Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner of a 16 attorney insurance defense law firm in Kansas City. We have two equity partners, four non-equity partners, and 10 associates. Only the two equity partners bring in client business. Since our clients are insurance companies, most of our work is new business from existing clients. Unlike other firms doing insurance defense work our billing rates are low and we have to put in a lot of billable hours and maintain a high ratio of associates and non-equity partners to equity partners.
In the past our associates stayed for a while and left after several years. By the time they reached the higher compensation levels they left and we replaced them with lower cost associates. In the last few years - with the economy and the oversupply of lawyers - they are staying much longer. We are concerned about our reducing profit margins and at what point an associate or non-equity partner's compensation is "maxed out." We would appreciate your thoughts.