A cynical and successful business lawyer I know believes there are three universal questions within law firms: “Who’s boss?”, “How loyal are you?”, and “How long are you planning to stay with the firm?” Some might say that the mere act of considering these questions as paramount undercuts any real concern for colleagues. Still, from what I have seen, as a rainmaking and recruiting consultant, most firms include lawyers who work well together and like each other. However, when significant energy is spent on intra-firm power and money struggles the result is unhappy lawyers, or worse. Sometimes the power plays and money divisions are so intolerable to lawyers that they start to leave the firm. When enough people leave, it can start a dangerous downward spiral. Over the years, local and national law firms of varying sizes have been significantly harmed, and sometimes closed, over the issue of how authority and money is divided.
Since January is the month in which most law firms are considering how to divide their profits, it’s a good time to explore the compensation implications surrounding the harsh but crucial questions of who’s boss, how loyal the attorneys are to the firm and how long they expect to stay.
Frequently, client origination is given the highest weight in deciding partner compensation. Although I do not believe that is always the best model, (See: “The Ideal Law Firm Compensation System”), emphasizing client origination can work well, provided that clients are not tattooed to lawyers. When the lawyer who originally brings in a client retains all the client credit, even when doing little or no continuing work, the originator is inevitably resented. To run a firm with cooperative and contented partners, “client tattoos” must be removed; the wealth must be shared with at least some fairness.
Bringing in a client is a big deal. However, when other lawyers have nurtured, expanded or maintained the client relationship and worked hard with that client over the years, origination credit should diminish over time. This is especially true when the client is neither a relative nor a friend of the originator. In those cases, clients often transition into thinking one or more non-originators are his or her lawyers. Such clients can, and do, leave with the person who has become “their” lawyer, the person running their deals or litigations.
Tatooing clients to the lawyer who made the original connection encourages resentment from those who have taken over the hoeing and watering. Even when a client is unlikely to remove all of its work because the original procurer is a relative or friend, the disruption caused by departures of one or more of the client’s “service” partners hurts both the client and the firm. That client will often send at least some business to the new firm where the lawyer who worked with them has landed.
The exact factors to be considered in dividing a firm’s profits can legitimately vary from firm to firm. However, it is always a mistake, for the individuals involved and the firm as a whole, to place enormous weight on an introduction that occurred years ago, and particularly the lawyer has not continued to significantly work on that client’s matters.