Group Practice Organization

Group Practice Organization

In small firms, informality is often the rule. The partners may make a series of decisions regarding many aspects of their practice without a great deal of overall planning. There are few employees, hence, personnel policies may be less formal, within legal constraints. Toward clients, there is a close relationship that may simplify billing and general client relations. Because of the small size of the organization, the partners may know their financial situation quite well without formal reports or much discussion. Firm meetings may be casually held at breakfast or lunch. Often all of the partners, and sometimes the associates, participate actively in most management questions, and may do it quite efficiently.
 
This method of operation may be called the committee of the whole style of management. Within the committee of the whole, each partner often knows the limits of his/her authority, despite the informal structure. For example, partners may know that they can order furniture for their offices on their own initiative, but that they must agree on the purchase of furniture to be ordered for jointly used space such as the conference rooms, or before changing from one type of equipment to another.
 
This type of informality becomes increasingly more difficult and complex as a firm grows beyond the three-or-four lawyer stage. Communication becomes difficult and the amount of lawyer time involved in discussion becomes costly, particularly if unfocused. Effective management requires the delegation of authority and responsibility. As a generalization, those firms in which a large number of partners remain fiercely independent also remain largely unmanaged. Unmanaged firms tend to be ineffective, expensive for their clients, and less financially rewarding for the partners.
 
Aside from the preceding sole practitioner and office sharing structures, the internal structure of a more formal group practice may be divided into four distinct types with many minor variations in each. These may be classified as the "town meeting democracy," the strong senior partner type, the committee system, and the modified corporate structure.
 
The town meeting democracy involves management by a committee of the whole. In the strong senior partner type of organization, all or most of the decisions may be made by a single individual. Under the committee system, most of the partners may consider items of routine business as members of committees with assigned areas of administration and, generally speaking, all partners are involved in final decisions at a policy level. Finally, in the modified corporate type of structure, there is often a clear division between basic policy reserved to the partnership, implementation of basic policy delegated to a managing committee, and daily administration delegated to a specific partner or partners or to a business manager.

[2] Town Meeting Democracy
 
In a town meeting democracy, decisions, whether strategic or trivial, are debated and voted on by all owners or all lawyers, or decided by consensus. Town meeting democracies are characterized by a slow decision-making process, frequent analysis/paralysis, painstaking consensus building, factionalization, and occasionally, a requirement for unanimous decision making. Except in very small firms, town meeting democracies often run into problems because at best they are inefficient and at worst paralyzed. Nevertheless, many law firms go through a short or extended phase, sometimes as a reaction to an unpleasant management experience or event. Other times, this style may be brought about by a lack of trust among the partners, or a highly autonomous group of personalities.

[3] Firms With a Strong Senior Partner

[a] Origins and Issues
 
Quite often, a law firm will evolve through a number of the foregoing organizational and management modes as it matures. Most larger firms had their start in one of three ways:

  1. A capable sole practitioner added associates who later became partners;
  2. A group of lawyers joined to form a new firm; or
  3. A group broke away from an existing firm to form a new entity.

The first situation in particular may give rise to the strong senior partner form of organization. The former sole proprietor, turned senior partner, may for years be the primary business generating force of the firm. He/she may unconsciously regard other partners as mere employees and retain all basic authority.
 
Many small firms, and a few very large ones, prosper under strong, authoritarian leadership. The most successful strong senior partners, however, temper their authority with extensive advance consultation with other partners. Where the senior partner is wise and concerned about the survival of the firm for future generations of owners, that partner may gradually delegate a number of management functions to younger partners while retaining ultimate authority for major decisions. Other strong senior partners have been known to abdicate strong authority altogether and to subject themselves to the decision-making authority of the group. Still other senior partners retain and may even increase their authority until the day they die, refusing any meaningful sharing of authority with others. These firms often become the training ground for other growing legal organizations.
 
Successful strong senior partners are rare. They are individuals who not only command respect without demanding it, but also who can successfully delegate day-to-day decisions to others while retaining meaningful control themselves. Like any good politician, they sell an idea to all of the key persons involved before they announce a decision. Above all, they maintain a reputation for fairness and accessibility.
 
