Law Practice Management Tip of the Week

Retirement of partners poses three major questions in law firms today:
 
1. Should the firm have mandatory retirement?
 
2. What retirement benefit, if any, should the firm provide, and more important, will the benefit be funded?
 
3. How does the firm retina as much of the retiring partner’s “know how” as possible?
 
Mandatory Retirement
 
Many firms have a policy of mandatory retirement.  The reason that many other firms do not have  a policy is that they do not address the issue until one of their partners reaches retirement age.  This is the wrong time to deal with the matter.  Once a firm is faced with a specific situation, the decision becomes an emotional one rather than a business one.  The best time to deal with retirement is when all partners are still fairly young.  No firm that intends to institutionalize its being can do so without a stated retirement policy.
 
The advantage of a mandatory retirement policy is that the firm, rather than the individual, is in control of the matter.  While many partners who reach retirement age (usually sixty-five to seventy-two years of age) remain eminently qualified to practice, many do not.  A written policy allows the firm to protect itself by easing out partners who simply no longer should or want to be in practice.
 
To provide for an orderly retirement process for seniors, many firms provide for a transitional period before retirement (e.g., three to five years) in which the partner phases out of firm management and transitions clients to others in the firm.  During that time, the compensation of the retiring partner is reduced to reflect his or her changing role in the firm.
 
Many retired partners want to continue to be involved in the firm after their retirement.  An of counsel relationship permits this.  Each year the retired partner and the firm could negotiate a plan of contribution outlining how the retired partner plans to spend that year and how he or she will be paid for that contribution.  The retired partner can continue to transition client relationships, market the firm, serve as a teacher or consultant to young lawyers, and essentially spread the firm’s goodwill in the business and legal communities.
 
Retirement Benefits
 
Many law firms in the United States have partnership agreements that commit the firm to paying substantial retirement benefits to retiring partners.  That is, retiring partners are paid out of the firm’s future earnings.
 
A huge disadvantage to this approach is that the firm must remain economically viable for the retiring partners to receive their benefits.  Often the economic burden to the firm is so great that remaining partners are unwilling to continue to make payments.  In fact, war stories abound (and some litigation) about law firms that dissolved because of large unfunded benefits due to departed partners.
 
There are a limited number of options.  The partners could agree that they will “take home” less and thereby contribute to some type of retirement plan.  This type of “funded” approach is known as the “pay as you go method.”  Essentially, all partners contribute to their own retirement benefit.  Some lawyers object to this method because they feel that the firm should provide a benefit.  The fallacy to this argument is that the firm as it currently exists may not be around to provide the benefit, and then the retired partner will be left with no benefit.
 
The other option for a firm that does not fund retirement benefits is to have the partners agree that each individual partner will be responsible for his or her own retirement planning.  The biggest disadvantage to this method is that often the individuals do not provide for their retirement, so when the time comes they cannot “afford” to retire and must continue to work, even if their legal skills and judgment have deteriorated.  This presents a problem for the remaining partners, who must either force the senior out of the firm or face possible malpractice problems.
 
In any event, the best advise to any firm, particularly to one just being formed, is to avoid unfunded benefits of any kind at all costs.
 
Retaining a Senior’s Know-How

Too many firms have realized after the fact that when senior has retired from the firm, the firm has suffered more than expected because they did not plan for the senior’s retirement.  Senior partners are a major firm asset, often in more than one way:
 
1. They serve as firm leaders, often as the “glue” that binds a firm together.  This leadership can be a major firm strength and when it is no longer available, can have devastating results for the firm.  In this situation, a transition period allows the senior to “pass the mantle” to a partner who, with the right support, can gain the respect he or she will need to bring the firm forward.
 
2. They control major clients by virtue of their relationships with those clients that have evolved over many years.  A transition period, with a well-designed plan for each major client of that partner, may help the firm keep clients they might otherwise lose.  The plan would include the designation of the partner who will become the client manager; with a plan of action for how the designated partner will be phased in as the client manager.  Part of the plan might include a way of introducing more than one lawyer to the client to enhance the relationship.
 
