Growing with Contract Attorneys

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Allison Williams: [00:00:05] Hi, everybody. It’s Allison Williams here, your host of The Crushing Chaos with Law Firm Mentor podcast. Law Firm Mentor is a business coaching service for solo and small law firm attorneys. We help you to grow your revenues, crush chaos in business, and make more money.

Allison Williams: [00:00:29] You are listening to another episode of The Crushing Chaos with Law Firm Mentor podcast, where this week we are going to talk about using contract attorneys to grow your law firm. So when we talk about growing a law firm, there are a lot of different ways that we can accomplish this. For a lot of lawyers, the first thought is, I can’t afford an associate. However, I need help and I don’t know when is the right time for me to fuel up and go ahead and step out on faith, I hire that full time associate attorney and let, and trust that the work is going to show up versus when it’s time for me to kind of double down, hunker down, do a little bit more, work myself and ultimately be able to keep more of the profit. Right. So if you have followed this podcast for any length of time, you know that I’m a big proponent of going ahead and hiring ahead of what you feel is the perfect time to hand off a complete separate load to a lawyer. Because far more often than not, as a law firm owner, there are things that are happening in files or available opportunities to make money off of a file that you’re missing simply because you are stretched too thin. You’ve got too much going on. You are the head lawyer. You are the head rainmaker. You are the head salesperson. You are the head manager. You are the head leader. You are the CEO. You are the visionary. You are doing so many things that it is almost impossible to conceive of anyone doing all of that exceptionally well. And as a result of that, what happens is that lawyers often fall into the habit of doing just what’s necessary in order to move a file forward, rather than doing everything possible to expand the value.

Allison Williams: [00:02:12] So I want you to think about that as just kind of a framework for how you should approach hiring a law firm. But having said that, we also know that there are times when you need help with the work and you can actually monetize getting help with the work much better if you get some initial help from a contract attorney and or start the relationship with a contract attorney before you move into hiring an associate so that you can dial in some of your delegation systems so that you can get some revenue in the door faster. You can actually start to expand your revenue pool faster than if you either did the work yourself or waited and hired an associate that you’re not going to be able to hand off on right away.

Allison Williams: [00:02:55] So there’s different models of how to grow. And today, rather than kind of go into a debate as to which is appropriate, there are some considerations that I want you to be thinking about when you’re contemplating hiring with a contract attorney. Okay.

Allison Williams: [00:03:09] So the very first thing to do is to think about what type of work you want your contract attorney to do. So this means that there are sometimes there are some lawyers that would feel comfortable, depending on the nature of their relationship with the contract attorney. They would feel comfortable handing over the entire file. I taking John Doe’s file and I tell John Doe at the consult, you’re going to work with my colleague Susie Smith. And colleague Susie Smith is going to handle everything about the file, but your billing is going to come through the law firm. Your communications will come from an email address here at the law firm. If there are any customer service issues, any disagreements with the contract attorney, obviously you don’t refer to them as a contract attorney. But if there’s any issues with the colleague, you can always come back to me. But generally speaking, the lead attorney on the file is going to be the contract attorney.

Allison Williams: [00:04:01] Now for a lot of lawyers, that presents a lot of risk. Right? There’s a fear of I hand over the file. The client bonds with the contract attorney and then when the case is over, I have now lost a client. Right? So I made some short-term revenue. But the lifetime value of the client is actually compressed because of the relationship formed with the colleague. There are ways to mitigate that risk, right? So you can make sure that you build your communications ecosystem on your law firm so that everything is happening through your law firm, that your colleague, the contract attorney, has to communicate through your ecosystem and ultimately has to do work on your platform so that the client file is maintained on your platform. And then you want to create a communication strategy that doesn’t just include communications going through the contract attorney, but also includes direct communications through your staff, like your paralegal, your legal assistant, your receptionist, and that ultimately touchpoints are happening from the firm to the client so that the client feels the relationship with the law firm and not simply with the lawyer who is doing the work on the file. But that is one consideration if you hand over the entire file.