The most important danger in the strong senior partner style of management is the void created when the senior partner retires from office, for whatever cause. A period of "drift" often follows because no leadership succession is trained or recognized by others in the firm. Sometimes a few of the remaining partners will campaign to become the authority figure without, however, having the advantage of the retiree's experience or status.
 
In many firms an abdication of management develops, since none of the partners desires to reduce his/her work as a lawyer to assume the unknown problems of management. In one example, such management drift developed in a middle-sized firm and lasted for three years, during which time the firm's economic fortunes steadily declined. The decline was not caused by client losses, but simply by lack of management and coordination. A move to the corporate form of practice forced this firm to examine its structure and created for it a new style of management which enabled it to recover.
 
A less common, but even more dangerous possibility inherent in the authoritarian leadership style of management is the mental disability of the leader. Declining faculties may come about gradually, because of age or for other reasons, and the afflicted individual may be unable to recognize his/her own failing competency. Because of the gradual nature of such afflictions, much damage can occur before other partners make a determined stand. Even then, depending on the terms of the partnership agreement, a firm may be torn asunder before a change in management can be brought about.

[b] Examples
 
One firm, dominant in its mid-sized community, had been founded by *** Jeppson. As a member of an old and well-known local family, he had obtained the largest local bank as a client. He began adding other lawyers to his firm, but retained complete control over the clients and the firm for 30 years. By that time, *** Jeppson was coming to the point in life where longer vacations and shorter hours were beginning to look attractive. His firm numbered 14 lawyers plus a few paralegals, and he decided that it was time for a change. He engaged a consultant to examine the management structure and organization of the firm.
 
The study revealed that Mr. Jeppson had begun to retreat from making management decisions during the previous few years, but that he had used his status to prevent others in the firm from assuming the authority he had begun to abdicate. There were more symptoms:

  1. Turnover was heavy among associates;
  2. Partners worked more hours than associates;
  3. Cash flow was irregular and uncoordinated;
  4. Little attention had been given to improvement of systems or adoption of modern techniques; and
  5. Estimated billable hours worked and the actual billings were divergent.

The consultants convinced Mr. Jeppson that there were other partners in the firm who could learn to manage its day-to-day affairs. He was promoted to a less arduous responsibility as head of an executive committee, with important responsibilities in client development and profit distribution. Day-to-day management was entrusted to a group of middle-aged and younger partners, who divided the functions of general management, finance, and lawyer personnel development.
 
In another assignment, a large Western firm was headed by Colonel Rare, a strong senior partner. The firm's extensive and lucrative probate practice was, indeed, of the Colonel's making. At a healthy 80 years old, he was still managing every one of the 25 other lawyers of the firm. Of these lawyers, 17 reported directly to Colonel Rare for assignments and supervision. The office manager also reported to him, and had little independent authority. Despite his years, which were belied by his vigor, he personally maintained the principal client relationships of the firm and managed to perform a considerable amount of legal work. It was a situation which required early change if a disaster was to be avoided.
 
The consultants sought to identify among the other lawyers one or more individuals who were interested and capable of assuming a leadership role in the firm, but found none. Colonel Rare had inadvertently ensured that such a lawyer did not stay with the firm. His reluctance to share any aspect of management with others had precluded potential successors from remaining. The eventual results were predictable. Following Colonel Rare's sudden death at the age of 82, the firm drifted along for a number of years, losing clients to more vigorous competitors. Eventually, a merger with a smaller, better organized group of lawyers saved what remained of a lucrative practice.
 
In another situation, the retirement of a strong senior partner had a happier outcome. This individual, although he remained the ultimate authority of his firm until his incapacity, had been forward-looking enough to begin training younger partners in the management of the firm some years before. The creation of an executive committee and the spreading of responsibility for daily management among a group of partners had prepared the firm for his retirement.

[c] Effective Direction
 
The strong senior partner method of management may be very effective when the senior partner is a capable manager, attuned to the needs of the organization and its clients. It can create a very poor working environment when the senior partner is less capable, especially if the problems of age and senility begin to affect the decision-making process. The basic danger of this management style, therefore, is that the individual who heads the firm, and may totally control it, reports to no higher authority, so that what begins as a benign kingdom may end as a mad dictatorship.
 
