Andrew McDermott

How to protect your law firm from insider threats

February 3, 2020 By Andrew McDermott

He stole from their clients.

A law firm employee stole the identities of 20 clients. Working with several accomplices, this employee went on a “theft spree,” stealing $170,000 in cash, expensive clothing, jewelry and an additional $31,000 from a local Neiman Marcus.

Think about that for a moment.

A law firm employee had direct access to sensitive client information and he made off with it before anyone noticed there was a problem.

Who are these insider threats?

It’s your employees.

Intel found insiders were responsible for 43 percent of data breaches. In a separate report, Experian stated:

“66 percent of data protection leaders admit that employees are the weakest link in an enterprise’s security posture.“

This sounds harsh, doesn’t it?

It’s easy to state that these threats are simply “your employees.” It’s accurate, but it’s also incomplete. When it comes to insider threats, there are two kinds.

Malicious. These employees willfully cause harm, destruction and chaos in your firm.
Accidental. These are employees who gain access due to negligence, carelessness or poor systems and procedures.

Why would these employees harm your firm?

According to Gallup and Steve Rasmussen, former CEO of Nationwide, your employees fall into one of two camps, patriots or mercenaries. Not because they want to be but because they have to be.

Patriots: These employees are engaged. They’re true believers who love, admire and believe in your law firm. They protect their firm’s interests, and they expect their firm to do the same for them. Patriots give value first to receive value.
Mercenaries: They’re self-absorbed, corporate climbers who are focused primarily on themselves. At best, these employees are not engaged. At worst, they’re disengaged saboteurs who work to destroy your firm. Mercenaries demand value first and give value minimally; firms have to pay to play.

Here’s why this is a problem.

Research from Gallup shows 34 percent of employees in the U.S. are engaged.

That’s good, right?

Absolutely, but it’s also hiding an unpleasant reality here; 53 percent of employees are “not engaged,” meaning, work is just a job. Another 13 percent are “actively disengaged” these are active saboteurs, seeking to punish or destroy their employers.

What does this have to do with insider threats?

It’s about risk. According to the Insider Threat Report, the biggest risk factor to businesses: too many users with excessive access privileges.

Is this true?

A recent study found 70 percent of IT managers surveyed “know or believe that users (employees) have business (client) data in their own personal file-sharing accounts.”

What a disaster!

Law firm employees have sensitive client data stored in their personal Dropbox accounts!

Yikes.

This data is accessible to both malicious and accidental insiders, meaning law firms are exposed and vulnerable by default. This is a situation that requires immediate attention.

Protecting your law firm from insider threats

There are a few straightforward methods you can use to minimize insider threats. It’s so obvious, so unoriginal, you may feel the urge to roll your eyes.

Use a proven hiring methodology like Topgrading to recruit, vet and retain all-star employees.
Take very good care of your employees (from their perspective).

This creates patriots.

Next, use a layered approach to guard against both internal and external threats.

Let’s take a look.

Layer #1: Encryption for all endpoints

What’s an endpoint? An endpoint, according to Webroot,

“An endpoint is any device that is physically an endpoint on a network. Laptops, desktops, mobile phones, tablets, servers, and virtual environments can all be considered endpoints.”

Encrypting endpoints helps to maintain compliance with data protection regulations. It also gives you control over data wherever the endpoint goes. If a disgruntled employee walks off with a laptop, you can remotely perform a crypto-erase on that laptop’s hard drive next time the employee connects to the internet. Hardware encryption also can’t be turned off locally, meaning that employees can’t bypass security measures you put in place.

Fully-managed encryption can be achieved in a couple of different ways.

Self-Encrypting Drives (SEDs) – a hardware solution that’s combined with remote administration is secure, easy-to-use and cost-effective. The SED automatically encrypts all data written to a hard drive, providing complete protection for your data. Encryption takes place on the drive itself, so there’s no performance loss.
Cloud-based Encryption Management – this is a software solution that requires no on-site server maintenance. It works with encryption tools native to the operating system (e.g., Microsoft’s BitLocker or FileVault). It’s also an inexpensive, fast and easy way for organizations to comply with regulations and maintain security.
Native Encryption Management – Think Microsoft’s native encryption feature, BitLocker. It stores encryption keys in hardware, so it’s a little bit more secure than software encryption alone, but not as complete as full hardware encryption like the SED. If your firm is looking for an inexpensive way to boost security, BitLocker is a great start. Combine it with remote administration for complete control over your data.

Layer #2: User rights and access management

According to the Ponemon Institute, 62 percent of business users report they’re able to access company data they probably should not see.

It gets worse.

The study also uncovered that when employees accessed files or emails they weren’t authorized to see, 43 percent of businesses didn’t detect the misbehavior for a month or longer. This means owners, partners, associates and support teams shouldn’t have the same user rights.

I’m talking about the principle of least privilege.

What does this mean?

Access is only allowed on a need to know basis.

There are a variety of user rights and access management tools. If you use cloud-based practice management tools like Bill4Time, you can use user rights management tools like LastPass Enterprise to manage who has access to what, when and under what conditions.

Here’s a demo that explains their service and how it works.

It’s simple and easy to use.

Layer #3: Data loss prevention tools

Effective endpoint protection can be an uphill battle. Protecting endpoints in your firm requires flexibility – comprehensive protection with no unnecessary restrictions or interruptions to your work. This is where data loss prevention tools (DLP tools) come into play.

Effective DLP Tools:

Locates and maps sensitive your data
Inspects, classifies, filters and blocks leakage of your sensitive content and data. It doesn’t matter if the channel is email, IM, Web, external storage or printers
Blocks or encrypts data transferred to external media and devices as well as block connections to unsecure wireless networks
Immediately recognize security risks, identifying any device that’s currently or historically connected to your endpoints
Generate regulatory compliance reports and security log summaries

The ideal DLP tool provides your law firm with complete protection, protecting sensitive data-in-use, data-at-rest and data-in-transit, without sacrificing productivity.

Layer #4: Consistent and testable backups

In my previous post, I mentioned that Matthew Perry’s law firm was attacked by cybercriminals twice. His law firm survived two ransomware attacks with no loss of data.

How did he do it?

He did it with consistent backups. Perry conducted regular backups of all files at pre-determined intervals. He made sure he had backups in several locations (e.g., offsite, onsite, archived, cold, etc.). Then, Perry tested his backups daily, verifying that:

The firm’s data was encrypted
Firm data was backed up successfully
That files were uncorrupted and accessible at a moment’s notice

It’s no secret, it just requires discipline.

Many firms don’t have backups in place; those that do, fail to test their backups as often as they should.

Layer #5: Employee training and education

Your employees are insiders; these insiders, under the right conditions, are threats to your firm.

How do you address that?

With consistent training. When combined with user rights and access management, employees can make good decisions regarding:

The attachments that should or should not be opened.
When to ask for help
How to spot phishing, spam and malware attacks
How to avoid common pitfalls

If your employees aren’t aware of your expectations, they’re obviously less likely to meet them.

Insiders threats create data breaches

Almost half of the data breaches firms experience come from insiders. Your employees are the weakest link in your firm’s security protocols.

They don’t have to be.

With a layered security plan and a bit of foresight, you can prevent accidental mishaps, corral malicious insiders and protect your data. You can reduce the risk your firm faces from the internal and external threats surrounding your law firm – no crime spree necessary.

Why your law firm needs legal workflows for long term survival

January 29, 2020 By Andrew McDermott

It’s an attorney’s nightmare.

Imagine working harder but producing less each day. This nightmare is an unpleasant reality for the majority of attorneys in the legal industry today.

This isn’t speculation.

A recent study found the average utilization rates, the number of hours spent on billable work, was only 31 percent. The average attorney is only paid for 2.5 hours of work per day. According to the National Association for Law Placement, the average attorney works 2,081 hours per year or roughly 40 hours per week.

That’s reasonable, right?

Why attorneys are only getting paid for 31 percent of their work

Joan Williams, the director of the Center for WorkLife Law at U.C. Hastings, exposes the reality of work you’re probably already familiar with. When attorneys bill 40 or 50 hours per week, they’re actually working 60 to 70+ hours per week.

