Best Practice Tips

Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. We are a 12 attorney firm located in the midwest. We are concerned about the impact that the economy is having on our practice and the current business environment. Our business is down and we are unsure what we should be doing financially to evaluate and improve performance - and survive. A. Management of cash flow is critical. Here are our suggestions of how to examine where you are based upon receipts and your pipeline of future collections: Monthly Billings Are you budgeting your fee billings? Are your billing and collections on track? Are your individual attorneys and other producers meeting their revenue goals? Why not? Collections and Receipts Are your collections in alignment with your cash requirements for firm expenses, client advances, loan repayments and attorney draws? Remember - the total expenses listed on the income statement does not represent all of your cash requirements. Balance sheet accounts such as partner draws, client advances, purchase of assets (equipment), and payments on loans also involve uses of cash and must be taken into consideration. Typically, there is a lag of three months between the time you incur expenses and do work for a client and receive payment. Be aware of potential cash deficits. Costs How are your actual expenses/costs tracking against your budget? Are you within your budget? If not - why? Investigate reasons. If over budget, should you cut costs or is there a way to increase revenue? Sometimes you have to spend money in order to make money. Which costs should be cut - and which should not? Be careful cutting marketing/client development investments. Accounts Receivable Are they increasing or decreasing? What percent are they of your annual billings? Fifteen percent is high - five percent is within the range of acceptability. Uncollected accounts can sink the firm - stay on top of them with an effective management system. Deal with collection problems early - formulate a client acceptance/credit policy - get retainers up front - reject problem clients from the onset.

Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. I am a new administrator with my law firm. I am also the first administrator that the firm has had. Do you have any suggestions as to where I should start? What are my priorities? A. As a first administrator you will face a dual challenge. You will have to justify the new position as well as yourself and your performance. You will be second guessed and partners will from time to time question whether a legal administrator was necessary or wise. There will be problems with role clarification. Suggest that you insist on a job description for yourself and a governance plan that outlines the authority and responsibility of the administrator, the managing partner, the executive committee, and the partnership. This will set the boundaries. On your first day at work suggest that you start by meeting with all of the personnel. Meet individually with the partners and associates and get to know them, their desires and hidden agendas. Initially conduct a get acquainted meeting with the staff and then meet with each staff member individually. Discuss their jobs and their duties. Ask for suggestions. Work with the bookkeeper and get up on the accounting operations as quick as you can. Learn the office computer system. Initially your two biggest priorities will usually be personnel and accounting. Read the minutes of firm meetings and office administrative files. If you are weak in accounting and computers obtain whatever additional training that is required.

Asked and Answered By John W. Olmstead, MBA, Ph.D, CMC Q. We recently implemented a new computer system and spent a lot of money on initial software training. However, our attorneys and staff must have forgotten everything they learned. It seems that they are only using a fraction of the software’s capabilities. A. Training and skill development is not easy. Studies reveal that 90 percent of the people who attend seminars and training sessions see no improvement because they don’t take the time to implement what they learn. Practices create habits and habits determine your future. Up to 90 percent of our normal behavior is based on habits. The key to skill learning is to get the new skill to become a habit. Once the new habit is well developed it becomes your new normal behavior. This requires practice. Unfortunately, law firms do not give employees time to practice and experiment. Research on memory and retention shows that upon completion of a training session, there is a precipitous drop in retention during the first few hours after exposure to the new information. We forget more than 60 percent of the information in less than nine hours. After seven days only 10 percent of the material is retained. Most memory loss occurs very rapidly after learning new information. Your employees can improve their memories by:

• Engaging in rehearsal/practice
• Scheduling distributed practice
• Minimizing interference
• Engaging in deep mental processing
• Emphasizing transfer
• Organizing information

Skills become automated through practice.