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August 06, 2007

Follow Up To " I'm a Solo Growing By Leaps and Bounds. Should I Hire An Associate?"

This post generated a lot of excellent commentary from talented lawyers and lawyers-turned-marketers and so I thought it was appropriate to make a separate blog post listing their commentary rather than have it buried in the comments section:  Here is the original post "I'm a Solo Growing By Leaps and Bounds.  Should I Hire an Associate?"

The latest comments are from Kimberlie Ryan, Ryan Law Firm, LLC, solo extraordinaire who practices in the arena of employment law; Allison Shields of Legal Ease catering primarily to those solo and small firm lawyers who are established but are now suffering from growing pains and in need of a business renovation, and Dustin Cole, author of Attorneys Master Class, helping practitioners break through their revenue ceiling.

Original Question:

I have been a solo practitioner since 2003. This year I have experienced a tremendous surge in referrals as well as an increase in my 'ideal clients.,  As a result I am consistently
inundated with more work than I find myself able to handle while still maintaining the level of excellent service I am known to provide. 

The hallmark of my success turns on quick turn-around times and rapid response to my clients' needs.

I know this is defined as a good problem to have. It appears I may need to obtain the services of another lawyer to assist me. I need someone who can cover routine motion hearings and can do high-caliber legal and research writing.

Should I hire an associate? The conventional wisdom from my peers is 'yes,'
that I would profit off of an associate, I would not be chained to my office and
my overall well-being would improve.

Will  I really be able to afford to pay an associate, can I really count on an associate to increase my firm's profits or will it be a net drain on profits?, what about providing benefits like health care, unemployment, worker's compensation and the like?

Answer: Kimberlie Ryan, Ryan Law Firm, LLC

Hi Susan - Love your blog. What an excellent discussion!  I second everything that has been said already and I have a few new comments from the perspective of an employment lawyer.  As a solo practitioner, I have worked with contract lawyers and I even hired an associate for a while.  I've found excellent results with both.  Currently, I'm back with contractors, and they are fantastic!  They're especially good for lawyers who want to keep virtual offices and have other attorneys  working with them remotely from their homes.  I've found new law graduates to be the best.  They are sharp, eager, and usually have not developed too many bad practice habits yet.  They do take a bit more mentoring, but that's one of the best parts!  They always surprise me with their acumen.

As an employment lawyer, here's a quick reminder that there are legal implications for either relationship you choose .  For example, beware of different tax treatment for employees and independent contractors, requirements for workers' compensation insurance coverage, and of course, anti-discrimination laws kick in for employees.
Make sure that you understand the type of working relationship you actually have if you bring other lawyers on in any capacity.  Essentially, the difference between an employee and an independent contractor boils down to the amount of control you have over their means, method, and tools of work.  I have devoted an entire chapter to this topic in my book Employment Law Guidebook:  For Colorado Business Owners and Human Resource Professionalshttp://www.lawyers.com/ryanfirm/articles.jsp   ( Note: while my book includes Colorado law, much of it is based on federal law and may still be a good tool for those of you in other states).
Since I can't put my whole book here, here are a few quick tips: 
1)  If you work with independent contract attorneys, be sure to have a written independent contractor agreement, both clarifying the terms of the relationship in case of IRS questions, and for the substantive scope of the work. 
2)  Have your contract attorney sign off on his or her ethical obligations to you and the clients.  I simply copied the relevant portions of the Rules of Professional Conduct into a form that I go over with the contract attorney to make sure we are all clear on our responsibilities, such as confidentiality of client matters, etc.   I have the contractor sign it, and I keep a copy in the contractor file.
3)  Best case scenario for preserving independent contractor status is to have a contractor who also works for other attorneys.  Get a list of your contractor's other clients, and keep a file of documents confirming the contractor status.
4.  If possible, make sure your independent contractor has insurance and put a copy of the policy in your file.
5.  Never refer to your independent contractor as an associate or employee - stick with attorney.
Simply calling someone an independent contractor does not make her one.  There can be dire consequences with the IRS or other agencies if you misclassify an employee as an independent contractor.   If you decide to work with a contract attorney, be sure to take all the steps necessary to protect yourself and to preserve the independent contractor status.

