Protecting Your Bottom Line in Tough Times: Management Tips
When the going gets tough, the tough get going! We’re not sure who first uttered those inspiring words, but they do seem to apply to the current business climate. Jobs are evaporating, money is tight and credit is nearly nonexistent. Firms are feeling the pinch and we’d like to offer some tips for surviving this recession. So, in our next several columns, we’ll cover the waterfront—management, marketing, technology and finance—with special emphasis on profitability and your bottom line.
Develop a Strategic Plan
This means a business plan, which includes a description of the type of legal services you intend to provide, a budget, a marketing plan detailing your target clients and how you’ll reach them, and a management plan setting out the key employees, physical space and technology you’ll need to succeed. In the process, take a look at what you already have and see what you can eliminate. A recession is a good opportunity to refocus your firm and put it back on the right track.
Once developed, put your plan to work as your road map to guide firm decisions. Tweak it regularly as needed. For help developing a business plan, see The Lawyer’s Guide to Creating a Business Plan: A Step-by-Step Software Package by Linda E. Pinson ( ABA, 2008).
Evaluate Your Firm’s Governance Structure
Do you promote people to management roles based on popularity or based on business acumen? Can your management structure be streamlined to be more nimble and responsive? Democracies are wonderful governmental structures, but they are not designed to make money most effectively and efficiently.
Ensure that you are selecting an effective management group that will have the trust of the majority while making the hard decisions to keep your firm out of the red ink.
Hire Professional Management
Whether it’s an executive director, a firm administrator, a chief financial officer or an HR director, professional managers are paid to produce results in their areas of expertise, freeing lawyers to spend their time doing what they do best: handling client matters. How can you tell if your practice is ready for this step? If the amount of time spent on management multiplied by your hourly billing rate is higher than the salary and benefits of an executive director, or even close, you are losing money by not hiring professional management.
Guard Your Assets
Since the top method of maintaining a firm’s profitability is having top income-producing partners, associates and staff, you must protect your income base. Recognize your stars and ensure that you are reducing the possibility of losing them to a competitor. Consider what you can do, from a management perspective, to ensure that your employees are happy. Remember that people don’t leave a job, they leave a bad boss, an unhappy work situation or a bad co-worker. The cost of turnover alone is estimated at about 1.5 times annual salary for nonlawyers and two times annual salary, or more, for lawyers. Factor in the additional lost revenue from a star leaving your firm and you can see that time invested in promoting a positive, satisfied and productive work culture is time well spent!
A couple of good resources to help you with this are The Extraordinary Law Firm: Making Your Firm a Great Place to Work by Charles E. Stinnett ( ALA, 2007) and Keeping Good Lawyers: Best Practices to Create Career Satisfaction by M. Diane Vogt and Lori-Ann Rickard ( ABA, 2000).
Get Your Ship in Shape
Use any downtime you or your staff may be experiencing to develop and implement a policies and procedures manual for your firm. Policies and procedures manuals are great for bringing a new employee up to speed or handling the unexpected or lengthy absence of a key employee. They’re also crucial to protect the firm should you need to discipline or fire a staff member. And they’re easier to develop than you might think.
Start by having all current employees outline the tasks that they perform on a regular basis and then fill in the details. If you don’t already have job descriptions for each of your employees, these outlines can also be used for that, to evaluate whether work is evenly divided, and determine whether there are overlaps or gaps in responsibility. If you do have job descriptions, compare the individual employee outlines to those descriptions to determine whether the employee is doing what he or she was originally hired to do. That comparison will enable you to discover whether the job description or the work actually being done should be changed. To jump-start the process, check out some of the policy and procedures templates available in Law Office Policy and Procedures Manual, 5th Edition, by Howard I. Hatoff and Robert C. Wert (ABA, 2007) and Law Office Procedures Manual for Solos and Small Firms, 3rd Edition, by Demetrios Dimitriou (ABA, 2005).
An additional note on employee policy for firms considering swinging the axe: Layoffs are difficult and painful to manage, but the uncertainty created by postponing the inevitable is bad for office morale, not to mention the bottom line. If you have to reduce staff, do it earlier rather than later. Then, reassure remaining staff that you believe you have made the needed cuts and that their jobs are secure. (See Marcia Shannon’s Managing column in this issue for more guidance.)
People are very receptive and will pick up on negative vibes. While nearly everyone is in the same boat in this economy, most of us prefer dealing with positive, upbeat people—especially when times are downbeat. This applies to management as well as staff. Set a great example for your people in your attitude, and it will pay off in the bottom line, even during hard times.
Special thanks to our colleague Jim Calloway, Director of the Oklahoma Bar Association’s Management Assistance Program, for sending us a couple of the tips in this installment. In the next issue, we’ll cover marketing your practice and how you can improve the return on your investment for your marketing expenditures.