Where does this extra work come from?

It’s nonbillable work. It’s attorneys preparing to do the work they will actually be paid for. These routine concerns sap your workday, ensuring you only have time for one thing, work.

Here are a few examples:

Gartner found that most law firms are missing almost 50 percent of their data. Eighty percent of the intellectual property a firm handles is communicated with or stored via email. What does this mean? It’s data your team will need to dig through to find what you need.
An IDC whitepaper found knowledge workers wasted 11.2 hours a week sorting through document management (DMS) challenges. This whitepaper calculated the loss at $19,732 per knowledge worker, per year, or a 21.3 percent loss in the firm’s total productivity.
A growing number of law firms expect their associates to deliver 2,300 to 2,500 billable hours each year. Remember, nonbillable work is on top of this figure. Those who fail to meet these predetermined thresholds find their compensation and professional future is in jeopardy. This is complicated by the fact that 19 percent of the time, the billable work an attorney does, does not make it on an invoice.
Interruptions at work can cost you as much as 6 hours per day. Researchers at the University of California, Irvine, found after careful observation that the typical office worker is interrupted or switches tasks, on average, every three minutes and five seconds. And it can take 23 minutes and 15 seconds just to get back to where they left off.

No wonder so many attorneys are burned out.

Most are struggling to meet their billable targets, but they’re asked to deliver more billable hours each year. On top of that, they’re bombarded by the nonbillable demands that increase with time.

It’s worse for law firms.

According to the 2019 Report on the State of the Legal Market, realization rates for law firms are stagnant or declining. Firms today are fighting for a shrinking piece of the pie; there are too many lawyers and not enough clients.

This is why law firms need legal workflows

The demands placed on attorneys and law firms are getting heavier. Here’s a direct quote from The State of the Legal Market.

“Given the tepid growth in demand for law firm services, the increased willingness of clients to move business to lower cost firms or alternative service providers, and the continuing client push back on rate increases (as reflected in declining realization rates), it is counterintuitive that firms would propose aggressive rate increases or that clients would accept them. But that appears to be what happened.”

As firms increase their rates, clients push back, refusing to pay or demanding more for less. An example of this is the fact that many clients are unwilling to pay for research costs.

What’s the solution then?

One solution to this complex problem is improved workflows.

I realize this sounds ridiculous.

How can improved workflows boost the survivability of your law firm? It’s simple, with the right workflows in place, you’ll have the tools and resources needed to deal with a continual increase in demand. Here’s a breakdown of the benefits.

Your utilization rate will increase
Nonbillable work will decrease
Your realization and collection rates will increases
Work-life balance is easier to achieve and maintain
Your firm will be able to keep up with client expectations and demands
You’ll be able to attract more clients with less work
Your productivity will increase as you build consistency into your services
The quality of your services will increase

This is why your law firm needs workflows to survive. Gone are the days where law firms can rely on the status quo to survive.

Workflows are the key to long term survival

If you’re an attorney, you know the truth.

You’re working harder and harder each day. Utilization, realization and collection across the industry are down. The research on this is clear; attorneys are working hard with less to show for it.

This nightmare is avoidable.

With the right set of workflows, you can produce stable growth for your law firm and your employees. You can increase firmwide productivity and boost revenue. It’s all possible if you have the right systems and procedures in place.

What are the right systems?

In my next post, I’ll discuss the workflows your firm needs to produce extraordinary results.

Does your law firm have the wrong compensation model?

January 24, 2020 By Andrew McDermott

Are your coworkers your enemies?

Infighting, rivalries and competition hurt law firms. Research tells us when clients are served by three or more practice groups firm revenues are five times higher. If they’re served by five practice groups revenues are 18 times higher!

Collaboration is profitable.

If it’s so profitable for firms and their clients, why is it such a rare occurrence for most law firms?

It’s your compensation model.

Does your firm have the wrong compensation model?

It’s not always apparent.

It’s easy to focus on the fact that a compensation model works. It’s rare for firm leadership to ask themselves the question, “is our compensation model working well?” or “how much is this compensation model costing me?” Is there an easier way to determine the value of your compensation model?

There absolutely is.

Here are six warning signs your law firm may have the wrong compensation model.

1. Self-serving client selection

Paul has just lost his biggest client. He’s desperate for work so he eagerly accepts a new client who puts $200,000 a year in his pocket. This client is bad for business though – their conflict waiver policy limits his firm’s ability to take on new clients in tangential markets.

2. Irresponsible rainmaking

Sue realizes she’s an incredible rainmaker. She enjoys the origination credit she receives from her business development efforts. She’s even more fond of the fact that she doesn’t have to do any of the work. She recruits clients indiscriminately. As a result, she’s brought on several bad clients who cost the firm and other partners a significant amount due to write-offs. Those write-offs hammer those doing the work.

3. Ignoring business development

Patrick feels his time is better spent working on client matters. He can’t be bothered with business development activities, recruitment interviews or public speaking. While it benefits the firm, he gets nothing in the short term, so he prefers to ride on the coattails of his partners and associates.

4. Partner end arounds

Stephen has a client who needs help in Geoffrey’s practice area. He doesn’t want to share the origination credit or additional fees with Geoffrey, so he goes to an associate in Geoffrey’s practice group and tells a young associate to do the work. He tells this inexperienced associate that he’ll let Geoffrey know, only he doesn’t. He keeps things quiet, so he doesn’t have to share the credit or fees for his hard work.

5. Matter bartering

Sue needs help with a client matter. She knows Stephen is the best person for the job, but she decides to go with Patrick instead who doesn’t have much experience in the desired practice area. Her reason? He’s the partner who’s willing to accept the lowest share of origination credit. The client gets a second opinion after seeing Patrick’s subpar work. The client eventually decides to take their business elsewhere to a competitor.

6. Origination sculpting

Geoffrey has brought a new opportunity to the firm. The problem? Geoffrey doesn’t have the skills, experience or acumen to take on this new opportunity. Geoffrey knows Paul is a specialist in his target practice area, but he refuses to share the origination credit. Geoffrey decides to approach this pitch meeting alone; he loses his opportunity to a competitor who’s better prepared. The firm loses an opportunity worth $23 million.

The list could go on.

Client, file and matter hoarding, turf wars, partner silos, poor succession plans, these are a small sample of the many problems firms run into when they have a poor compensation model.

What’s the solution?

Peter J. Winders, General Counsel at Carton Fields Jorden Burt, suggests that there are only two options.

Create a framework of rules. For example, corporate attorneys cannot dabble in litigation. The idea behind this rule is simple; keep attorneys in their practice areas.
Change employee motivation. As far as solutions go, this one is much more difficult. Firm leadership decides ahead of time what is best for the firm. The compensation model is redesigned to reward what is good for the firm and punish what is bad for the firm.

Both have their pros and cons.

Which of these plans is best for your firm? Can you use both? I’ll tackle that in my next post.

The wrong compensation model comes with signs

Many firms refuse to collaborate.

While it’s upsetting, this isn’t their fault entirely. It ultimately comes down to your firm’s compensation model. Compensation models that produce hoarding, infighting, end arounds, competition – they’re bad for business. As we’ve seen they cost firms a tremendous amount of money.

Collaboration is profitable.

But it all depends on the compensation system you choose. This is why it’s such a rare occurrence for firms today. It doesn’t have to be that way. In my next posts, I’ll present you with options you can use to improve your firm’s compensation models.

How attorneys and law firms can 2x their productivity (with 50% less effort)

December 11, 2019 By Andrew McDermott Leave a Comment

Attorneys are burned out.

It’s a case of diminishing returns – attorneys are working harder each year while achieving less. If you’re part of BigLaw, you’ll work a minimum of 80 hours per week. If you’re a solo attorney who’s looking to grow, you’ll experience a similar workload but may only average 1,200 billable hours annually.

Is burnout inevitable?

The legal profession is characterized by intense, high-stress work

Even worse, there’s an inherent amount of conflict in the profession.

It’s everywhere.

