Group there may be subgroups for Chapter 7, Chapter 11, Chapter 13 and Individual Creditors. Under Wills, Trusts and Estates a firm may have Wills, Trusts and Estate Planning separate from Estate Administration.

The objectives of these subgroups, in most firms that have this organizational structure, are to insure that the client work is being allocated and performed in a high-quality, timely manner, to train the attorneys and paralegals working in that practice group, to systematize the practice to the extent possible, and to be able to identify profitability of different areas within a major structured group and then make a determination as to whether or not that practice area should be expanded, discontinued or simply kept in its current form.

The second method of classifying practice groups, in addition to practice area, is by client. It is important to recognize that when a firm has practice groups by client, there will frequently be a crossover of disciplines. In other words, the XYZ client group could have litigators, business attorneys, etc. In the practice groups formed by practice area, most of the attorneys in those groups provide the same type of service.

Managing the Practice Groups

Once the structured practice groups have been identified, it is essential to determine how they will be managed and evaluated, and the roles they will have in the firm's organizational structure and management.

Notwithstanding the fact that the practice group model is the most common structure for organizing and managing the delivery of legal services in mid-size and larger law firms, there are some impediments to having the system work properly.

1. The Management Problem

Generally, the most senior attorney within a practice group automatically becomes its chairperson. However, what do you do when that person has poor organizational abilities or is not a good manager? Younger partners have a problem assuming this role because they now have to ride herd on someone senior to them with respect to assignments, intake of new clients, staffing, etc. The firm has to be prepared to make changes in the practice group leadership if in fact the most obvious person to be in charge is not the one who will carry out firm policies and make the group successful. Further, time constraints caused by heavy practice or outside responsibilities of the chairperson may limit his or her ability to function as an effective practice group leader.

2. Partner Time Commitment

Someone in the group, generally the chairperson, must spend a considerable amount of time planning meetings, setting marketing strategy, allocating attorney resources, reviewing financial information, resolving conflicts, etc. The question is how will this non-billable time be accounted for? If the firm's partner compensation system heavily weights billable hours, then there will be a reluctance to manage a practice group unless that person is prepared to spend hours normally devoted to other pursuits doing so. What I have seen in some firms is awarding the chairperson so many hours credit for what they must do in this management capacity.

3. Less Than Full Commitment on the Part of the Partners

Less than full commitment on the part of the partners to adhere to and participate in the firm's practice management initiatives and/or policies will inhibit the successful implementation of the practice management concept. Hence, the need for the practice group chairperson to provide frequent and meaningful reports to members of the leadership team so that they can take corrective action, as required, and contribute substantively and on an informed basis.

4. Reporting Process

The firm needs to have some type of reporting process that identifies what the practice group is doing to make certain that it is coordinating its efforts in concert with the overall firm efforts. Generally, each chairperson will be asked to provide both a written and oral report to the partners at various intervals throughout the year, normally on a quarterly basis, outlining the activities of the group, successes, etc.

5. Profitability Analysis

Is the issue whether or not some type of profitability analysis is going to be prepared at the group level? If so, are there going to be any financial incentives as a result of exceptional performance? Most firms are doing the analysis for several reasons. One is to ascertain whether certain practice areas should continue. Another is to change the behavior of the individuals within that group; whether it will be bringing in non-profitable work, not billing and collecting on time, not putting in billable hours, heavily staffing in relation to the work performed, etc. Keep in mind that the fact that a group is not profitable is not necessarily bad. Many firms have an insurance defense practice and recognize that it may not be extremely profitable. However, it provides many other benefits to the firm — it gets young attorneys into the courtroom very early on in their career, it becomes a feeder to more profitable insurance work, i.e., coverage work, etc., it creates great cash flow since the insurance carriers pay regularly, and it consumes a large amount of overhead. So when reviewing your practice groups, look at the other benefits that the group may provide other than just profits.

*****
Joel A. Rose is President of Joel A. Rose & Associates, Inc., a firm of management consultants based in Cherry Hill, NJ. A member of this newsletter's Board of Editors, he may be contacted at 856-427-0050 or [email protected].