The strong senior partner method of management has served many firms well. The strong senior partner who is successful in directing a firm generally follows the precepts below.

  1. Consults extensively with other partners before making important decisions, although the consultations may be informal.
  2. Delegates some aspects of management to other partners, to associates, and to an administrative force, retaining only the ultimate policy-making authority.
  3. Accepts the responsibility for management failures rather than parceling out the blame to others.
  4. Uses the services of experts to aid him/her in making wise decisions.
  5. Introduces the partners to clients, and shifts client responsibility to younger shoulders as much as he/she can.
  6. Gives sufficient time to the job of management.

[4] The Committee System

[a] General Organization
 
A number of firms, including some large ones rely on a committee structure for the general management of the firm. The committees may be augmented with an office administrator, who may help in the coordination of committees. In some firms, though not generally, associates may serve on certain committees.
 
Typically, the committees may have responsibilities for such assignments as:

  1. Secretarial and other support personnel;
  2. Associate recruiting and training;
  3. Finance and accounting;
  4. Office space, including design and furnishing;
  5. Technology;
  6. Library;
  7. Community relations and bar associations;
  8. Partnership matters;
  9. Systems and procedures; and
  10. Marketing.

In most committee structures, terms of committee membership are for limited periods, allowing a great many partners to be involved in the management of the firm. The Partnership Committee (Senior Partners' Committee, Executive Committee, etc.) or a managing partner may be responsible for coordinating all of the committees, and ensuring that they function.
 
There are many potential problems with this type of structure. Closely related committees may duplicate efforts and, perhaps, come into conflict. For example, the library is evolving into a digitized, technology accessed resource, inviting jurisdictional conflict between the Library Committee and the Technology Committee. Equally as bad, some committees may not function at all, creating a vacuum. Scheduling a multiplicity of meetings, plus attendance requires a great deal of professional and staff time, often costly out of proportion to the matters under discussion.
 
Decisions may be very difficult to reach. While the Library and the Technology Committees debate, as in the foregoing illustration, library users might work under adverse conditions. The cost of decision making might be more than the cost of the decision itself. The hiring of a promising associate could be delayed too long, making the decision academic once the potential employee had accepted other work.
 
Another problem with governance by committees in law firms is that committees tend to proliferate and the phrase "let's form a committee" tends to be viewed as an end in itself, rather than a means to an end. One firm of six lawyers was governed by seven committees! More typically, as we review the committees in many medium and larger firms in the course of consulting projects, we will find many committees that have ceased to function and some may never have met at all.
 
A final limitation on the committee system can be summarized: committees don't implement--individuals do. To be effective, committees' decisions need to be clearly documented and framed for implementation, with an individual (possibly a committee chair) placed in charge of seeing that the process is completed or the activity is performed.
 
As an evolutionary step in the development of law firms, the committee system has, at times, been a desirable necessity. This is especially true when a firm has been dominated by a strong senior partner who retires or dies. In this situation, the remaining partners, now on their own, often have not established secondary leadership patterns, and the result is committee management. The sharing of responsibility through committee participation may permit partners to experiment with management and may bring to the front one or two naturally talented managers on whom the other partners can rely later. Similarly, a committee structure may be an evolutionary step for a town meeting democratic law firm moving toward (at least slightly) greater efficiency in decision making and accountability for implementation.
 
A committee structure requires a central coordinating function--perhaps a single managing partner--an executive committee composed of some or all of the committee chairs, or a committee of senior partners who are not committee chairs. Larger firms with this structure, generally, have an office manager or administrator. The committee structure is, however, a difficult environment for an office administrator's function. Generally, an administrator's areas of jurisdiction will tend to overlap those of many of the committees, so that he/she will report to more than the single individual required by good management practice. He/She may find that some committee chairpersons are capable and interested and that others are disinterested and weak. In this situation, an administrator may withdraw into a single function, such as accounting or the management of secretarial personnel; he/she may become less than totally effective.