Conflict inside the firm due to competition and infighting
Conflict with clients who disagree with you on key points
Conflict with third parties to defend your client’s interests

It’s no wonder then that the World Health Organization classifies burnout as a disease. Attorneys are working harder but losing the majority of that time to nonbillable work. They’re hammered by falling realization rates, discouraged by insufficient origination credit and struggling with compassion fatigue.

Many are struggling to cope.

They’re fighting valiantly against the problems they experience on a day to day basis, but they’re finding it harder and harder to perform at work. They ask themselves the question…

Why am I working so hard?

They judge themselves unfairly as being lazy, not having what it takes. As if they’re failures who haven’t been able to produce results. Their days are dominated by busywork.

No wonder so many attorneys hate their jobs.

Increasing productivity requires preparation

It’s completely doable.

If you’d like to achieve a 2x increase in productivity, you’ll need to do some upfront preparation first. This is a massive post, one you’ll want to refer to often. Take notes, test things out for yourself.

First things first.

You’ll need to record your day. Here’s an example shared on Q&A site Quora, by an unhappy and anonymous attorney.

Scan through it.

You’ll need a broad understanding of all of this when it’s time to create your own productivity framework.

********

I’m a mid-level or perhaps senior associate at a large law firm. Let me describe the two types of days that I routinely experience and then mention why I actually think I’m unhappy – as opposed to what you might think if you simply read TNR or ATL.

Busy Day:

7:00 am: Wake up, check Blackberry. See that 30 emails directed to me / my team on projects have come in since I put it down at 2:00 am. Response to 10 of the 30, get four junior associates in motion on tasks for the day. Try to go to gym, but realize I can’t make it because, while I was writing those 10 emails, I’ve had clients send me meeting planners for 8:30 am and 10:00 am calls. (For the initiated, clients rarely ask if I can make a call; sometimes I’m told to get on the line in five or ten minutes, sometimes I get random meeting planners. If matters conflict, somebody screams uncle, but it usually isn’t me.)

7:30 am: Hop on the train (subway). Read more emails while on the train and respond to another 4 or 5 so that responses will launch as soon as I come up from underground.

8:15 am: Arrive at the office. Start printing documents for 8:30 am call b/c secretaries won’t arrive for another hour.

8:30 am: Call gets moved to 9:00. Thank god I don’t expect it to last more than an hour, or I’d already have a conflict. Use extra time to look over documents I expect I’ll be discussing on 9:00 call. (But still no clue of its content because I tried emailing the client, but the client did not respond.)

9:00 am: Jump on call. Fortunately, it’s on what I expected. Client wants to do another call with the other side at 10:00 am because he is heading to the beach with his kids at noon. I inform client I have another call at 10:00 and client asks me to push that call for him. I try to dodge by proposing 10:30 and promising to keep the other call to 30 minutes. All the while, 40 new emails come in while I am on the call. I get two more junior associates moving on projects, IM with another three and request additional experienced staffing for one project.

10:00 am: Get on second call. Again have no idea what it will be about, but assume I can handle it because it is with an unsophisticated corporate client that we love because it lets us ring the meter. Junior comes to my office to listen to call. In-house lawyer bloviates about irrelevant points for 30 minutes and I field another 20 emails while on call and mark a document at my desk, occasionally paying attention to the call. The junior is in my office, but I never look at her because I’m just trying to get done what I need to get done to not fall further behind.

10:30 am: I recap call with junior associate (largely because I missed key points while marking the document that is at my desk, and need her to tell me what happened). I then get on the 10:30 am call with the 9:00 am client and try to pay attention because the client is a business-side managing director. I check the news, anyway, however, in part because I know that nothing I do on the call will in any way impact my pay or my chance of promotion, so I don’t really pay much attention.

11:00 am: Call ends. I follow-up with benefits and IP on some points raised on the 10:30 am call. They’re not expecting my queries, but they can’t do anything. I CC the client and the relevant partners so that the client knows I’m following up on his points and so that the benefits and IP associates have to meet my stated timeline or look bad. (Chances are, they won’t respond anyway. We won’t fire them for it, and we won’t pay them any more if they do.)

11:30 am: Take a few minutes to skim the news; get coffee. Return to desk and begin marking documents drafted by juniors for one of my deals. Attempt to mark them without interruption, but answer the phone every 10 or 15 minutes and lose train of thought.

1:15 pm: One of my callers asked me if I’ve seen emails that just came in, and if I’ve reviewed the documents attached — 250 pages, came in five minutes ago. I tell the client that, no, I have not yet reviewed the documents, but I will as soon as I can and generally try to determine whether the matter is urgent. When I realize that his deadline for this afternoon is false (like most deadlines), I find a way to push the work back. (I have more work on my plate than I could complete if I stayed in the office 24×7 for two or three weeks, so it’s always a matter of fighting whatever fire is burning strongest; never a matter of real project management.)

2:00 pm: Begin catching up on emails; see that I missed two calls while reviewing documents and hope clients/partners are not mad at me for missing them. Call juniors to determine what I missed.

2:30 pm: Urgent email from client. Don’t believe that matter is urgent b/c every matter from this client is said to be urgent, but call client to check.

2:45 pm: Matter not urgent, so grab lunch in the cafe. Eat lunch at desk while responding to emails.

3:00 pm: Things are quiet, so catch up on document that has sat on my desk for more than a week. The official deadline was last Friday, but we all know that deadline was false and I probably blow through 50+% of my deadlines.

3:30 pm: The fire drills begin. Client says it wants to sign a set of documents today, none of which we’ve seen. I call two juniors to get them to review parts and to get tax review. I skim as fast as I can, isolating key points.

4:00 pm: Three clients have already sent me voicemails on other projects, and I have two more meeting planners, both for calls at 4:30 pm. I ignore all to close out document I’m reading for the 3:30 pm client.

4:30 pm: I jump on one of the calls and find out this client also wants documents signed tonight. I IM some juniors and wonder how I can possibly get this done.

5:00 pm: Partner drives by and drops a 200-page markup on my desk. He spends 30 minutes in my office trying to discuss it despite my telling him that other matters are in process and need to be closed out.

5:30 pm: I’ve been hit with two more clients who want to sign documents today. I now have five projects that are trying to get done by today. I push things forward to the extent I can, do the least possible amount of work I am OK with on each project and push things out. I am on and off calls with each client for next three hours while turning the documents.

8:30 pm: I’m now waiting for comments on three of the five matters. The other two have died: false alarms. I catch up on emails.

9:00 pm: Things get hot again and it’s just like at 5:30 pm, except that now it’s harder to reach the clients but the deals still need to get done. This continues until 10:30 pm.

10:30 pm: Order dinner on seamless, catch up on emails not related to hot projects.

11:00 pm: Documents begin to come back and junior associate dumps work on me from outside of my practice group. I try to tell him to shove it, but I can’t because he has CC’d a powerful partner. I ignore the deals that I’m trying to close and deal with the junior associate’s query.

11:15 pm: Return to hot deals. Continue going back and forth (I’m still receiving 50-100 emails an hour on these projects) for next 2 hours.

1:15 am: One deal done, the others can’t be finished because one side’s clients went home and all outstanding points are “business points” (i.e., they matter, so we can’t touch them because we are just lawyers). Turn back to other work that builds during the day. Because most of my juniors are gone, do whatever needs to be done that hasn’t yet been done.

2:00 am: Get markups from Asian office. Powerful partner CC’d, so turn documents myself, which include such wonderful 2:00 am tasks as adding brackets to the trailers on signature pages. Finish in about 90 minutes, and call a car.

3:45 am: Get in car, knowing that everything that I did not close last night will be open by 9:00 am the next morning, likely with clients hounding me to get in touch with the other side, update all dates and numbers, etc., from approx. 7:00 am onwards.

*********

Not-Busy Day

7:00 am: Wake up, check Blackberry and see 20 emails. None need to be handled by me, so I ignore them.

7:15 am: I go to the gym and aim to get into the office at 9:30 am.

9:30 am: I skim the news and ignore projects that have sat on my desk for weeks. I turn to them at 10:00 am and work on them until 1:00 pm.