Allison Williams: [00:05:13] Another great way to mitigate risk is to only hand off projects. And this is probably the most common model that I have seen with lawyers who are growing through contract attorneys. So handing off activity on files oftentimes means you’re going to hand off larger projects. Your contract attorney is going to meet with the client to go through discovery. Your contract attorney is going to be writing legal briefs and motions for the file. Your contract attorney might be doing things like auditing the file so that they can put together comprehensive timelines and schedules or conducting legal research on esoteric issues that you want to assert as a defense or a claim in the case.

Allison Williams: [00:05:52] Whatever the contract attorney is doing, the goal is that there is only so much work that the contract attorney is doing, and they’re doing it in snippets, if you will, and your contract attorney is doing pieces of work. When they are doing snippets of work, you have far more control over retaining the client because the work that is being done is the kind of work that is not independent of the representation. Meaning the client has formed a relationship with you or other members of your team, and then ultimately the contract attorney has a very prescripted, very limited contact with the client so that the relationship that is formed between the client and the law firm is sustained and continues whether that contract attorney remains in your employee for a series of months, a series of years, or ultimately for one and only one project.

Allison Williams: [00:06:47] A great way of using contract attorneys for this particular process. Right. Having only a project done by the attorney is when you need to have short-term help, when you know you’re only going to need this person’s help over a defined period of time. That can be when you are going on extended leave. It could be for maternity leave or if you have an ailing parent that you’re going to take some extended time off to care for. It could just be when you are in a surge of growth, but you are not trying to ultimately grow your business.

Allison Williams: [00:07:20] Now, most of you that are listening to this podcast, you have a desire to grow your business, right? So your goal is not to bring on someone for a project here or there to make a little extra cash and then go back to doing everything yourself. You, you probably listen to our episode on enterprise, goodwill, and the importance of having a branded system in a company, as opposed to you being the, the delivering, the delivery person of the service, as well as you being the face of the firm, because that restricts what can ultimately done in terms of selling it when you choose to retire or shift positions or even change careers. But assuming for the moment that you’re not yet at a place of growth, you’re not yet at a place where you truly desire to step into something much bigger for yourself and step into more revenue for yourself. But what you really desire to do is just manage the growth in a way that allows you to have extra money right now so you can fuel the growth. Right. So in other words, you don’t want to necessarily go out and bring on an employee which has a whole host of economic consequences, such as payroll taxes and health insurance benefits, because a lot of people believe that when they hire an employee, they really need to have benefits. It’s advisable, but oftentimes not required. But a lot of people believe it is required. Right. So you have to kind of think about these things kind of going in. And if you decide on a contract attorney to get you some short-term help, the nature of the project is something you really have to think about.

Allison Williams: [00:08:51] Another major consideration when it’s time to think about hiring a contract attorney is where to find them, right? So there are a lot of services that have popped up offering loft, law firm project contract assistance. Right. And I’m not going to name any of the services. I’m sure you guys have heard them all before or heard at least some of them before. And I’m not going to say anything positive or negative about the services, but I will note that there has been an ongoing debate in the legal community about the economics of these services that we as legal professionals, we are in a business. Right. So as a business owner, your goal is to maximize your profit, which means typically getting the most bang for your buck on the labor that you’re bringing into your company. Whether you as an individual have a moral center that says you need to be participating in economic well-being of your employees or your contractors, whoever is ultimately doing work for your business and you thus should not be a part of exploitative labor. That is a very individual choice, and I don’t want to proselytize to anyone how they should see the world in terms of how they compensate. But there is something to be said for how a person sets up the economics of their business. And if they are compensating a lot of individuals or even a few individuals through some of these services that pay 15, 20, 30 bucks an hour to a lawyer for legal work, there could be an issue with whether or not you must pass along that information to your, to your clients, and if so, how they will feel about that in terms of your business as a business practice. So I won’t name the jurisdiction, but there’s at least one jurisdiction that I’m aware of that requires that if you are using contract attorneys, you must disclose to your client the rate at which you are paying your contract attorney So you can’t charge your client $300 an hour and pay your contract attorney $70 an hour and not disclose that discrepancy to the client.