3. They have stature in the business and legal community.  This is a more difficult role to transition and one that usually takes years, but, through a series of introductions in the right places, a senior can help ease the way for firm lawyers that follow his or her.
 
Regardless of what choices a law firm may make in the face of the issues discussed here, it is essential to the institution’s preservation that each issue be confronted and dealt with “up front” so that an issue’s irresolution shall not sow the seeds for later discontent and the possible destruction of the fragile fabric of the firm.

During the preceding "era of plenty," typified by record setting earnings and substantial distributable income to partners, law firms grew rapidly with modest concern given to  containing overhead.  Plainly stated, in most firms there was plenty of cash to go around and partners were satisfied with their firm's gross revenue, profit and their net income.  However, during the last twelve months the economic landscape has changed dramatically.  The financial picture for many law firms, especially those firms having a “transactional” practice, is different than a year ago.  Competition for the legal dollar is stronger.  The expansion resulting from the steady stream of premium fees for mergers and acquisitions and other profitable transactional deals have dried up.  Client billings are off, cash flow has slowed and profits are down.  In many firms, partner compensation has been relatively “flat”. The “extra distributions” that partners were accustomed to receiving over the last few years have not been made this year.

The "economic euphoria" resulting from clients’ demands has been replaced by concerns resulting from a contraction of new transactional business from existing and potential clients, over-staffing of professional and administrative personnel, higher overhead, excess office space, under-utilized associates and unprofitable partners.

This article describes several strategies that firms should consider to survive a downturn.

Develop a Short Term Plan

The complexities of life during a downturn cycle requires all law firms to engage in some type of strategic planning, at least for the next year or two year.  This kind of planning may be described as the process whereby a firm formulates its immediate goals and methods for achieving these objectives.  When properly conceived and implemented, this planning process will enable partners to reach a consensus about shared goals, identify qualitative and quantitative benchmarks and develop an action plan that includes timetables and lawyer accountability for performance.

1.  Survey Partners - The initial phase of this process calls for the managing partner or management/strategic planning committee, to survey all or a representative number of partners to obtain their perceptions about internal and external developments that will have an influence on the firm. 

The issues usually addressed during this  process include: (1) reassessing the firm’s objectives and current guiding principles, (2) partner/associate relationships, i.e., the ratio of associates to partners, classes of partners and partners and associates, criteria for admission to partnership, communications among and between partners and associates, etc., (3) partner satisfaction with gross revenue and net profit, individual net income, hourly and billing expectations, etc., (4) firm resources and capabilities, its perceived strengths and weaknesses, reputation and position in the marketplace and (5) the willingness and ability of attorneys to sell legal services and cultivate new prospects within the firm’s current and potential market.

2. Analyze the Firm's Competitive Position - This analysis should  highlight those internal and external factors which affect the firm’s competitive position. For example, the managing partner should focus on the firm's perceived strengths and weaknesses, its competitive advantages and disadvantages and anticipated changes in the partner complement as the result of retirement, withdrawal, etc., to determine the effects these changes will have on the existing and potential client base. Also, this analysis should assess the extent to which the present partner compensation plan encourages or discourages partners to perform those nonbillable activities that are required to be performed by the partners to achieve the firm's short-term objectives.  Any factors that will affect firm’s ability to attract and retain the required volume of profitable business, either favorably or unfavorably, must be considered.

3. Analyze the Firm’s Economic Position - The managing partner, assisted by the firm’s administrator should identify and analyze the following trends for at least the last  two or three years: fee revenue and expenses; gross fees per equity partner; gross fees per lawyer; expenses per lawyer; net income per partner; net income per lawyer; the aged inventory of unbilled time and accounts receivable; costs advanced; the number of billable and billed hours of partners, associates and paralegals; fee billing realization; fee collections realization; the average length of time from when billable time is recorded until the fees are collected, etc. Also, the analysis should include the fees collected from the firm’s top fifteen or twenty clients, by the nature of the work performed.