1:00 pm: I get lunch and say hi to my secretary. I eat lunch at my desk so that I can continue to plow through the backlog from busier days.

4:00 pm: I get coffee b/c I am bored with the work and want to talk to somebody. I bring coffee back to my desk, anyway, and continue to read and mark more documents.

8:30 pm: I finish reading what I think ought to be read today (It’s really my call; every deadline I have at this point is obviously false and I cannot possibly clear my plate.), and call it a day by having document services scan my markups.

8:45 pm: I take the train home, a little happier because I talked to the folks in document services, at the coffee shop and the cashier in the cafeteria. Otherwise, I just spent the last 11.25 hours alone in my office, proofreading and marking documents without any human interaction.

*********

How many people would like to work through either of these two types of days?

When you add partners who scream at you (and do indeed throw objects when angry), associates who routinely backstab each other, fixed salaries and bonuses so that there is no link between pay and performance, or pay and value add, and partnership odds of roughly 1 in 25 to 1 in 50 – as well as sometimes weeks on end in which you do not leave the office before midnight – there are just a lot of things not to like about the practice of law.

This is horrible.

It’s easy to understand why this attorney is so unhappy. This attorney is in a bizarre form of solitary confinement (11.25 hours alone). Their day is filled with assorted power moves, a consistent deluge of work from above and below as partners and associates drop work her and soul-crushing isolation.

This is unhealthy.

There’s very little human interaction — no hobbies or downtime to speak of. No time for family, relationships or even a full night’s rest.

It’s unsustainable.

Why you should copy this unhappy attorney’s example

No, I’m not recommending that you copy their professional lifestyle.

Just the journaling.

You’ll want to document your day from beginning to end for 30 days. This isn’t about right or wrong. It’s not about whether your current schedule or level of productivity is effective or not. Just get your current performance down.

No judgment.

No beating yourself up over any failures, no blaming others for a lack of progress. Just creating a factual account that outlines your productivity and the way you spend your time each day.

What happens afterward?

You’ll want to take note of the following details in your day.

When you start work
What you work on and when
Who you speak to throughout the day
Which clients reach out to you the most
What these clients want or choose to discuss with you
Which matters, activities or events produce the majority of your billings?
The matters, activities or events take up most of your time
Who adds to your workload?
What is added to your workload?
How you’re tracking or documenting your time (and whether it’s accurate)

Why go to the trouble of documenting and analyzing your day? You can’t fix a problem if you don’t know it exists. You need a clear idea of the details you’re facing.

You need reporting.

If you’re relying on a legal practice management tool, you should already have reporting options in place. You just have to record your time. If you don’t have a practice management solution in place you can use charting tools like amcharts to visuals your time spend.

If you’re like many other attorneys, these charts may confirm what you already know.

You work too hard.

Fear kills attorney productivity, increases busywork

What are attorneys afraid of? Let’s take a look at a few of these fears so I can demonstrate what I mean.

If you work hard, you’ll make partner. This isn’t true in a large number of cases. Some firms create partners-in-name-only (Pinos). Others dangle the carrot in front of associates until they give up, move on or finally succeed.
If you make a mistake, we’ll fire you, or you’ll ruin your career. A single mistake involving the wrong client or partner can be enough to disqualify an attorney from future employment.
If you want to keep your job, you’ll outwork work your peers. This is an implicit expectation that’s typically hinted at with passive-aggressive comments and used to keep associates pushing hard to meet increasingly difficult demands.
If you don’t do a good job, you won’t get more work. The implication here is that you’ll be weeded out if firm decision-makers decide that you’re incapable of producing the quality or quantity of results they’re looking for.
If we overwhelm you with work, it means we like you. It’s an invitation for attorneys to run on the hamster well of partner approval, constantly striving for positive feedback in the hopes of one day making partner.
If you’ve made a mistake, hard work will fix it. Push yourself even harder. Produce more billables to compensate for your mistake. Work hard enough and we’ll let you know when you’re back in our good graces.
Your peers are working harder than you. Code for “if you consistently outpace your peers, there’s a good chance you’ll be able to cultivate enough social capital to keep your job during the next round of layoffs.”
If you want to pay off your student loans, a career in law is the only way you’ll be able to do it. This isn’t the only way for students to pay off their student loans, but it is the most obvious and viable solution. According to Nerd Wallet, the average law school student graduates with $145,550 student loan debt, including undergraduate loans.
Associates are expendable and replaceable. Research shows there’s a surplus of attorneys who are looking for work. That’s good news for firms and bad news for associates.
Partners are expendable and replaceable. The implicit expectation here is rainmaking. Partners are expected to bring in a significant amount of new business to the firm. For many firms, this is the only way to ensure true security.
You can’t attract clients without us. The idea behind this fear is the fact that you’re trading on your firm’s good name to attract and retain new clients. This may or may not be true.
You need us; you can’t make it on your own. This is an irrational fear that’s used to retain associates and partners, especially if the firm in question is prestigious or authoritative.
If you leave the firm, you’ll lose everything. The frightening part about this is the fact that it’s true to a certain extent. There’s a surplus of hungry attorneys who are out of work. That number is always rising. If you leave on less than ideal terms, there’s a chance you may hurt your career prospects, especially if your firm
If you leave your firm, your standard of living will decrease. It’s true only if you’re unable to find another position that enables you to maintain your standard of living. If you’re an average attorney that’s a very real possibility.

Taken to an extreme, these are dangerous.

Is there anything wrong with a firm promising partner or using it as a tool to motivate associates? Not at all. It is a problem if firms are using these items to sow fear, uncertainty and doubt in their team.

Why is this a problem?

Moral and ethical issues aside, what’s the issue here? Many of the above issues have a degree of truth to them. If you’re terrible at your job, yes, it’s a great idea to fix the problem before giving you more client work. Many professionals don’t see the problem.

It’s toil vs. productivity.

Many people believe toil and productivity are the same. In reality, they’re opposites. Let’s break it down a bit.

Toil refers to tedious, exhausting and repetitive busywork that’s relentless or never-ending. It’s fruitless, low-value work that erodes morale in your firm. Repetitious tasks – document reviews, proofreading, copying performed indefinitely – these are the necessary but despair-inducing parts of practicing law. Unhealthy toil produces stress, burnout and fear.
Productivity: Work that moves the needle, takes you closer to your goals, or helps you build a solid reputation in your firm or industry. It’s work (big or small) that produces the kind of results you’re looking for in your career. Its meaningful work you know will showcase your considerable talents. It’s a morale booster for firms.

Give toil a purpose, create a compelling why, and it morphs into productivity. Remove meaning or purpose from a productivity task; take away the why and it becomes toil. It’s all about the why behind your work.

Get the why right and productivity skyrockets. Create meaning and you’ll find you’re able to dramatically increase your salary, create the promotion you want, or become your firm’s next all-star.

With the right why your…

Conventional results create trust. Conventional results = doing your job exceptionally well. Being a great attorney, going above and beyond for clients and your team. Exceptional day-to-day performance increases. If you’re a real estate attorney, your documents and agreements are above reproach; your work is pristine, you’re fast, efficient, helpful, productive, etc.
Transformative results create career opportunities. These are extras, the above and beyond results that make things better for your firm, the industry or clients as a whole. It can be as simple as sharing knowledge via a speech, interview or article or as comprehensive as personally taking on a client. It’s your big break, the chance to handle a major action on behalf of your firm or take the lead on a major client’s matter.

Here’s why these results matter. Conventional results are boring and often insignificant. They’re little things that show partners how you’ll perform with big things. Transformative results are outlandish, terrifying and intense – if they go wrong, they can be career, firm or relationship enders.

Here’s the thing about these.

The partners in your firm? They want both conventional and transformative results. But they’re not interested in transformative change until they trust you to achieve the conventional. Transformative results are often risky; the trust you’ve accumulated acts as a buffer, giving them what they need to take a chance on you.

Think back to the items in our list above.

Can you see the problem with these items? These whys create toil. They don’t create productivity. The people in these firms will only work as hard as they need to, to prevent these disasters from coming true.

They coast after that.

