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Finance
Teaching Associates the Business of Law
May 2006
When most law students complete their education and take the bar exam, one of the last things on their minds is how they would market their services to potential clients. It is the rare graduate who starts his or her career by working for themselves. Most newly minted lawyers are looking forward to the chance to start their career at a place where someone else will be guaranteeing that the rent is paid, the lights are on, and there is a computer on their desk. As a result, understandably, most young lawyers have no idea what it costs to keep them or their firm in business. One could argue that in the early stages of learning how to practice law, as opposed to studying it that it makes little sense for new lawyers to worry about the cost of running the business. But because many attorneys will be assisting clients in successfully managing their businesses, it might be instructive for law firms to share more information with their junior employees about the business costs of running the firm.
Many firms do publish information internally indicating billing numbers for everyone in the department or in the firm. This benchmarking may serve as an incentive for attorneys to reach goals and to see how they measure up compared with their peers. But it is clearly not enough information to help younger attorneys understand the importance of their work to the firm’s success. One of the ways in which sharing cost information is helpful, is in showing associates the day to day costs of operating the business, and in assisting them in feeling a greater commitment to the enterprise as a whole. Often, when making the transition from associate to partner, lawyers indicate that they previously had little knowledge about the costs associated with running the firm, and the way in which their relationship to those costs would change once they became a shareholder. Greater transparency in this process would help associates understand what is necessary to maintain a successful practice and what their commitments will be long term.
What Inhibits Transparency?
What keeps law firms from sharing more firm financial information with their associates, and staff? Often, firms are unsure about how the information will be handled, and how to best maintain confidentiality in the process. Remember that associates in your firm have just taken and passed the MPRE; the ethics exam that might not have been required when you begin practicing law. Just as junior lawyers must maintain confidentiality about client matters; it is not unreasonable to expect them to treat firm financial information the same way. In the fairly flat management model of the law firm, with governance often being handled by a small committee, even partners may not be aware of all relevant financial information about the firm. But in an argument for transparency, it makes sense for everyone to receive at least a skeletal outline of information regarding costs and client billings. Every day attorneys are making decisions about how to spend their time – having information on how that time commitment impacts the bottom line can help foster better time allocation.
Teaching Marketing
Some lawyers, like some people, have an entrepreneurial personality and will need little assistance in the client development arena. But most attorneys will not have this natural talent and will need help and guidance in developing or fostering the characteristics that will eventually help them develop business. This developmental process is difficult for both associates and partners. Early in an attorney’s career, there must be an emphasis on learning good lawyering skills, and good firm and client service. Lawyering skills are by their nature technical, and the transition from the law school environment to the law firm can be difficult. With an emphasis on keeping track of time, responding to partner requests and learning how to work and bill effectively, the long term goals of learning how to develop client relationships takes an understandable back seat to other more pressing matters. And in some instances, if the associate is working for a very large firm, there is little likelihood that he or she will ever be a business originator. Large institutional client relationships are developed over years, and are not typically maintained by a single individual; they often become the client of the firm and their work is handled by a number of lawyers.
But if an attorney is working for a small or even mid-sized firm, their long term future will be significantly impacted by their ability to retain and eventually attract business. This is where partners can be helpful. Young attorneys often understand that the experience of a successful partner is based upon a certain personal style and long standing business relationships, and is unlikely to be their path. Therefore, having partners meet with associates and tell “war stories” about the ways in which they developed business may not have the desired effect on associates. If partners are to pass on their knowledge of client development it makes sense for it to be generalized to behaviors and activities that would make sense for any lawyer. Attorneys for whom these behaviors are second nature may find it even more difficult to share their wisdom with young lawyers who are just beginning to find their way in the profession. There is a need for fundamentals, and an understanding of the stylistic differences that exist between people marketing their practice and their firm.
What can a Partner or firm do?
Make Introductions
Many years ago I had a supervisor who took me everywhere. If he was attending an institutional event, he made sure that I was invited as one of his senior staff. I met all of the people that he felt that I should know, not only within the role of my position, but within the institution as a whole. Although I was flattered at the time, I didn’t realize until later what a terrific service he had done for me. Because he was making the introduction, I was greeted with interest by the person that I was meeting, and I had, at least temporarily by association, some of the credibility that he had earned over his career. The next steps were mine. I had to talk a bit about my role in the organization, how I worked with my supervisor, and try to engage the person I was meeting. That included getting a business card, and following up later on.
Young lawyers need to populate their Outlook contact managers early on with the people they meet, and learn to manage those contacts in ways that can foster relationship development in the future. The adage that you never know where a client may come from is true. The more contacts that you have and effectively maintain, the greater the likelihood that some of them will be transformed into clients some day.
Create a Budget and Direction
Many law firms encourage associates to market the firm by allocating a budget for client development. But often there is little to no direction about how the budget should be utilized. While associates may appreciate the freedom to take someone to dinner or to an event on the firm – without some direction the money may be ill spent, and the young lawyer may have little to show for it. Creating a list of ways that associates can use this budget may make more sense. Do they want to join a professional association, an industry group, attend a meeting focused on their client base, or make a commitment to a local organization on a regular basis? Repeated interest in an organization, attendance at meetings, and a long term commitment is part of what helps generate business. Although entertaining potential clients may be useful, at the early stages of an attorney’s career, he or she might better spend that allowance on becoming more linked with communities that can create business in the long term.
Encourage Community Involvement
Getting involved in the community is a great way for a young attorney to build potential client relationships. Joining non-profit boards is a way of giving to the community and getting to know a variety of people typically outside of your day to day contact group. It makes sense to pursue board opportunities based upon interest, and the subject need not be related to your practice area. Boards typically seek new members on a staggered year basis, which will give the board member an opportunity to meet additional new people over time. A commitment to the organization is a way of building credibility and of being able to offer expertise as needed. Board members and their contacts may become friends – or clients. Spending time in the non-profit community is another time commitment, and associates trying to make billable requirements may feel hard pressed to spend time doing something that does not contribute to reaching hour goals. It might make sense for firms to give some kind of credit to associates for time committed to the community, in a way similar to the way in which some firms record pro bono activities.
Good Client Service is Good Business
Just as you teach associates how to be responsive to partners and attentive to client matters, there is a crossover to how good client service is good business. As attorneys are aware, generating business can be far more time intensive and difficult than servicing existing clients. The habits of returning phone calls quickly, updating clients on on-going matters, and keeping partners informed of what may seem to be insignificant activities on a file are the kinds of things that help a firm maintain their business. Helping associates understand the links of their day to day behavior on the financial success of the firm (and ultimately their own future) just makes sense. But while lawyers may teach the importance of good habits in regard to clients, they may not always help associates understand the dollars and cents importance of such behavior.
In the long run, a lawyer’s flexibility is strongly tied to his or her client base. In addition it helps to understand the financial commitments necessary to run a business. Law firms that help their attorneys understand these principles will help them turn this knowledge into profits.
About the Author
Wendy L. Werner is the owner and principal of Werner Associates, a legal consulting and career coaching organization.