While the essential fact-gathering may be readily accomplished in-house, there are situations where the firm may be better served by electing to retain the services of outside consultant knowledgeable about law firm management and economics to assist in the overall strategic planning process.  For example, the firm's lawyers may be disgruntled as the direct result of management's lack of firm leadership or control over specific practice areas.  Perhaps the firm has expanded too rapidly without due regard of the market.  Maybe the firm has over-invested in lawyer and administrative personnel, technology or facilities. In such circumstances the partners may be more willing to discuss their views and grievances with an objective outsider who will retain the partners’ identity in confidence, rather than having a confrontation with members of firm management. The experienced law consultant can expedite the short-term planning process. Familiarity with the economics and dynamics of law practice assists the consultant with interpreting partners’ responses in view of the firm's financial and management information, procedures, economics and political trends.

4. Identify Objectives and Developing Strategies -  The information obtained from
partners during personal interviews and the analysis of firm's financial, management and client data bases should enable the managing partner to formulate plans and strategies for presentation to the partners in each of the key areas that were highlighted during the analysis. 

5. Increase Marketing Efforts -  A firm should not wait for an economic downturn
before 's organizing and implementing practice development activities. However, in anticipation of the downturn, a firm’s marketing activities should be intensified and coordinated by a partner who functions as a “marketing czar” or by a marketing committee, rather than implemented by partners in an ad hoc manner.  Partners should be accountable to the committee for their business development plans and efforts.  Personal marketing plans should be developed for those attorneys who have demonstrated skills or the potential to generate new clients or to proliferate work from existing clients.  Variable hourly budgets of time devoted to business development activities by these attorneys should be recommended.  Their billable and marketing goals must be adjusted accordingly. 

Selected partners and senior associates should be encouraged to become active in at least one professional organization or activity.  Others may be encouraged to seek and fulfill appropriate speaking and writing opportunities with professional and business forums.  Partners and associates should become actively involved in at least one civic, charitable or community activity.  Members of the marketing committee should be available to counsel lawyers in their selection of activities and proposed commitment of time.

The marketing committee should establish, as an objective, and implement, an organized program for client development. For example, one objective may be that one-third of the firm's clients will use at least two of the firm's services.  Selected partners should be designated to meet with clients having significant potential for additional profitable business, either through growth of their own operations or their ability to refer business.  Opportunities for cross-selling of legal services to clients should be pursued in order to further "bond" the client to the firm.  To accomplish this, partners must invest their time to understand the client's business as well as their legal needs.  Partners must review with appropriate lawyers what is involved in cross-selling their legal services.  Introductions of appropriate client executives to appropriate lawyers should be arranged.  Partners should meet with their clients periodically to determine their legal needs.  Partners should survey their clients to measure client perceptions of the firm, determine the client's expansion or contraction in particular areas of work, specify work in practice areas needed to be performed by the client and determine other areas of legal expertise the client might use if the firm had the expertise.

6. Commit Partner Time to Marketing Efforts -  Much of the marketingwork cannot be done on the partner's own time.  The firm must realize that marketing time is as important as fee producing time.  This means that a firm must recognize that an effective marketing program may produce fewer individual billable hours, although it will increase the firm's total billable hours, fee income and profitability. It has been the author’s experience that notwithstanding their good intentions, the marketing efforts of may partners are never realized because the firm’s compensation system. Those firms whose compensation systems overemphasize the importance of increasing revenue from personal partner production, rather than  increasing  revenue from the generation of profitable work by partners who delegate thios work to others within the firm who are competent to perform same will find a diminution in the amount and quality of their marketing activities. Therefore, firms must be selective in determining which attorneys are best able to carry a heavier workload of billable time and those attorneys who may be most productive by devoting a portion of their time to effective marketing efforts.  Hand-in-glove with this philosophy, is the notion of partner accountability to the marketing committee for time devoted to marketing activities.

7. Manage the Firm's Culture -  A major component of the planning process is
the ability of the managing partner or the management committee to "manage" the firm's culture to satisfy the partners' expectations and the firm's needs and priorities.  If, during the initial survey process, partners indicate that they want the firm to become larger and more profitable, they must be willing to undertake activities that will influence the future of the firm to accomplish their expectations.  Specific activities to be performed by individual or groups of partners must be recommended and monitored by the management committee.  Typically, it is not easy to change a firm's culture.  However, partners may be more willing to modify established behavior patterns when a firm is in a crisis situation. 