Performance drops once that fear is gone. How can associates and support teams in these firms continue to grow? How can their firms grow? Their why doesn’t motivate them to improve, it restricts movement due to a fear of loss!

How to 2x your productivity in half the time

This sounds pretty unbelievable, doesn’t it? You’re overwhelmed with work as it is. How are you supposed to be able to accomplish more in half the time?

Focus on principles first.

With the right principles, you’ll be able to achieve massive gains in productivity, gain more free time and achieve work/life balance, something others believe to be impossible.

Step #1: Plan for Parkinson’s Law

Parkinson’s law is the adage that “work expands to fill the time available for its completion.” Why would this be a problem for attorneys?

Your peers are going to sabotage your progress.

As you make significant strides with the productivity framework below, you’ll come across saboteurs. Other associates, partners, support teams – they’ll see that you have more free time. If you don’t have a plan for your free time it will be taken from you.

They’ll fill your time with extra work.

As your productivity increases, you’ll need to have a plan for the additional time you receive. That time needs to be guarded jealously. You can fill that time with more billable work, business development work, free time, anything you choose But it needs to be done on your terms.

Step #2: Develop a F!@k off fund

You need leverage to be able to say No with power.

Paulette Perhach wrote the Story of a F!@k Off Fund. She showed how people accept horrible behavior from their co-workers and bosses, simply because they need their job.

“A few weeks later, your boss calls a one-on-one in his office, walks up behind you, and stands too close. His breath fogs your neck. His hand crawls up your new dress. You squirm away. He says, “Sorry, I thought…”

You know what to do. You’re just shocked to find you’re not doing it. You are not telling him to f!@k off. You are not storming out. All you’re doing is math. You have $159 in the bank and your car payment and your maxed out credit cards and you’ll die before you ask your dad for a loan again and it all equals one thought: I need this job.”

It doesn’t have to be a situation that’s as flagrant as this. It could be as simple as:

Junior associates CC’ing partners when they drop extra work in your lap to corner you
Partners demanding that you fast track a particular matter or project over other priority items
Partners attempting to poach clients from you
Being asked or expected to “ring the meter” or provide clients with subpar work
Resisting attempts to steal your origination credit
Being forced to work with toxic or chronically abusive clients (who make the firm a lot of money)

This doesn’t have to be monetary.

There are hundreds of little headaches like these, many of them occurring daily. The circumstances are different, but the pattern is the same. Something goes wrong. You see it but decide to keep your mouth shut.

You want to keep your job.

The point here is the fact that you’re able to say No to flagrant lapses in judgment. You’ll need leverage to do that. Here are some ways you can create leverage (and the ability to say No).

You don’t need a paycheck due to (savings, investments, trust fund, etc.)
You’re a brilliant attorney with deep expertise in a profitable practice group
You have connections (or the ability to create connections) that are beneficial to your firm
Your breadth of knowledge is massive. You’re the maven everyone goes to for answers
You’re a unicorn (e.g., workhorse rainmaker who happens to be connected to powerful influencers)
You’re an exceptional rainmaker who’s consistently able to generate business on demand
You have a unique ability that enables you to do what other attorneys can’t or won’t do

Your F!@k off Fund boils down to having something your firm wants or needs but can’t get on their own. Don’t have the leverage you need? Take an additional 30 min. to two hrs per week to identify strategies you can use to create leverage.

Step #3: Learn how to say No

Partners don’t want to hear the word No.

But you need to use it often. How do you say no without saying no? Here’s how Adam Grant, Wharton professor and author of Give and Take, does it:

The deferral. I’m completely swamped right now. Would you follow up with me later, say 3 PM?
The delay. The deadline for [client project] is today. If I take on one of these new matters we’ll miss this deadline. Would you check with [partner] to see if he’s okay with me taking this on?
The introduction. I’m completely in the dark about [practice area]. Mitchell is our resident expert, would it be alright for me to follow his lead on this?
The bridge. Catherine and Reginald are actually already working on [client matter]. Would you like me to reach out to them?
The relational account. If I take on [matter], I’ll be letting [partner] down. He was counting on me finish this by 4:30 PM today. I’m happy to help if he’s okay with putting his project on the back burner.

See the difference?

Every demand has a consequence, something that’s easy for management to forget. But that’s exactly how it works in the real world. If you want X done, I won’t be able to finish Y, and so on. Do it this way and you teach co-workers that every decision comes with a cost.

Step #4: Create a list of barriers and disruptors

At this point, you should have a substantial amount of data outlining the various aspects of your productivity. You’ll want to make a list of the problems impacting your productivity and your solution to deal with each of these problems.

Problem	Solution
A partner at your firm adds to your workload daily	Use Adam Grant’s No strategies (see above)
Junior associates CC partners to corner you into more work	Use their CC to re-delegate task back to the junior partner or a more capable associate
Clients haven’t given you the materials or feedback you need to finish your work.	Pivot to another client matter or project
You can’t handle client matters and business development	Outsource, delegate, automate or hire additional help

Do this for each of the barriers you’ve identified in your 30-day assessment.

Create solutions for each one.

Step #5: Choose your time categories

Choose the time categories you’d like to devote your time to. You may not be able to pick and choose the tasks you prefer. I get it. It still important that you choose the tasks you’re going to focus your attention on.

You’ll see why in a moment.

There are several categories attorneys are expected to manage. Here’s a shortlist.

Working on client matters
Business development
Review management
Client intake and follow up
Client service and support
Administrative tasks
Scheduling meetings and appointments
Automating tasks and deadlines
Automated time tracking for billing and invoicing
Bookkeeping
Automated document assembly
Employee management
HR support and career development

There’s a good chance you have more to do, but we’ll begin with this shortlist for now. Which of these is most preferable? That all depends on whether you’re a grinder, minder, binder finder. Attorneys generally fall into one of these four roles.

Finders are rainmakers. They bring new clients, business and revenue to a firm. Good finders are exceptionally rare, which makes them incredibly valuable to a firm. When times are good, finders often make more. When times are bad, finders often make dramatically less money than their peers.
Binders are connectors. These attorneys are sophisticated networkers, able to connect with, build and maintain deep relationships with important and powerful people. They receive and provide others with important introductions.
Minders are managers or bureaucrats. Often times they’re on executive committees or they’re the managing partner responsible for administrative tasks. They manage attorneys, paralegals and support teams. In short, they run law firms. They’re efficient, precise and capable of managing a firm.
Grinders are the workhorses of their firms. The majority of attorneys are hired to do one thing. Work on the matters given to them. These attorneys are expected to (a.) do as much (billable) work as possible (b.) produce high-quality work as quickly as possible. Grinders aren’t hired to be mentors, rainmakers or managers. They’re workhorses, nothing more, nothing less.

You’ll want to sort your roles and responsibilities by category. Start with the role you’re assigned at your firm. Most attorneys are hired to be grinders.

Here’s the problem.

Many attorneys are expected to fill multiple roles. Grinders are expected to become rainmakers and binders are expected to maintain connections while grinding away at the office.

That’s okay.

Choose your primary, secondary, tertiary and quaternary roles. Your attention will be focused on your primary roles. If you’re expected to fill multiple roles, you’re going to…

Step #6: Slash and burn all other roles and responsibilities

Am I suggesting that you shirk your responsibilities?

Not at all.

Instead, I’m recommending that you outsource, delegate, automate or hire additional help to handle the other roles on an as-needed basis. If your soul law firm that’s short on funds here are three ways you can attract the help and support you need.

Barter: Trade legal services in exchange for marketing and business development help
Spend: Pay for the help and support you need from capable service providers
Buy: Software tools that will enable you to automate and delegate the important parts of practice management

What does this look like?

If you’re a solo grinder, you can:

Hire the top 3 percent of freelance marketing talent to set up business development funnels. You can also use these freelancers to run low-cost ad campaigns for your firm.
Hire a virtual assistant to manage key components of your personal and professional life.
Purchase practice management and online review software to automate key portions of your business

If you’re a finder and a small firm owner you can:

Hire the top 3 percent of freelance marketing, finance, and project management talent to improve business development and operations efficiency.
Use freelance attorney services like montage legal group, Hire an Esquire or Flex Legal Network to find competent freelance attorneys who are willing to work at a reduced rate.
Focus your attention on rainmaking and growing your firm while relying on third-party help to handle client matters in a specific practice area.

