Originally published on May 24, 2011 in our free SmallLaw newsletter. Instead of reading SmallLaw here after the fact, sign up now to receive future issues in realtime.
Last year in TechnoLawyer's BigLaw newsletter, columnist Liz Kurtz profiled my move from one of the world's largest law firms (Latham & Watkins) to one of the world's smallest (Joshua Stein PLLC, a solo commercial real estate practice in New York City).
My solo days were short-lived. Now I run a small law firm. Translation — I'm an employer. When you hire your first employee, you stop being a sole practitioner and start being a small business. And when you hire lawyers, you're a unique type of small business. In this issue of SmallLaw, I discuss the lessons I learned during my transition from solo to small law firm.
Establish Workflows and Make Sure People Follow Them
You can't work amidst chaos — not even organized chaos. I use a serious online document management system (NetDocuments) to keep documents under control. Any documents that we plan to edit always stay in NetDocuments. I am absolutely manic about how we name documents and versions of documents. I know we will inevitably receive requests for a copy of some document, marked to show changes from some specific previous version. We have to service these requests quickly without any detective work to make sure we show changes from the right draft.
For other documents — scanned correspondence, previous agreements, notes — I established a somewhat standardized file structure on my file server. Everything needs to go in the right place with a name that communicates what it is. We all have access to the same files.
Online document management and a robust email system (a business-grade hosted Microsoft Exchange server from Intermedia) take us most of the way to a "virtual office," which means that anyone who works with us can perform all their work on any computer as long as they have an Internet connection.
To take us the rest of the way, I set up remote access to most of my computers, and also bought a Pogoplug, an oddly named and odd-looking device that enables all of us to access one or more of my hard drives over the Internet as if it were a local drive, though the connection is much slower. I can also, at least in theory, offer clients secure access to specified subfolders on the same device. It has a sound and well-structured user interface, and works well for our internal e-filing.
Don't Change Your Workflows Too Much
Once I figure out a good workflow for a task, I've found it pays to stick with it unless there's a compelling reason to change it. You don't want to keep retraining people, or trying to catch up with whatever new system you've put in place.
To help me define and remember my workflows, I maintain a formal Office Procedures Manual, which is over 80 pages. I don't require anyone (least of all me) to memorize it. In fact, some of the people who work for me don't know it exists. I maintain it because I find it's a good discipline to memorialize how I want to run my firm. If I change my mind, I change the words.
Get the Equipment You Need and Then Some
Don't cut corners with your computers and accompanying technology. I have 10 computers in my office of five people. This excess capacity leaves room for errors and extras. I have boxes and boxes of extra cables neatly sorted, some extra monitors, and more scanners than I strictly need. And I have three heavy-duty color laser printers — incredibly helpful when one of them temporarily breaks or someone prints a long document. Each printer represents less than one billable hour of my time, a remarkable fact on both sides of that equation.
What happened to the paperless office? I've made great strides in eliminating paper. Nearly everything arrives in electronic form. We try to keep it that way rather than print it. All our files for completed and pending work are electronic. We store very little paper. But if I need to review something very carefully, I've found I just can't do it on the screen, even though I have eight monitors and a laptop on my desk and two more monitors in another corner of my office. I have to print it out, turn on a bright light, read it on paper, and write notes in the margin. I can't do that on a computer.
So I've learned to buy paper by the case at Costco. I try to buy laser toner cartridges by the case as well. Once you stray from the original brand name, though, the quality varies. When I figure out a good supplier, I'll stick with it, and undoubtedly qualify for a bulk discount.
Forget Secretarial Support — Use Smart College Graduates
Lawyers don't need secretarial support if they are comfortable and facile with computers. As you hire associates, make sure they meet that test. A few still don't.
With no need for a legal secretary, I hire recent college graduates who got high grades from great schools. They have no bad habits or bad attitudes. They are enthusiastic, smart, cheerful, and very computer savvy. I can teach them everything they need to know fairly quickly. They answer the phone, keep the office organized, handle filing, make coffee, answer the door, and take care of special projects.
I tell them they can freely go out on interviews for a "real" jobs. When one of those interviews results in an offer, I hire their unemployed friend, with a day or two of overlap for training. It has worked very well so far. I think one member of my little alumni association will come back soon.
Attracting and Retaining Clients: Share the Wealth
When you hire junior lawyers, you can't control all the client communications. You have to let your staff work directly with your clients. And you have to live with the risk that your clients and the lawyers who work for you will figure out a way to not need you at all. It's up to you to protect your position by providing the value that junior associates cannot — making sure the client realizes that, but without undercutting your subordinates — and building and preserving client loyalty and staff loyalty.
Going a step further, it's up to you to grow and preserve your practice by attracting new clients. If you try to "protect" the client relationship by having important communications go through you, you will make everyone crazy, including you.
Payroll Is a Pain; Payroll Services Are a Pain Reliever
The various levels of government impose so many withholding requirements, reporting requirements, forms, and adjustments that you do not want to go anywhere near the process. Hire a payroll company. It will cost more than $20 per paycheck — an expense that adds up over the course of a year just for the privilege of hiring and paying staff — but it's worth the money.
If you get any piece of the payroll puzzle wrong, some government agency will fine you — in effect a tax on starting a new business because you might foolishly hire people before you have fully set up all the insurance coverages and filings that various laws require. In particular, you need to have a workers' compensation policy in place before the first day someone sets foot in your premises as an employee. New York State, for example, may fine you $2,000 for hiring just one part-time employee for one day without such coverage. It's apparently better if you don't hire them at all.
Beware Independent Contractors
We have all heard that you can avoid some of the burdens of having employees if you instead hire "independent contractors." Don't count on it. Thanks to continuing revenue crises, many states have cracked down on the use of independent contractors, conducting extensive (and often ultimately expensive) audits of employers who try to use this technique.
You often can't treat someone as an independent contractor if they provide services that you resell to your own clients. People in this category must be treated as employees, with all the burdens described above. It's a category that includes hourly attorneys whose services you might resell to your own clients. So if you hire hourly attorneys, even if they intuitively seem to have many characteristics of independent contractors, you still may need to treat them as employees and add them to your payroll. You need to investigate this issue carefully. Don't rely on your intuition or the "obvious" reasonable result. The law in this area is not "reasonable."
As Liz noted in her BigLaw column last year, I have one person who works for me on an hourly basis off-site (actually near Seattle), handling only accounting, payroll, calendar updates, contact maintenance, and version management (saving incoming drafts and preparing redlines). When some New York state agency got wind of her, they investigated but decided she qualified as an independent contractor.
Make the Jump Despite the Hassles
Even with the burdens of overseeing payroll, being my own technical support department, dealing with love letters from state agencies, and running an office — not just practicing law — I still find that having my own small law firm beats my previous life as a large firm partner any day of the week.
Written by Joshua Stein of Joshua Stein PLLC.
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