8. Assess the Partner Compensation Plan - As noted above, partner compensation
plans may have to modified to reward certain partners for their total contribution to the firm and to encourage them to do the things they do best, in ways they can do their best and that are in the firm's immediate and long-term interest.  If a firm over-emphasizes the billable hours concept, then partners may eschew marketing or other management activities in order to record a higher number of billable hours.  Partners' talents should be recognized and a well conceived and implemented compensation plan will be a positive incentive to accomplish the firm's objectives.

9.  Clean-Up of Dated Unbilled Time and Accounts Receivable -  The firm may
consider providing incentives to clients, such as a one-time 25 percent discount credit for cleaning-up of accounts receivable and unbilled time that are more than 180 days old.  This collection may provide a cash flow stream of operating capital that may not otherwise have been available.  To the extent that this plan be implemented, it is imperative that these monies be utilized to fund certain of the firm strategic planning activities and/or operations, not automatically distributed to the partners.  This extraordinary action plan should be undertaken by the individual lawyers who provided the services, with the approval of the managing partner or the management committee.

10.  Downsize -  A contingency plan for survival should include a program for down-sizing the professional and administrative staffs.  This program may be implemented over a three to nine month period.  Oftentimes, firms are reluctant to terminate employees, especially at the professional level, even if that employee has not been productive or if there is insufficient client work.  The timing of lay-offs is frequently as important as the decision to terminate individuals.  The managing partner and management committee must consider this step carefully and weigh the pros and cons of their decision.  Consideration must be given to minimizing the loss of desirable and potentially valuable employees, maintaining an esprit de corp among remaining personnel, keeping "street talk" favorable, managing public relations and explaining the retrenchment strategy to the remaining professional and administrative staff.

11. Implement the Plan -  Implementing the plan is frequently the most difficult
part of the process.  It is recommended that the plan be implemented through the firm's existing organizational structure, i.e., the managing partner, the management committee, the strategic planning committee, heads of substantive practice areas, etc. Individual partners should be assigned responsibility and held accountable for the satisfactory implementation of each phase of the plan in accordance with an agreed upon timetable.  Partners responsible for the implementation phase should report to the managing partner, the management committee or the strategic planning committee or other group designated to oversee the planning process.  Problems and/or progress should be reviewed on a routine basis.  Ongoing assessments should be made to determine the most appropriate strategy to be followed.  Status reports should be provided to the other partners on progress and/or problems in each phase of the plan in order to keep them apprised about the planning activities.

The implementation phase must be monitored to assess the effectiveness of the plan and to recommend that corrective action be taken, as required.

Conclusion

It has been said that during periods of prosperity law firms are successful in spite of the management abilities of the partners.  However, during a recession, good lawyering is not enough.  Business skills and acumen are essential.  Sound management practices are required to manage the firm's resources, ensure adequate cash flow and develop and implement the marketing and planning process.  As difficult as an economic downturn may be for most firms, the managing partners and management committees in the better managed firms are able to to recognize opportunities, implement action plans and assume risks that will provide their lawyers with the framework for building stronger and more successful law firms.

By Joel A. Rose

At meetings and retreats, law firm partners openly discuss the implications of the continued recession that has resulted in fewer clients, lower revenue, reduced profits, and, ultimately, the need for fewer attorneys at the partner and associate levels. Before taking drastic steps, however, partners and their managing-partner colleagues should consider implementing strategies such as those enumerated below that can maintain cash flow and improve margins:

(1) Engagement letters. Any program addressing cash flow and margins should begin with adherence to engagement-letter protocols. An engagement letter should define the firm’s specific work to be performed for the client, the billing and payment policy for that client matter, and the firm’s response if the client does not comply with the agreed-upon billing and collection policy.

(2) Retainers, advance fees, and security deposits. As a prerequisite to accepting representation, attorneys should require retainers from new clients. Also, encourage clients to agree to pay "evergreen retainers." This type of retainer allows the firm to bill against the retainer. When the balance of the retainer is reduced to a specific minimum amount, a bill is sent to the client to replenish the retainer balance.