See what I mean?

Get someone else to handle all of the work you can’t (or don’t want to) handle yourself. Here are some ultimate guides you can use to outsource, automate, delegate or hire additional help.

See what I mean?

Focus your attention on your primary role or responsibility. Find ways to outsource, automate, delegate or hire additional help for everything else. It’s an easy way to save a significant amount of time, energy and effort. It’s a way to establish work/life balance, protecting personal, familial and professional relationships.

Sure, this can boost productivity. A 2x increase though?

That sounds impossible.

It certainly sounds impossible but the data shows it’s really quite achievable. Research shows attorneys lose 6 hours per day, every day, to nonbillable work. Attorneys are struggling to produce 2.9 hours of billable work each day.

It’s an uphill battle.

The strategies and tactics I’ve shared means individual attorneys and law firms can generate the revenue they need with 50 percent less effort. This isn’t really about adding anything new; it’s about eliminating the barriers that are already hurting your firm’s ability to perform.

That’s it.

Eliminate these barriers for everyone in your firm and productivity skyrockets.

A 2x productivity boost is possible with the right framework

Attorneys are burned out.

They’re struggling with a case of diminishing returns. Attorneys are working harder each year while receiving less. The legal profession is characterized by incredibly demanding, high-stress work. No wonder they’re finding it harder and harder to perform at work.

Why are they working so hard?

As we’ve seen, you can boost your productivity to unprecedented levels with the right framework and a bit of strategy. A 2x boost in productivity requires some upfront preparation but it’s all fairly simple.

You can do this.

With the right approach and clear boundaries, you’ll find there’s no limit to your productivity gains.

Performance-based vs. salary: What’s the best compensation plan for law firms?

December 11, 2019 By Andrew McDermott Leave a Comment

Performance vs. Salary — What’s the best compensation plan for your business?

Hazard #1: Emphasizing Revenue over profits
Hazard #2: Prioritizing Billables over Realization
Hazard #3: Focusing on Rainmaking instead of Service
Hazard #4: Incentivizing personal success over firm success
Hazard #5: Sacrificing health for financial rewards
The best compensation plan for your firm is…

Is it the end of the pay raise?

According to SHRM, more and more companies are rethinking the annual pay raise. The rationale goes like this.

“If you wait an entire year [to review compensation], you might lose employees who don’t want to wait for a [raise].”

This seems true, doesn’t it?

It seems as if the traditional compensation systems are failing to produce the kind of loyalty and morale boost firms need to remain competitive.

Why the traditional compensation system is broken

The system creates team misalignment.

If they want a meaningful raise, employees will need to perform well throughout the year and during their annual performance review. During the review, employees sit down with firm leadership to discuss their performance and discuss the possibility of a raise.

Where’s the misalignment?

For many organizations, the annual performance review is simply a way for employers to justify paying their employees less than they deserve, at least from your employee’s perspective. Their perspective matters because it has a significant impact on your organization.

The annual review (and the compensation adjustments that follow) impact:

Morale in your firm. If paralegals, associates or partners work hard, but their contributions are ignored (or worse, criticized), it kills morale in the company.
Employee engagement or disengagement. Annual reviews (along with day-to-day interactions) can change your employee’s engagement levels completely. The severity of the annual review or your employee’s perception of the review is all it takes.
Interest in advancement. An employee’s annual review or compensation plan may impact their interest or desire to climb the ranks at your firm. Instead of pursuing a career, they view their position with you as simply a job, a stepping stone to something better. If this happens, you won’t get their best work.
Loyalty. Employee loyalty is a subset of engagement and dependent on how you treat them. If they’re fresh off an unjust performance review or they feel they’re receiving less than they deserve, they’re probably not feeling very loyal.
Productivity. Gallup sorted employees into three engagement categories. The engaged (patriots) who love your firm and truly believe in the work they’re doing. Not engaged, employees who view work as “a job,” and the disengaged, active saboteurs who are looking for a way to punish your law firm for real or imagined slights. Each of these employees has varying degrees of productivity, the lower the engagement, the worse your team’s productivity.
Utilization rates. Your utilization rate is a reflection of your firm’s productivity and billing efficiency. The higher your utilization rate, the more efficient your firm. Productivity measures individual performance, while utilization can be used to measure individual and group performance.
Billable benchmarks: Unproductive employees won’t meet billable goals or timekeeping targets. This has a direct impact on the amount of revenue your firm brings in, and naturally leads to a decrease in realization rates.
Realization rates. The amount of money you bring in is typically less than it should be. Unhappy, disloyal, disengaged and unproductive employees cost more and produce much less. It sounds obvious, but you’d be surprised at the number of firms that ignore this truth.

This isn’t even everything.

Firms are struggling due to lockstep compensation. Law firm employees are expensive, especially if they fail to hit their billable or performance targets. But these compensation models are wreaking havoc on firms even when employees exceed performance expectations.

Law firm compensation depends on environment

If your compensation model is a seed, your environment is the soil your compensation model needs to grow. A toxic environment creates a scenario where your compensation model, even a perfect one, is unlikely to thrive.

The following five toxic work environment hazards will negatively impact your compensation models.

Hazard #1: Emphasizing Revenue over profits

Look at your last three years of revenues. Have profits grown in lockstep with your revenues? If the answer is Yes, you’re in fantastic shape.

What if the answer is No?

Your law firm is in a dangerous position. If revenues exceed profits, you’re vulnerable. Any downturn, client poaching, or major economic change can bring your firm to its knees financially. When revenues exceed profits (due to partner decision making, poor margins to win client business, etc.), your firm has no buffer in place.

This may mean client work ends up costing you in the long run.

This also has a throttling effect on compensation in your firm. The perfect compensation model doesn’t matter all that much if you can’t follow through on your promises to your employees.

Hazard #2: Prioritizing Billables over Realization

It’s common for firms to focus on billables.

This makes sense.

Research from Thomson Reuters Legal Executive Institute and the Center for the Study of the Legal Profession (CSLP) at the Georgetown University Law Center had this to say about billables.

The average attorney is billing 165 fewer hours than the previous decade.

It’s no surprise then that firms prefer to focus on billables. The decrease in productivity, billables and utilization has a significant impact on the revenue a firm brings in.

Here’s the problem.

Your realization rates are just as (if not more) important as your billables. That’s because realization rates are also decreasing. James D. Cotterman, Principal with Altman Weil, outlines the problem.

“There are three metrics that makeup timekeeper revenue—demand, pricing, and realization. The recession ravaged all three of these metrics. Demand for lawyers’ services collapsed in some practice areas and weakened elsewhere. Rising hourly rates, once the driver of revenue growth with increases easily outstripping inflation and expense growth year over year, now barely match inflation. A decline in realization, which had been very gradual over the long-term, accelerated and, combined with slowing price increases, has resulted in nearly no net gain on a realized rate basis. Much of these patterns continue as the profession transitions beyond the recession.”

He outlines several realization issues.

Timekeeper discounting. Inexperienced timekeepers may discount the amount of time entered on their timesheets due to the erroneous belief that “they took too long.” Other firms rely on reconstructive or sloppy timekeeping habits, resulting in fewer billable hours recorded than actually completed.
Write-downs of unbilled time. According to Cotterman, realization rates suffer the most during billing. Attorneys are afraid clients will push back on their invoices or not pay them in full. These attorneys attempt to self-regulate using write-downs as a way to keep clients happy. This robs firms of much-needed revenue.
Client adjustments resulting in write-offs. Aggressive or unexpected billing leads to distrust and increased client oversight, extending payment cycles and an additional loss in revenue.

These realization issues will decrease firm revenues and profits, hurting your firm’s ability to compete and compensate employees effectively.

Hazard #3: Focusing on Rainmaking instead of Service

Rainmaker worship.