Allison Williams: [00:11:07] Now, there are lots of different thoughts around that, whether or not that’s appropriate, because obviously, I don’t disclose to my clients what I, what I choose to pay my associates. I don’t show, I don’t disclose to my, my clients what my benefits package is, what the, what the expenses are that I incur for the firm, what my rent is in my law firm. But this particular structure, I think it was put in place by the jurisdiction that I’m thinking of, in part because they did not want to oppress the lawyers that were doing work as contractors. They didn’t want to have the gig economy be exploited as members of this profession because we do have a higher responsibility than just being America’s next top business owner. We have ethical responsibilities that have lawyers to some degree be the stewards of our community. And so when you start looking at what our responsibilities are, they tend to transcend what you have as a business owner or purely a business owner. So just give some thought to that. Think about that in terms of what your obligations would be, in terms of disclosing your fees, because however you feel about that, that can be something that your clients, if made, made aware, could use against you in terms of how you choose to compensate.

Allison Williams: [00:12:24] Now, having said that, beyond the services that are out there that will pay lawyers a fee, that you ultimately pay a lower hourly rate to secure, there are also lawyers that choose to be solo that don’t want to grow their law firms, but the way that they fund themselves is they do contract work for other law firms. That’s kind of their perpetual way of being. And those lawyers that do work for other law firms, including that they would be willing to do work for your law firm. They oftentimes will have an added benefit, which is that they will negotiate with the rate is for their compensation. And I’ve heard ranges anywhere from 25% to 40% of the fees. A third of the fees is probably the most common compensation model that I’ve heard of across a multitude of jurisdictions. When a lawyer is charging you for the work that they’ll do. So if you are taking in a client and charging them $300 per hour, typically you’re going to pay at least $100 per hour for the contract labor. Again, general rule of thumb, it varies from place to place. You really have to test your own market. But I just wanted to give you that number if you have no conception at all about what they are paid.

Allison Williams: [00:13:41] All right. The next consideration that you really have to take into account when you’re working with contract attorneys is your system for delegation.

Allison Williams: [00:13:50] Now, systems, of course, is what we preach here. It is the Bible of law firm management effectiveness here at Law Firm Mentor. And we talk about crashing chaos all throughout law firm culture by virtue of systematizing. However, when you are dealing with a contract attorney, the necessity of systems is particularly important because as we talk about in our crushing Chaos Master class, you want to create your standard operating procedure, your modus operandi of business that protects you. If anyone were to ever allege anything inappropriate about your business, if anyone were to ever claim you did not do something, you have your standard operating procedure to at least fall back on as a premise to help support your defense of that claim. But with contract attorneys, because they are external to your business, right? They are not full-time employees. They typically don’t have access to everything in your business. They typically are not under your direct supervision the way an employee might be. You have a greater need to have systems in place so that when you are transferring work, you are considering things like maintaining confidentiality of your client files, ensuring that messages that are sent back and forth are sent in the most secure method possible. That can be a client portal, that can be an encrypted cloud-based software like Dropbox. That can be any number of different ways. But you want to have that codified and you want to have in writing the, the principles that you require your contract attorney to live by when handling your client files.

Allison Williams: [00:15:29] So that means things like can they work on a laptop outside of the office when they’re working on client matters? What is their responsibility to ensure that that information, if kept local, is kept under lock and key so that someone else who might have access to that computer does not have access to your clients confidential information. How are you going to ensure that information is timely submitted to the, to the attorney, the contract attorney, that it is timely remitted back to you. What is your system going to be for compensating that person? And what if you start to have disagreements about the extent of time spent on different matters? Right.

Allison Williams: [00:16:07] So one thing that we talk about a lot here at Law Firm Mentor is systematizing your legal work, ensuring that you have a range of appropriate time parameters around how long it takes for work to be delivered. Because if you have an hourly-based system, you want to be able to project out how many hours it is going to take so you can project your revenue. And if you have a flat fee-based system, you want to ensure that you are not spending more on the labor to produce the work within a flat fee than would be appropriate based on the fee that you’re charging. In other words, are your fees appropriate? Do you need to raise your fees based on how long it takes to do the work and the compensation rate you’re going to charge for that? Or do you need to in the, the work that you do, do you need to become more efficient at it so that you can scale your profit off of your flat fee case. Right. So big considerations there, which means you need to know how long it takes to do the work.