It also should be mandatory for attorneys to obtain an advance fee or a security deposit from new clients. The advance fee payment, like a retainer, constitutes funds paid in advance for some or all of the work the attorney is expected to perform on the client’s behalf. The security deposit is a sum of money that will be held by the lawyer to secure payment of fees for future services that the attorneys are expected to render.

(3) Billing and collections. Generally, clients tend to pay their bills in relation to the promptness with which they are billed once the work is done. Since some time usually elapses after a client matter is completed and the bill is sent, the sooner a bill is mailed, the sooner a firm is likely to be paid. In an attempt to maintain a steadier flow of incoming cash, consider shifting to a continuous billing cycle throughout the month rather than waiting until the end of the monthly billing period to submit bills. To support this practice, the partner responsible for billing the matter should ensure that all lawyer time and disbursements are submitted promptly upon conclusion of the matter so that a bill can be prepared.

The shortening of payment cycles also has given added impetus to this procedure. If the firm completes work for a client at the beginning of the month and waits until the end of that month to submit the bill, payment may not be received until 60 days to 90 days after the billing date, thus lengthening the cycle to 120 days or more. If the client had been billed immediately after the work was performed, however, the payment might be received that much sooner. More frequent billing during the month will help the firm to avert a cash crisis and avoid the cost of borrowing money.

(4) Clients pay costs directly. Firms should encourage clients to pay costs directly. Rather than permitting "use" of the firm’s money, the clients should be billed for travel, litigation support costs, expert witness fees, and other major out-of-pocket expenses as they are incurred. Do not nickel-and-dime. Even clients who insist on being billed annually or at the end of a case should be willing to pay major-cost items advanced by the firm at regular intervals, at least quarterly, or when they exceed a reasonable amount.

(5) Peer pressure for unbilled time and receivables. Some firms are utilizing peer pressure to motivate partners who are delinquent in billing clients. These firms circulate a monthly report on late billers. The value of this practice is to apply some pressure to delinquent billers to be accountable to their partners for their "inaction." This method strives to encourage more timely billing and stresses that the behavior of one partner directly affects the well-being of every other partner in the firm. Some smaller and midsize firms have instituted monthly billing meetings to ensure that bills are prepared and reviewed in a timely and systematic manner.

A number of law firms reportedly are penalizing partners who have not satisfied their billing obligations. The firms acknowledge that although the partners grumble about this, the results have been effective. To further reinforce the importance of the billing process, a few firms actually have computed the interest that would be due if the firm were forced to utilize its line of credit to pay operating expenses and the partners’ salaries. The delinquent partners who do not bill in a timely manner must be made aware of the fact that when the firm’s source of cash is not tied up in unbilled time, distributions can be made on a regular basis.

(6) Write-offs/write-downs. Another method of expediting the billing process that is used by many firms is generally referred to as the "15 percent rule." This rule holds that the billing attorney may write-up or write-down a bill by up to 15 percent of the total fees independently without obligation to review the matter with any other partner. However, if the amount of the fee write-up or write-down is in excess of 15 percent, the billing partner must obtain the concurrence of the head of the practice area and managing or financial partner before submitting a bill to the client.

(7) Educate partners about firm economics. Many firms have authorized their administrators to educate partners about the financial realities of operating a law firm and the importance of billings and collections. The effort is meant to ensure that partners understand the necessity to bill and collect for work performed. In this manner, the partners are made to realize that since working capital is required to carry unbilled time, less unbilled time will result in fewer demands on the firm for cash.

The effort to regulate cash flow does not end with the billing of time and costs. To facilitate collections, most firms have developed a program that includes centralizing control over collections with an individual lawyer, a committee, or the firm’s administrator. When lawyers have to justify delays in billing or lack of follow-up on the collection of receivables to a designated individual or group, this creates a greater incentive for the billing lawyer to initiate the billing procedure and become more active in the collection process.