It’s the prevailing culture at many firms. If an associate or partner can generate a significant amount of business for a firm consistently, they’re rewarded handsomely. They’re deified and treated differently than other producers at their firm.

And that’s the problem.

Origination credit, with no sunset clause, is common in many firms. But this approach creates unnecessary headaches. It also creates bitterness and resentment resulting in the breakdown of teams and the build-up of silos.

Here’s how it affects compensation.

It teaches producers in your firm to prioritize sales over service. The longer origination credit lasts, the worse this tendency becomes. Attorneys are motivated to land profitable clients but less interested in serving these clients.

It’s great, in the short term.

It’s intensely unprofitable in the long run. Billables aren’t where they should be. Inexperienced people spend more time on matters leading to client pushback. Permanent origination credit takes much-needed revenue from the firm, decreasing recurring revenue.

Don’t get me wrong. These attorneys should be rewarded handsomely for their hard work. But one-time performance shouldn’t provide perpetual and permanent rewards. These aren’t the only issues, but they reinforce my point.

Hazard #4: Incentivizing personal success over firm success

Some compensation models like the “eat what you kill” model are focused primarily on individual achievement. In this compensation model, the result is king. There’s no recognition whatsoever for anything beyond an individual attorney’s personal production.

This model creates mercenaries and increases disengagement towards your firm.

Think about it.

In this system, firms may charge attorneys a share of the overhead, but each partner pays the salaries of their support team. Attorneys also cover their individual expenses (e.g., business development, continuing education, personal technology, etc.).

These are all covered by the individual attorney/partner.

A junior attorney’s time is “purchased” from the firm at predetermined rates and billed to clients at a higher rate (whatever the attorney/partner feels is appropriate). Partners sell an interest in a particular file or client to another partner at a negotiated rate (e.g. 10 of whatever is billed by the purchasing partner).

Compensation models/plans like these are destructive.

Here’s an example of one problem.

Geoffrey has brought a new Fortune 500 client to the firm. He wants to keep the origination credit. His firm follows an “eat what you kill” compensation model, so Geoffrey is definitely against sharing is “kill” with the other partners and associates in his firm.

He decides to hoard his clients, matters and files.

As a result, Geoffrey performs work that he knows he’s not qualified to do. This has negative ramifications for his client, and it ultimately tarnishes his reputation, the firm’s reputation and future billings. At first glance, it seems his selfishness was to blame.

Geoffrey isn’t the problem.

The compensation model his firm decided to use is. These problems will weaken his firm’s ability to compete in the marketplace over time. It will also spawn competitors who open their own boutique shops, taking firm clients and secrets with them.

Hazard #5: Sacrificing health for financial rewards

Attorneys are often encouraged to sacrifice their personal health for financial rewards and professional achievement. It’s a great way to guarantee burnout in your team. In fact, there’s a simple formula to predict this.

Client trauma + essential minutia + mounting workload = burnout

The research bears this out.

Stress, Burnout, Vicarious Trauma, and Other Emotional Realities in the Lawyer/Client Relationship: A Panel Discussion
Do Not Make their Trauma Your Trauma: Coping with Burnout as a Family Law Attorney
Vicarious Traumatization: The Corrosive Consequences of Law Practice for Criminal Justice and Family Law Practitioners

Lisa Johnstone is a famous example of overwork.

She’s the Skadden associate who died of an apparent heart attack at the ripe old age of 32 after pulling several 100-hour weeks. She felt compelled to take “stimulants” to help her perform under this mounting pressure. The pressure was so great that she was experiencing dramatic hair loss.

This is unsustainable.

It’s also completely backward. The research again is clear on this. According to MIT Sloan Senior Lecturer Bob Pozen, author of the bestselling book Extreme Productivity: Boost Your Results, Reduce Your Hours. Research by Tony Schwartz shows humans move from full focus to fatigue every 90 minutes.

Research shows productivity should be treated as a sprint.

That’s a problem.

Attorneys at firms are often expected to sprint through an entire marathon. They’re hit with more and more work. They’re forced to grind through a deluge of busywork, minutia and client matters.

It’s too much.

But it’s also what most compensation plans reward. Instead of rewarding team effort and collaborative KPIs, firms are forced into the miserable position of sacrificing their health and personal well-being for financial rewards.

These are all bad.

The best compensation plan for your firm is…

One that works with your firm identity rather than against it.

I’ve covered this in my [previous] [posts] on [compensation]. This isn’t a satisfactory answer though, is it?

What does the data say?

I’ve shared this before. Research shows, when clients were served by three practice groups, revenues were 5.7 times higher than those served by one. Clients who were served by five practice groups generated fees 17.6 times higher than those served by one.

This is a crucial point.

It’s also confirmed by a variety of sources, including data from Harvard Business School. Collaboration produces a significant amount of benefits. These benefits can extend to the individual, group and firm level.

Wait a minute.

Aren’t we discussing compensation plans? What does collaboration have to do with compensation plans?

It’s simple.

Collaboration provides the revenue needed to create the golden handcuffs.

Collaboration removes barriers.

Many employees are self-interested mercenaries. Collaboration aligns their self-interest with the firm so everyone benefits.
Partners want to receive the financial rewards that come with their role. Collaboration dramatically increases the payouts they are able to receive.
Partners or associates often abscond with the firm’s clients, creating major financial upheaval. Collaboration, especially across practice groups, dramatically reduces “lift outs,” a group of partners or associates taking a large book of business away from their firm.
Collaboration, if accepted by employees in the firm, builds deep trust in a way that’s impossible to copy. Firm collaborators grow to trust in their colleague’s competence (i.e., I trust you to do an exceptional job and avoid blunders) and integrity (i.e., I trust that you won’t undermine my relationship with my clients).

These are the barriers. What about the benefits?

Employees are hesitant to leave their firms. Healthy firms with a supportive, collaborative culture provide employees with deep fulfillment they need to see that they’re making an impact and delivering value.
Firm employees are also compensated well due to the considerable amount of revenue generated across practice groups. Firm leadership works to consistently reward their team based on shared KPIs.
Employees are also hesitant to leave due to the consistent financial rewards. The harder they work, the more they receive. If they leave their firm, they’ll be forced to start at the bottom, if they receive a similar offer anywhere else.
Partners make even more than they would by hoarding their book of business (or poaching origination credits from others). They make more money doing less work, which, if we’re honest, is what equity partnership was about in the past.
The firm grows rapidly as clients receive extraordinary care, guidance and protection. The firm is aligned with their interests, and they’re receiving significant value. They’re open to spending more as a result.
As word spreads, top tier employees jockey for the chance to join the firm. They’re burned out, exhausted and tired of the competitive backstabbing they’ve experienced professionally. Your firm gives them hope that a career in law could be profitable – personally and professionally.

So what does this mean then? Should your compensation plan be performance or salary based?

Both.

Why would firms use a salary + performance-based compensation plan?

The best compensation plan maximizes control for firms and employees

In my previous article on compensation, I mentioned that the vast majority of compensation models fall into one of seven basic categories. I’ll briefly recap them here.

Equal partnership: Law firm profits are divided equally among a defined group of employees (partners, associates, support teams, etc.).
Lock step: The longer an attorney stays with their firm, the more compensation (e.g., salary, bonuses) they’ll receive. This compensation model is all about seniority.
Modified Hale and Dorr: Partners are split into three categories. In addition to a base salary, contributing parties would receive a predetermined percentage of the profits in exchange for the work that’s done.
Simple Unit: The simple unit model rewards seniority, production, rainmaking and nonbillable work. It relies on a points system. This is used to determine profit allocation among partners and employees.
50/50 Subjective-Objective: In this model, metrics are used to determine attorney/partner income. The better the performance with KPIs (e.g., billables, realization, utilization, etc.), the more they make.
Team Building: Individual performance takes a back seat to firm performance. Fifty percent of a partner’s income is based on the firm’s financial health and performance. Forty percent is based on a practice group or department’s performance. Ten percent would be based on individual performance.
Eat What You Kill: The eat-what-you-kill model focuses exclusively on individual effort. Firms may charge attorneys/partners a share of the overhead, but each partner pays the salaries of their support team. Attorneys also cover their individual expenses

Note: You can read this article for a comprehensive breakdown.