[b] Case in Point

One firm with more than 100 lawyers describes its organization as follows:

The firm annually elects an Administrative Committee consisting of a chairperson, five department heads, and a number of rotating members.

The number of rotating members of the Administrative Committee is determined from year-to-year but, in recent years, has been five. The chairperson and department heads may, and normally do, succeed themselves. The rotating members may not, but they are eligible for re-election after the lapse of one-year.

The Administrative Committee annually designates several standing committees which have responsibility for decisions and recommendations in certain areas, such as lawyer hiring, lawyer assignment and training, non-lawyer personnel, finance and accounting, and the development and use of office facilities, and infrastructure. From time-to-time, as required, ad hoc committees are established. Whenever it is appropriate, associates are appointed to membership on these committees. For example, the Lawyer Hiring Committee includes associates, and some of these may be lawyers with only a few years experience. That committee determines which law students shall receive offers of permanent or summer employment, subject to consultation with the Administrative Committee. In the appointment of any standing committee, consideration is given both to the importance of continuity of experience and to the desire for involving qualified and interested partners and associates in the administration of the firm.

With respect to certain fundamental matters of firm policy, the authority is totally reserved by the firm in the sense that the Administrative Committee is not expected to, and does not, undertake to initiate recommendations. These are the matters of admissions to partnership and the determination of the relative profit percentages of the percentage partners. In other areas of fundamental importance, the firm must give express approval to the action to be taken. These areas are defined generally or specifically from time-to-time as questions are presented.

To the extent that they are expressly defined, they are spelled out in the manual distributed to all lawyers or in the minutes of firm and Administrative Committee meetings, which are regularly kept and reported to all partners.

Proposals for admission to partnership originate in firm meetings, following the annual firm evaluation of all associates.

Percentage participation is reviewed every three years. The recommendations on that subject are made by a "Point Committee" elected by the firm. The chairperson of the Administrative Committee and the department heads are not entitled to membership on that Committee by reason of holding those offices, but normally are among those elected. The number of members of the Point Committee is determined at the time of the election. It usually has included ten or 12 partners. Meetings of that Committee produce a recommendation as to the distribution among individual partners of the profits of the firm for the next three years. These recommendations are "published" with an opportunity for any partner to question them, and finally are approved or may be modified by the firm as a whole.

[5] The Modified Corporate Form
 
The modified corporate form of law firm organization emulates the common form of business organization familiar to many practicing lawyers.
 
The shareholders' and directors' functions may be combined or shared by the partnership in full meeting, and a committee of partners designated as an Executive Committee, or a Management Committee. These two entities, the partnership in joint session and the Executive Committee, apportion between them the basic policy-making powers of the firm. This includes such matters as:

  1. The admission or expulsion of partners;
  2. The merger of practices;
  3. The compensation of partners;
  4. Major expenditures of funds or allocations of resources; and
  5. Similar basic matters of the firm's policies.

Day-to-day business management is generally left to one or a few partners who correspond to corporate officers. These may include an individual designated as the managing partner who may operate at the same or at a higher level than other partners, and individuals with specific responsibilities for such matters as finance, library, associates, and the like. The precise division of functions and number of persons involved is dependent, of course, upon the size and needs of the operation and the people available.
 
An administrative manager may report, in turn, to the managing partner, or he/she may report directly to the Executive Committee.
 
The variations of this plan are many and depend greatly upon the number of lawyers, whether the firm has one or more offices, whether the firm is highly specialized or functions in many legal fields, and the like. One common variation is for the technology function to report to the administrator on at least a matrix basis, or to have the administrator serve on the technology committee.
 
To augment this general management structure, a firm will have a practice management structure for the performance of legal work. This co-exists with the general management structure and is embodied, in summary, by the boxes entitled: "professional personnel committee," "operating legal departments," and "lawyers." In large firms, a departmentalized form is common. Departments may be organized along the lines of legal specialization or they may be organized around the work of specific clients. In some firms, both types of departments co-exist.
 
In small firms, on the other hand, each partner often functions as a miniature department, having responsibility for his/her own clients and billings, and for the supervision of associates who work on the partner's specific matters. 

The source of this article is "How to Manage Your Law Office." Lexis.com subscribers can access this publication online.