(8) Creditworthiness of clients. To gain better control over collections, more firms are screening incoming matters by evaluating potential clients’ creditworthiness before agreeing to commit the firm’s resources to their representation. One method of testing the client’s ability to pay is to request an initial retainer at the inception of the matter. Furthermore, an increasing number of firms have standardized policies concerning retainers and deposits. Arranging a monthly retainer billing schedule, for example, may enable the firm to regulate its cash flow.

Some firms have attempted to implement a program of charging clients interest for late payment of bills. However, more firms avoid this practice in favor of applying pressure on the billing attorney to determine the proper type of follow-up action that may be required to collect the receivable. In some situations, a reminder statement may be sufficient. In other cases, a telephone call from the billing partner may be necessary, and as a last resort, a personal visit may be in order.

(9) Purchases and payables. Periodically, every law firm administrator should review the cost of office supplies and related items to ensure that the firm is paying the lowest price available for the quality supplies, materials, and equipment required to operate the firm effectively. This will involve an ongoing comparison of vendors’ and suppliers’ rates and special offerings. Also review the terms of purchase orders and contracts in order to use the maximum time allowed before actual payment of bills. In today’s competitive environment, law firms should negotiate terms for payment to encourage lower prices, discounts, or extended payment schedules without incurring penalties or late charges.

(10) Cash management. Encourage all partners to promptly submit any checks they receive to the accounting department for deposit. In most firms, this is accomplished by centralizing the mail receiving and opening process so that all checks routinely are forwarded directly to the accounting department and the cover letter that may accompany the payment is routed to the billing lawyer. In order for the program to work effectively, the individual who opens the mail must be instructed to process the mail and checks accordingly.

The necessity for more stringent management of cash also has prompted firms to review their procedures concerning lawyer expense accounts. To expedite the billing of clients for costs advanced to attorneys for expenses, firms are establishing tighter controls over the blank checks once given to partners in advance of trips and other activities. As an added measure, most firms request that credit cards be issued in the partner’s name rather than the firm name.
This practice ensures that partners will submit their requests for reimbursement when they return from trips instead of waiting for the credit card company to bill the firm. This also places the burden of setting the billing process in action on the lawyer rather than the firm. Once the costs are routed to the bookkeeper or accounting department, a bill can be prepared and sent to the client in a timely manner so that the firm does not carry costs for an extended period of time.

(11) Establishing a capital reserve. Since the financial position of a law firm fluctuates in response to a variety of factors not necessarily within the firm’s control, such as general economic conditions and a client’s ability to pay bills promptly, many more firms have established the practice of maintaining a capital reserve. A reserve of working capital will enable the firm to maintain a reasonable cash position to accommodate operating expenses without resorting to the line of credit when receipts are poor but the firm’s financial obligations must be met.

Depending on the firm’s areas of practice and its collection policies, the general rule is to establish a cash reserve that is equivalent to one month to three months of operating expenses. In addition to maintaining a capital reserve, it is sound financial management to routinely set aside funds for specific purposes.

Monitoring the firm’s requirements for both present and future cash outlays will enable it to avoid getting caught short, which invariably results in dependence upon the line of credit and generates still more costs. Prudent cash management calls for the line of credit to be viewed as the line of last resort. Undue reliance upon the credit line can set in motion yet another drain on the firm’s available cash. Maintaining an adequate cash flow requires balancing the firm’s demands upon its reserves.

Strong Hands-on Leadership is Needed During Troubled Times
by Joel A. Rose

A financially and professionally successful law firm does not simply evolve. It must be built in an orderly and systematic manner. The values important to a firm have to be identified, defined, organized and centrally placed. The responsibility for achieving these goals must be keyed to an organizational factor. Whether this is a committee or an individual, ultimately someone must be responsible.

The point to be emphasized is that any partnership, no matter the size, needs leadership. Good law firm management cannot be achieved until all the partners agree to subordinate some degree of independence to a managing partner or an executive managing committee. The partners must strike a balance between their rights as owners and their responsibilities as citizens of the firm. They must relinquish some personal prerogatives in order to achieve the overall results that they would not be able to attain on their own.

In theory, all partners are created equal. By dint of partnership status they are accorded the same rights and privileges. As many firms discover, though, this is not the case in practice. Invariably, each partner has his or her own idea about how to perform the job, and partners exercise their authority accordingly.