As you’ve probably noticed, some of these plans are performance-based while others are salary based. There are pros and cons to both, so this complicates the decision further.

Which plan is best?

All of them – provided that you have the right framework in place. Instead of recommending one compensation plan over another, a layered strategy may be best. Here’s a strategy you can use.

Use collaboration is the foundation.
Team building (or a variation of #6 above) as the primary compensation model.
Finally, add any other plan as a secondary compensation model.

This is an a la carte approach.

It isn’t an easy approach, it’s a lot more work, and it requires thinking on the part of firm leadership rather than the copy and paste methods many firms are used to.

A plan like this requires a few separate ingredients.

A layered compensation plan: See above
Fixing team dysfunctions: According to Patrick Lencioni, there are five dysfunctions of a team. They are: An absence of trust, fear of conflict, lack of commitment, avoidance of accountability and inattention to results. These issues affect each of the other ingredients below. It’s a good idea to continually monitor and resolve each of these issues as they appear.
Consistent team training: As I mentioned above, competence builds trust. It’s an essential element that’s needed to increase organic interpersonal collaboration. An easy way to do this is via team cross-training. Practice groups train each other, teaching them about their specialties, how to better serve their clients and how to make money.
Collaboration checks and balances: There needs to be a system that regulates team collaboration. This doesn’t need to be complicated. It can be as simple as verifying that employees are behaving ethically, are competent and that employees have an anonymous and reliable system for reporting inappropriate behavior.
Origination planning: Rainmaking is the holy grail for many firms. Good origination plans create rainmakers on a consistent basis. A solid origination plan also eliminates client and file hoarding, end arounds, turf wars and silos, matter bartering and poorly picked pitch teams. Our ultimate guide to origination planning walks you through the twists and turns of origination credit.
Counteracting unhealthy silos: Unhealthy silos create turf wars. You’ll need to know how to destroy barriers that allow unhealthy competition to crop back into your firm. You’ll also need to know how to identify, non-engaged and disengaged employees as well as how to rehabilitate or remove these employees.
Proven hiring methodologies: Methodologies like Topgrading enable you to attract the top 10 percent of talent in the industry with a 90 percent success rate, reducing the odds of attracting disengaged saboteurs or morale killers.
Behavioral ethics and value alignment: How will you handle offenders? What if a partner poaches clients or origination credit from another employee? Do you have the systems and procedures in place to address the problem?

Each of these ingredients tackles a barrier that threatens your compensation plan. These ingredients are the details minders in your firm should be focused on.

Why is this the best compensation plan?

Because a layered compensation plan allows you to work with your firm’s culture rather than against it. If you’ve read my previous post on culture and values, you know why this is crucial.

So what does this look like?

If your firm has a clan culture where everyone behaves like family, You may prefer to:

Use collaboration as the foundation.
Use the team-building model (or a variation) as the layer for partners in your firm.
Use a modified Hale and Dorr model for associates and support teams.

If your firm has a market culture that’s utilitarian, results-oriented and pragmatic, you may prefer to:

Use collaboration as the foundation.
Use the team-building model (or a variation) as the layer for partners in your firm.
Use a kill-what-you-eat model to motivate associates and support teams to compete (in a healthy way) while also cooperating.

If you have an adhocracy culture you may prefer to:

Use collaboration as the foundation.
Use the team-building model (or a variation) as the layer for partners in your firm.
Adjust compensation plans to fit your particular circumstance, whether that’s determined by practice groups, employees, etc.

If you have a hierarchy culture you may prefer to:

Use collaboration as the foundation.
Use the team-building model (or a variation) as the layer for partners in your firm.
Provide a variation of the lockstep model for your firm.

See what I mean?

Why the “best compensation plan” question is difficult to answer

It depends on you and the identity of your firm.

Compensation, as we’ve seen, depends on a complex mix of ingredients. Traditional compensation systems are failing to produce the kind of loyalty and morale boost firms need to remain competitive.

We now know why.

Successful law firm compensation plans depend on environment. If your compensation model is a seed, your environment is the soil your compensation model needs to grow. A toxic environment creates a scenario where your compensation model, even a perfect one, is unlikely to thrive.

No one can decide for you.

You’ll have to choose. Use the framework I’ve shared today, and you’ll have the necessary ingredients you need to create the best compensation plans for your firm. Choose carefully, and you’ll find pay raises are largely irrelevant.

The dark side of law firm productivity: Why attorneys work too hard

December 9, 2019 By Andrew McDermott Leave a Comment

Why do attorneys work so hard?

Are they pursuing a higher purpose or some lofty goal? Some are, but they’re in the minority. Are they simply more driven or ambitious than the rest of the world? Maybe, but these attorneys are the exception, not the rule.

What is it then?

Why are attorneys willing to work 50 – 100 hours per week? Are these attorneys more productive than the rest of their peers?

The dark side of productivity: attorneys who work too hard

In my previous post, I shared research from Stanford University. Professor John Pencavel found productivity per hour declines sharply when a person works more than 50 hours per week.

It’s a case of diminishing returns.

Those who work 70+ hours per week get the same amount done as those who work 50 hours per week. It’s a sharp decline in productivity attorneys continue to push themselves to do more. A few of these attorneys work themselves to death.

Why do they do it?

The answer to this question is a controversial one that’s bound to provoke a strong reaction.

The cause? Fear.

Skeptical? Let’s take a look at a few of the causes so I can demonstrate what I mean.

If you work hard, you’ll make partner.
If you make a mistake, we’ll fire you, or you’ll ruin your career.
If you want to keep your job, you’ll outwork work your peers.
If you don’t do a good job, you won’t get more work.
If we overwhelm you with work, it means we like you.
If you’ve made a mistake, hard work will fix it.
Your peers are working harder than you.
If you want to pay off your student loans, a career in law is the only way you’ll be able to do it.
Associates are expendable and replaceable.
Partners are expendable and replaceable.
You can’t attract clients without us.
You need us; you can’t make it on your own.
If you leave the firm, you’ll lose everything.
If you leave your firm, your standard of living will decrease.

Taken to an extreme, these are dangerous.

Why is this a problem?

It’s toil vs. productivity.

Many people believe toil and productivity are the same. In reality, they’re polar opposites. Let’s break it down a bit.

Toil: Tedious, exhausting and repetitive work that’s relentless or never-ending. It’s fruitless, low-value work that erodes morale in your firm. Repetitious tasks – document reviews, proofreading, copying performed indefinitely – these are the necessary but despair-inducing parts of practicing law. Unhealthy toil produces stress, burnout and fear.
Productivity: Work that moves the needle, takes you closer to your goals, or helps you build a solid reputation in your firm or industry. It’s work (big or small) that produces the kind of results you’re looking for in your career. Its meaningful work you know will showcase your considerable talents. It’s a morale booster for firms.

With the right why your…

Conventional results create trust. Conventional results = doing your job exceptionally well. Being a great attorney, going above and beyond for clients and your team. Exceptional day-to-day performance increases. If you’re a real estate attorney, your documents and agreements are above reproach; your work is pristine, you’re fast, efficient, helpful, productive, etc.
Transformative results create career opportunities. These are extras, the above and beyond results that make things better for your firm, the industry or clients as a whole. It can be as simple as sharing knowledge via a speech, interview or article or as comprehensive as personally taking on a client. It’s your big break, the chance to handle a major action on behalf of your firm or take the lead on a major client’s matter.

Here’s the thing about these.

Think back to the items in our list above.

They coast after that.

This is the dark side of productivity.

The list I’ve shared above, it motivates attorneys to work very, very hard. It’s effective, but only in the short term. At some point, the problems in our list will be resolved or employees will simply stop caring. It’s an individual event for each employee, but the effect these decreases have on morale keeps productivity lower than it should be.

This is why most attorneys work as hard as they do.

Fear of loss.

In my next post, I’ll share practical strategies and tactics your firm can use to 2x, 4x and even 10x productivity with billables while decreasing the amount of time spent on non-billables.