Answer:  Allison Shields, LegalEase, LLC

Susan - Thanks for opening up a great discussion on this topic. I, too, have heard this question (in various forms) from many attorneys whom I have worked with in my practice helping lawyers become more productive and profitable by examining the business, marketing, operations and client development aspects of their practices. Outsourcing is one great solution. It's a good way to test the waters to see whether you really need to hire a full time (or even part time) associate.

But there are other things to consider as well, before making the leap to hiring another attorney.  Technology is a great friend of the solo - it's one of the reasons the playing field is becoming much more level and solos are able to compete for business that only a few years ago they wouldn't have been able to even consider. Hiring a lawyer can be an expensive proposition, not just in terms of a salary and possible benefits, tax considerations, malpractice and the other issues raised in the post, but in training time, emotional investment, and other management issues which many attorneys fail to consider before hiring employees. In addition, the costs involved, both in time and money, for recruiting must be considered. And when hiring an attorney, there are even more factors that might come into play.

Before jumping to the conclusion that you need to hire another attorney, ask yourself the following questions: How much legal work is actually being performed during the day, and how much time is spent on other endeavors, particularly administrative and non-billable tasks? Are my processes and systems such that I am not 'reinventing the wheel' every time I create a document, write a letter, or perform a specific task within the practice? Am I re-using or modifying the work I've already done (whether legal work, forms, or business development) for other clients/matters, rather than starting from scratch each time? Are there billable tasks within the office that can be performed (either fully or partially) by someone other than an attorney? Do I have set procedures for how I perform specific tasks or handle certain types of matters within my practice? Is my practice structured in such a way that repetitive tasks are performed 'automatically' (by the use of technology or otherwise)? Do I have the people and management skills to be a boss and a leader? Do I have a vision for the future of my firm for my clients and my employees? Do I know how an associate would fit in to that vision? Am I making the best use of the available technology (hardware and software) at my disposal? Am I working with the clients and matters I most want to work with? Are my clients loyal clients who refer business to me and pay their bills in full and on time? Can I alter my fee structure or the fees themselves to bring in more revenue without hiring another lawyer? (In other words, can I continue to work at the same level but make more money?)

While this is by no means a comprehensive list, answering these questions will go a long way toward determining whether it's appropriate to hire an associate. The answers may reveal that you don't have enough work (or enough of the right kind of work) to delegate to another lawyer. They also might reveal that there are other tasks that you can delegate or outsource so that you can spend your time doing the tasks that you get paid for or that bring in business. This exercise can also help you determine whether your practice can handle an employee from a business and management perspective.

If you haven't determined the steps involved in particular tasks or the manner in which you prefer those tasks to be accomplished, if you don't have forms or procedures, if you don't bill regularly or don't have billing guidelines, etc., you're probably preventing yourself from maximizing the revenue from your own time, but you're also likely to have difficulty training an associate and help ing them to be productive and profitable. Likewise, if you can increase revenue by attracting a higher level of client, change your fee structure to eliminate or reduce administrative time for billing and collections, or raise your fees (which may eliminate some lower value clients, but free you up to perform higher value work), you may decide that hiring an associate just isn't necessary.

Finally, many solos are solos because they wanted to go their own way and didn't want to deal with the politics at a firm. Being a boss is a responsibility, and it takes more than just legal skill and available work to keep an associate happy and productive. It's a commitment, an additional responsibility and potentially an additional source of stress. Hiring an associate (or any employee, for that matter) is a business decision that should be made based on more than just the volume of legal work you're currently bringing into your practice.