If the firm is to establish a form of governance that will satisfy all of its members, the attorneys must first acknowledge the need for leadership. The designated leader, whether an individual or a management or executive committee, will not succeed until all attorneys in the firm recognize that the impetus for successful management is derived from the willingness of all firm members to be governed. The partners must also recognize that managing a firm, either as the managing partner or a member of a committee, is just as important and as difficult as performing client work.

In some firms, the leadership role is assumed easily and naturally, because the individual is either a founding partner or controls a significant client base. In firms in which the partners are relatively young and inexperienced, the process of "natural selection," as it were, may be somewhat more difficult, if not virtually impossible. In situations in which no partner surfaces as a natural leader or no one wants the job, the firm must take aggressive action if it wishes to grow and satisfy the professional, economic and personal objectives of its members.

Leadership Decisions

In any case, the firm must make some hard decisions about the kind of leadership that is required and what the members of willing to live with. Should the general partnership elect a managing partner? Should this individual be appointed by the management committee?

Sometimes the size of the firm will preclude this dilemma. The smaller firm is in a position to establish a democratic form of governance that includes all the partners in a leadership role. If this is not practical, the partners face a difficult choice. They risk setting up two power centers if the general partnership elects both the management committee and the managing partner. This will create great potential for dissension and divisiveness. To avoid this debacle, selection of the managing partner by the management committee is the preferable course of action.

What kind of person makes a good managing partner? Generally, lawyers are not recruited to a law firm on the basis of their interest or skills in management. They are rarely trained by the firm in management skills. Consequently, lawyers' skills and levels of interest in management are greatly varied.

Any management committee will include some attorneys who are good managers and some who are not. This should not be viewed as an obstacle. Management skills are not necessarily the only factors that qualify an attorney to serve on a management committee. It may be equally important to provide equitable representation on the committee to each of the groups of lawyers that constitute the law firm.

The requisites for leadership are, in this day and age, well known. The leader must garner respect and support, have clout and wield it when necessary. The leader's skills must combine judgment, timing and vision.

The managing partner must keep the objectives of the firm in proper perspective. The managing partner must be able to rise above the "self" and understand that the good of the firm must come first. The managing partner must be able to make decisions and have them stick. Perhaps most important, the managing partner must want to manage the firm.

Many partners want a great deal of "say" in firm operations, but stop short of following up on their advice or opinions with recognizable action. Such "management by debate" leads many management committees down a blind alley of endless discussions and meetings. It can be generally agreed that the members of the management committee and the managing partner, as lawyers, want primarily to practice law. The amount of time available for management is limited and must be used wisely.

Collaboration is the best way to generate ideas and options for managing the firm. In the most successful firms, much gets done by teams of partners pulling together. The firm, not the leader, becomes the star; the leader serves primarily as the one who articulates the firm's goals and plans for accomplishing its objectives.

There are some management functions, however, that should be performed by the management committee or the managing partner and should not be delegated. There are other tasks that may be performed by either the committee or the partner, but also may be performed by individual members of the management committee or other lawyers in the firm. The managing partner and the committee should be charged with those functions that require their specific talents and energy. In placing responsibility for other tasks, it is important to make certain that the management committee and the managing partner have the time to perform the functions that only they can perform.

In assessing his or her function, the managing partner should realize that attorneys' expectations regarding the practice of law may well be different from the expectations that attorneys held ten years ago. These expectations may have changed in regard to hours of work, specialization, income, risk, independence and ethics. Attorneys have a greater desire to know the reasons behind decisions and to participate in decision-making.

The managing partner might consider how the social, educational and economic backgrounds of the new crop of attorneys have changed, and how these changes may be reflected in their attitudes, needs and expectations. Ultimately, these changes will be reflected in the firm's recruiting activities, turnover, work product and fields of specialization.

In the final analysis, it is the work that binds and unifies the various components of the firm - that is, the attorneys. The prudent managing partner will recognize the need to chart a course that mediates between the requirements of the practice of law and the needs of those who perform the work.