Allison Williams: [00:17:04] Well, we know that there is always going to be some degree of variability between humans, right? No. Two humans are going to take exactly 2 hours and 43 minutes to do a particular project. Someone’s going to take a little bit longer. Someone might take longer on certain projects and less on others based on their experience and based on what they enjoy doing. I know some lawyers that can go down a rabbit hole with research and they will wander aimlessly like a cloud for hours, and hours, and hours if allowed to. Not because they are not looking for the answer to the specific question posed, but because while they’re in there, they’re learning, they’re reading, they’re absorbing in a way that another attorney who is more efficient might not choose to do. So you have to think about that as a process with training any attorney on your team to do legal work in your law firm. But it’s particularly important when someone is external to your law firm that you consider not only how long will it likely take that person, but if that person takes significantly longer on a particular task, then you would have taken, How are you going to handle that? Is this going to be a flat fee that you pay with a person for every motion? I’m giving you 6 hours of compensation. That’s it. Right. So if you choose to take 20 hours, great for you. You’re getting paid for six. Or what if it is a person who expected to spend a certain amount of time but they encounter a lot of personal challenges that had them stopping and starting? Right. We have talked on this podcast a lot about the necessity, the value of block scheduling so that your mind is focused on a major task and you’re not bouncing back and forth between emails, phone calls, letters, client communications, adversary communications, staff, communications while you are trying to do a project. But we know that sometimes, especially people who are not within our office and not within our supervisory control, that they oftentimes will handle things very differently. So the bright lawyer who’s capable and gets you brilliant work product but who kind of wanders around the prairie a few times to get there because they, they allow themselves to have an unmanaged mind.They are not disciplined and structured in the way that they do work, that person could take longer, right? Every time that we stop and receive an interruption. The estimate that now neuroscientists are projecting for the time that it takes for your brain to recenter and re-acclimate to the previous task is about 3 minutes. So if it’s taking 3 minutes, every time you stop a task and start again and you stop and start ten times over the course of an activity, that’s an extra 30 minutes, which doesn’t sound like a whole heck of a lot until you consider that if that is how a person ultimately centers themselves and does their work, every single time you give them a project and you give them 30 hours worth of projects over the course of the time that you’re working with them, let’s say it’s over a month, you give them 30 hours over a month. Well, that can easily add up to another 5 to 10 hours, depending on how many interruptions and over what course of time and the number of projects. Wow, an extra 5 to 10 hours adds up, especially when you’re going to have an ongoing relationship with the person. So how are you going to handle that? Right. Are you going to have a flat fee schedule for the activities that they’re going to do going in? Are you going to give them some range of variability? Are you going to have a flat fee schedule for when that person ultimately commences the work? Are you going to say, I’m paying you a certain number of hours and if you need more, you have to come back to the well, right? Because if you just have a flat fee schedule, you might ultimately educate the person that you are inflexible and that if they can’t reduce the amount of time that they spend, that they’re either going to shortchange the quality of the work or they’re going to shortchange themselves. And that’s a really challenging place for a person to be in, right? Nobody wants to feel like they have to half-assed their job if they are a person of such quality that they take pride in their legal work. And that presumably is the kind of person you’d want to have on your team. So you have to think through these things in advance. And of course, everything is subject to communication, right? You can always engage the person in a conversation and say, you know, I want to be fair to you, but I also need to maintain a budget for how much we’re going to spend on this particular project. Let’s find a way that makes this work for both of us. Right? You can do that. But going in, you should always have some hypotheses as to what it’s going to look like, what the time commitment is going to be, so that when you ultimately commence the relationship, you have as few hiccups as possible.

Allison Williams: [00:21:53] All right. The last thing I want to note about contract attorneys before we wrap this up is that it’s really important that you monetize the role with a contract attorney the same way you would with an associate attorney before you start the relationship. And what I mean by monetize the role is you need to be thinking about how many hours you’re going to give the person on an ongoing basis and what some of the ancillary non-billable costs are associated with that relationship. So that means what does the cost of labor? Require for this particular employee. The cost of labor for an associate is not just the time, the money that you spend on their salary, their payroll taxes, any benefits that you pay, any investment that you make in them like CLE’s and travel expenses and things like that. Right? All of that pure economic value you can quantify, but you are also investing in your associates. This is one of the reasons why I am always chagrined when I see these debates online where people say, if I refer out a case and I would have paid John Doe the referring source 30%, why would I not pay the same 30% to my associate? And the reason why you wouldn’t necessarily you could and in certain circumstances that number is appropriate.

