Lessons from Small Business to Small Law Firm - - Hiring and Firing

A small business owner lamented The High Cost of Bad Hiring a few weeks ago in an article in the New York Times "You're the Boss" series.   Small law firms are also small businesses.  The solo practitioner or small firm partner is also a "boss."  

 Lawyers tend to be notoriously poor managers.  Don't interpret that last comment as entirely negative.  Lawyers simply prefer to practice law, not interviewing new hires, training office staff or giving performance feedback.  This same tendency might be observable among other professionals and even in some businesses where the principals would prefer to focus on their particular expertise (for example design, cooking or merchandising) rather than manage their business.

 There are exceptions in the legal profession.  Some excellent managers, even CEO's of substantial businesses, are legally trained.  But, let's focus on the more general case.  Most of us can benefit by thinking through the lessons offered by The New York Times'  once-frustrated-but-now-enlightened business owner: 

1. It's worth taking the extra time to thoroughly screen candidates to find the "right" one;

2. Training is essential.  So is supervision.  As our now-enlightened owner put it: "I was not delegating.  I was relegating.

3. Tenacity is important.  It may take a while and multiple tries to find the "right" person for the job.


I would add that effective hiring is especially critical for the small law firm.  There is simply no one around to pick up the slack for a bad hire.   By the way, a "bad" hire can mean a bad hiring decision or bad supervision by the manager or partner, not just an underperforming employee.

 My bottom line: if staff is necessary for the delivery of professional services, legal or otherwise, a well-balanced approach with due attention to managerial issues, such as hiring, can only benefit the practice.





Ridgefield Chamber Event: Economist Seminar

As I’ve said before, I am not an economist but occasionally play one on this blog (though I’m always conscious of my amateur status in the field).

Imagine my pleasure, therefore, of attending the informal “seminar” conducted by a REAL economist, Nicholas Perna, at the Ridgefield Chamber’s “Rise & Shine” breakfast earlier this week. Dr. Perna was able to side-step ideology and talk “real” economics, not only in an understandable fashion, but also with humor.

Our law practice, like any small business, is directly impacted by key economic trends. We also have to manage our practice around those trends. For example, last year, there was a drop in real estate transactions, while there was an increase in employees contacting us to review severance agreements. In Big Law, outright layoffs and the rescinding of job offers to graduates were even better evidence.

So, in addition to being informative and entertaining, the Rise and Shine breakfast was directly on point. My thanks to Dr. Perna and the Chamber.

Keeping Current: Law Practice and Business Management

A healthy business requires appropriate and effective attention to the process of staying in business. A law practice is no exception. Keeping up with developments in the law is a “given,” but with respect to our business processes, we share many of the concerns, issues and shortcomings of any business, including the current pressures of the economy.

(For me, interest in business processes comes naturally. I became a lawyer in mid-career; my pre-law credentials include an MBA and project management experience developing business software and “back office” procedures for insurance and financial organizations.)

Last week I attended the Sixth Annual Law Practice Management Symposium of the New York City Bar.

Don’t stop reading. This is not “inside baseball” for lawyers.

So, very briefly, here are my highlights of the symposium:

Cash Flow – Considering the economic environment, what business is not interested in improving cash flow? Merchant banking (credit card processing) services for our business have become really sophisticated and not only improve cash flow, but also automate some of the strict controls over attorney escrow accounts that we otherwise handle manually. For example, clients can now pay by credit card via e-mail and the terminals are “virtual,” that is, online.

Financial Services – A few banks have focused on attorneys as a market niche and have developed expertise on how to handle escrow accounts (such as organizing statements to facilitate reconciliation). Generalizing to other businesses, why not work with a financial institution that actually understands your business?

Marketing – All the buzz in marketing was about social networking sites on the internet. Here, my “take-away” was pick and choose carefully. However, two important points were raised, applicable to any business: (1) a down economy is not the time to save on marketing, and (2) businesses that don’t cut back on marketing tend to increase market share in a down economy.

Information Management – Practice management systems for lawyers have evolved and are now truly impressive. They tend to be sold on the promise of capturing more billable time and increasing revenue for lawyers. That’s not good news if you’re a client. Take heart. My “take-away” is that they are not likely to increase revenue significantly but they are likely to organize information so as to save lawyers from loads of “administrativia” and free up lots of time for real work or for (is it possible?) leisure.

And, incidentally, it’s a myth that lawyers gain by wasting time on clients’ work to boost billable hours - - actually, getting the work out efficiently and effectively leads to a more profitable practice and is a win-win with clients.

Balance of Work and Leisure – This is as much an issue for lawyers as it is for other professions and occupations. My take-away is that if you organize your practice (or business) so that it functions effectively, life balance becomes a more manageable issue.

And, as a parting point, my primary criterion when evaluating business processes is effectiveness rather than efficiency. I think that applies to any business and more specifically to law practice management.


Friends Going Into Business Together

A group of friends and I are considering going into business together. What kind of partnership agreements/incorporations would be best? What exactly is a “closely held business?”

We are often contacted by friends intending to go into business together. The first thing we tell them is that they are now negotiating among themselves so their interests are in conflict. They may each want to consult their own attorneys until the agreements that they need to form the business are put in place. They can waive the conflicts and consult an attorney together but should do so only if they fully understand the conflicts they are setting aside.


The term “closely held business” is generally used to distinguish the business from a publicly traded business. So, it is a business owned by a relatively small number of people. Obviously, there can be wide variations: from one owner to hundreds. And, in specific tax contexts, the definition can be more precise and technical. 


Entire books have been written on selection of a form of ownership: sole proprietorship, “S” corporation, “C” corporation, limited liability company (LLC), partnership, limited liability partnership and so on. One of the first considerations should be to effectively limit the liability of the owners. Then, there are many tax and business considerations. The selection has to be based on considerations specific to each business and its principals but here is a general point to remember: after the selection of form of ownership is made, it is important to observe the formalities so that you do not lose any of its benefits.