Answer: Dustin Cole, Attorneys Master Class

I am always surprised that lawyers who get too busy move directly to the conclusion that they should duplicate themselves and hire an associate. They should first look at a simple concept called "leverage."

Building leverage means analyzing how you are spending your time and identifying what tasks -- and parts of tasks -- could be done by a person with a lower level of expertise, such as a (better) secretary or a paralegal. The fact is that many solo practitioners spend far too much time doing the firm "housekeeping" which keeps them from doing billable work. So the area of non-legal work, should be the first place to look. The more $9 per hour skill-level work you can move to another person means the lawyer has more time to do the higher-level legal work at, say, $250 per hour.

The same concept is true for legal work. The work doesn't all require the same level of legal expertise. In fact, a large precentage often requires only a fairly low level of skill. So the smart sole practitioner's approach to this issue should start with the question "how am I spending my time?" Followed by "what could be accomplished at a lower level, and do I have anyone at that level I can delegate it to?"

At this point we get into a morass of discussion about the frustration of hiring, managing and delegating -- which isn't really about that at all, but is really about the attorney's (usually nonexistent) business and people management skills. The bottom line is that few sole practices will ever reach the biggest bucks without a great support team in place. But that support team doesn't have to be attorneys.

Bottom line: Stop jumping to the "hire an attorney" conclusion, past the needed investigation into WHAT you are doing and how you are working. Step back and do your due diligence by examining the expertise level of the various kinds of work you do every day. You'll be surprised at what you discover.

Let's keep the discussion going.  If you have thoughts, ideas, experiences with this very common question please contribute.  We would love to hear your thoughts.

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» When Is It Time to Hire An Associate? from Legal Ease Blog
Susan Cartier Liebel has written a couple of posts in response to a solo lawyer struggling with the decision about whether to hire an associate. The first post, You Ask - I Answer - I'm a Solo Growing By Leaps [Read More]

Comments

Harry Styron

I went from being a solo to having four associates then back to no associates over a four-year period. My practice is primarily based on representing real estate developers in a boomtown. I have now one partner and have added one associate. Here are things that I learned in the often painful and expensive rise and fall:

1. My administrative systems were not organized well enough to make my associates comfortable. I was "too busy" to establish personnel policies, filing procedures, forms control, etc., in advance of hiring. I should have used consultants to assist with these things. The office manager that was to help me with these things was more of a financial controller than a practice manager.

2. I should not have hired additional associates without solving the problems with existing associates that were not performing well. By confronting the problems with the current associate, I might have better understood the extent to which I (personally or administratively) was causing or contributing to the associate's underperformance and unhappiness. The new associate would have started work in a better situation with happy colleagues. In a small firm, having several unhappy associates is a nightmare.

3. Because of my location (retirement area), it was difficult to recruit and retain young attorneys, so I hired as associates several 40-ish fixer-uppers, who were intelligent lawyers of good character who had never operated consistently at a high level, but who lived nearby. Needless to say, I couldn't fix them, though they all did some things well. When two or three lawyers in a six-lawyer firm are hitting on only three cylinders, it's financially dangerous. I was spending much of my time doing unbillable fence-mending with clients and redoing work. Everybody was stressed out.

4. At one low point, I hired a consultant who did a good job interviewing employees and explaining to me how some of my behavior patterns (and those of a few others) were making things much worse than they needed to be. She also made some helpful observations about the physical organization of the office.

5. I changed the incentive-based compensation formula that was causing a lot of my stress (some associates were making more than me, burning through retainers on easy cases, leaving me the gnarliest problems with unhappy clients and not much money to work with), which resulted in some departures.

6. I wish that I had spent more money on technology and training for me and non-lawyer staff before hiring associates. Better systems for HR,document production, conflicts checking, and file management, would have resulted in a more harmonious and profitable office.

7. My partner and I produce 60% of the revenue that we had with four associates. We're becoming much more profitable. We're turning away business that I would have assigned to associates.


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