Allison Williams: [00:23:16] But the reason why generally you would not necessarily pay a referring person the same as an associate is because the associate is getting other benefits of employment that the referring person is not getting from you. Right? So it’s purely transactional. When you are getting a file from a referring source, your associate is getting things from you in excess of what you are paying for that referral. So you’re paying for the referral, but you are also paying to develop them. You’re also having internal communications about customer service issues that may or may not be caused by the associate or that are implicated by handing work off. You are investing in their career. Presumably, your reputation is something that they get to take into the marketplace when they’re interacting with your clients, with their clients, with other adversaries, with judges, they are getting something more than pure financial compensation from you. So when you think about that in the realm of the contract attorney, that’s, by the way, the reason why contractors receive a higher rate of compensation, just flat dollars and cents over an associate because they are not just having to pay out of that payroll taxes and expenses for themselves. They are also getting purely economic benefit from you and not just not, not the indicia of the employment relationship that an associate would get.

Allison Williams: [00:24:38] So I mention that because when you think about the time and energy and effort that you pour into your associates, a lot of times lawyers don’t think about it. They think of it as the cost of doing business and they don’t quantify it. So you don’t think about how many hours a week you are meeting with your associates and how many times you’re having meetings without your associates to plan out the work that you’re giving them, to create delegation strategies, to monitor the work that they’re doing, i.e. going into your system and reading documents that they prepare that you have not seen before, and making sure that they are attending the right CLEs and growing and learning and developing as an attorney so that they give the highest quality for your clients. Right. All of that that goes into managing your associate is not necessarily absent when you work with a contract attorney, because while you might not be paying for them to go to CLEs and you might not be overseeing their speaking engagements and their marketing and their networking because you’re trying to grow them as an attorney, you do still have the consideration of the time that’s going to go into facilitating the relationship, right? The time to delegate the work, whether that’s going to be compensated or not, are you going to charge your clients for delegating work to your team? You know what’s going to happen when you have a customer complaint, right? That is a part of being in business, dealing with client complaints. I don’t care who you are or how great an attorney you are. People will be people and people will have issues and you have to deal with those issues. Communicating with your contract attorney about those issues is going to be critical. Making sure that they have access to all of the pertinent software, that they have access to all the pertinent documents that you give them what’s necessary to create the best work product, right? All of that additional time and energy and effort goes into creating and sustaining the relationship, even though it is not economically coupable, if you will, at least in the immediacy from your contract attorney. So you have to think about that before you add the person because even as you add the person, a lot of times failure to think through the financial plan associated with labor is what will have lawyers say. I hired this person and now I am making minimum wage while this person is making x dollars. Or I added this person to my law firm, but this person is costing me more than I’m making or the headache of managing them. And the negligible amount of increase in income that I have is just not worth it. Whenever you hear someone say that I for x my attorney roster but my profit went down and my dollars and cents went down and my headaches went up. That is the result of having the right system. Doesn’t mean that they didn’t have any systems. It typically means that they didn’t have the right system to create the law firm that they truly desire, which is frankly where we as Law Firm Mentor come in.

Allison Williams: [00:27:25] So if you are someone who has created a law firm and you have used contract attorneys as a model, and you’re finding that either that model or your ultimate goal of growing through other means is not working for you. I want you to reach out and have a call with us. You can speak with a growth strategist on our team. The link to do that is going to be in the show notes. So I’m Allison Williams, your Law Firm Mentor you’re listening to The Crushing Chaos with Law Firm Mentor podcast. I’ll see you on our next episode.

Allison Williams: [00:28:16] Thank you for tuning in to the Crushing Chaos with Law Firm Mentor podcast. To learn more about today’s show and take advantage of the resources mentioned. Check out our show notes. And if you enjoy today’s episode, take a moment to follow the podcast wherever you get your podcast and leave us a rating and review. This helps us to reach even more law firm owners from around the country who want to crush chaos in business and make more money. I’m Allison Williams, your Law Firm Mentor everyone. Have a great day.