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Deciding When And How To Effectively Use A Legal Administrator

The American Bar Association consistently reports that the average size law firm in the United States is comprised of 6-7 lawyers plus selected support staff. The owners of many of these firms do not seem to understand or appreciate the economic benefits that accrue to their firm(s) through the use of a trained business administrator. Many law firms today are still asking themselves the question "should we hire a full-time experienced business manager/administrator to run the operational side of our firm?".

Criteria For Making A Decision

In truth, even the sole practitioner with a single employee has already delegated all or at least a portion of administrative management responsibility/authority to the staff member. Basic duties will include: word processing, billing, collections, ac- counting, purchasing, cash management, insurance management, payroll issues, personnel matters, etc.

As the firm expands and more lawyers are added, someone must be assigned the growing responsibilities for handling operational issues. By the time that a firm reaches the 10-12 lawyer size, a full time business manager can easily be cost-justified.

The basic factors for the 1-10 lawyer firm to consider in deciding to hire a full-time administrator are:

  1. Record and evaluate how much time is being spent by ALL lawyers in administrative tasks (ie., jobs that can be delegated and performed by a non-lawyer);

  2. Compute the "soft costs" of factor 1 above by multiplying the total number of hours recorded by the billing rate(s) of the lawyer(s);

  3. Determine if the costs calculated in factor 2 above are sufficient to hire a competent, experienced business manager/administrator;

  4. If the analysis in factors 1, 2 and 3 above indicate at least a "break-even", then the firm should definitely make the decision to hire the administrator;

  5. The other single most important factor to ensure success for the new administrator is the unqualified support of the senior lawyer(s) and willingness to delegate authority to the new administrator for getting the assigned duties accomplished;

Recent history throughout the country has proved convincingly that an experienced business administrator can bring training and expertise to the management team that the vast majority of lawyers simply do not have. The potential payback to the firm can be several times the actual compensation of the administrator, depending primarily upon the extent of the authority delegated by lawyer managers to the senior non-lawyer manager.

Mid-Size and Larger Firms

The phenomenal growth of the Association of Legal Administrators over the past 20 years is ample evidence that law firms around the country are beginning to understand the value of having an experienced business manager on the management team. ALA has grown from less than 1000 members in 1976 to over 8000 as 1995 gets underway! Most importantly, the vast majority of these members work in law firms with less than 20 lawyers.

An entirely new profession is developing rapidly consisting of these new managers. Therefore, the Annual Educational Conference of ALA regularly attracts 1800 or more attendees seeking to learn and share knowledge about more effective law firm management skills.

Very few law firms with more than 20 lawyers try to manage their business affairs without the assistance of a full-time experienced administrator. It is simply a terrible misuse of lawyer time to have business issues assigned to a lawyer, who generally is neither trained or experienced or even remotely interested in the day-to- day operational matters of the firm. Here again, the basic "break- even" analysis will quickly prove the value in using an experienced administrator to handle these tasks.

Compensation vs Value Received

Admittedly, salary levels for competent, experienced business managers have risen sharply in recent years. The demand for people with credentials including the MBA, CPA and/or other similar qualifications has naturally forced compensation levels to rise. As more and more firms made the commitment to hire experienced managers, the supply/demand equation has contributed to this escalation.

However, each firm's potential use of it's firm administrator is almost unlimited, restricted only by licensing requirements and sufficient creative ideas. A competent person can bring incredible value to the management team, if the lawyers delegate authority along with responsibility for managing the administrative operations of the business. By the same token, the administrator will be severely crippled and minimally effective if there is assigned responsibility but very little authority to accomplish the assignments.

The key to success is to have a clear description of the expectations from the management team regarding the role of the firm administrator. With this definition as common ground, the organization has a reasonable chance for effective success.

Summary Suggestions

Every law firm, regardless of size, can use the services of a non- lawyer business manager/administrator. Lawyers absolutely should not be engaged in any activity that can be delegated to a non- lawyer on the staff. Keep in mind that only lawyers can recruit, hire and train other lawyers; create new business opportunities; create and deliver a quality legal product to the client in a timely manner; and generally maintain internal quality control over the management of the legal practice.

After all is said and done, there are only two aspects of managing a law firm, regardless of size - they are practice management and administrative or operational management. Lawyers must manage the practice. However, every other aspect of firm management can and should be delegated to a trained non-lawyer for optimally effective and profitable management.

There are still far too many lawyers who refuse to accept the basic ideas that have been presented in the above paragraphs. However, refusing to accept a valid concept does not invalidate that idea! Managers and owners of firms that have not been willing to hire an experienced business manager are simply losing profitable opportunities every single business day that passes under that management structure. Indeed, they are also suffering heavily the "lost opportunity costs" of the time and income which could have been theirs if they had delegated non-lawyer tasks to a qualified business manager/administrator and used that time instead for billable activities or development of their practice. These lost profits become enormous if leverage and the time value of money are used to project them out over several years. It is literally true that it pays to make the decision to utilize an experienced administrator as soon as possible.

Operational management in a modern law firm today requires the talent and skills of someone who is trained to competently make quick and difficult but informed decisions. The vast majority of practicing lawyers simply do not have any management training or education, and do not have the time and/or interest to carefully prepare themselves to make key management decisions in their practices. The old saw still is true that lawyers usually become lawyers to practice law, not to become personnel managers, financial managers or business managers.

For all of these reasons, the evolution and use of the experienced law firm business manager is growing exponentially. Each firm will decide the timing for adding this key member to it's management team. However, the question of whether or not to add a business manager is moot - the only question is "why has the firm waited so long to make this decision and how does the firm locate and hire a mutually compatible person to fill this key position?"

A more profitable and smoothly operating law firm is waiting for any management team willing to step out and join the growing majority of law firms that are already reaping the tremendous benefits of using a trained, experienced law firm administrator.

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