Look Before You Leap

One of the most difficult decisions any partner faces is whether to make a lateral move. Unlike associate lateral moves, which are relatively straightforward and can be accomplished in as little as one week, the issues facing partners are far more complex, and the process can typically take three to four months ' sometimes much longer.

Before making the leap, partners should consider the following seven questions:

1. What should I look for ' and look at ' in a new firm?

Unfortunately, in many cases, the main criterion partners focus on when evaluating other opportunities is the new firm's Profits Per Partner (PPP) listed in the AmLaw 100, The American Lawyer's annual survey of law firm revenues and profits. In fact, on several occasions partners have eliminated firms from consideration solely because the new firm's PPP is lower than their current firm's, “so they must make less money.”

Although a firm's PPP is important, I think very few partners realize that no independent entity is verifying those numbers and that, in a few cases, the numbers are probably about as accurate as Enron's financial statements.

Important factors to consider include:

• Platform. Will the new firm be able to support your current practice or, better yet, offer synergies that will allow you to further develop your practice?
• Compensation. Will the new firm's compensation structure complement your own practice? Will you be rewarded for continuing to develop your practice in the manner you prefer or have grown accustomed to, or will you be forced to change your practice or style in order to achieve your compensation goals?
• Billing. Is the new firm's billing structure consistent with your current billing rate?
• Conflicts. Are there potential conflicts between your existing clients and the new firm's clients?
• Culture. Is the “culture” of the new firm in line with your expectations?

While each of these factors could be the subject of its own article, the important thing to realize is that neither money nor PPP should solely drive the decision.

2. What does my partnership agreement say?

Do you remember, after making partner, that the firm sent around the partnership agreement for you to sign? Did you read it? Many partners never do, as they're still basking in the afterglow of having “made it.” The truth is, most partners would probably sign anything at that point, even if it included a provision requiring them to donate their children's internal organs to the managing partner.

In one of life's great ironies, the law firm partnership agreement is actually the ultimate contract of adhesion. But it is a contract, and if you're thinking of making a move, you need to know what your rights and obligations are under that contract. What will happen to your capital contribution? Do you have to give notice? Will you forfeit any retirement funds? All of these matters are typically addressed in the agreement, and if you haven't read it, you're operating in the dark.

3. What's my book?

When evaluating lateral partner candidates, firms typically focus on several metrics, notably the partner's originations, or “book”; personal collections (ie, money collected on the partner's own billed time); billing rate; and realization rate. Most firms will ask for at least two or three years of historical numbers and projected annualized numbers for the current year.

While all of these numbers are important and will greatly influence a firm's interest (as well as your compensation), the portable book is by far the most significant, and is often a threshold issue for many firms. Determining one's book should be relatively easy for most partners, as it involves two simple questions: 1) What clients do you think will follow you to the new firm, and 2) how much business do you think they will generate?

As a general rule, I've found that partners with significant books of business typically know or volunteer their books before even being asked, while partners without significant business (or with no business) often try to either hide this fact or convince the recruiter that it's really, really difficult to determine.

To those who might fall into the latter category, the best advice that I can give is to not take that approach, as it will only serve to undermine your credibility with both the recruiter and the firm. Be upfront about your book and let the chips fall where they may. Trying to hide the number doesn't fool anybody.

4. Will my billing rate change?

Partners looking to move should also be very sensitive to billing rates. This is especially true for partners with low billing rates looking to move to firms with higher rates. Is your practice sustainable at the increased rate? For example, let's say you have $2 million in portables and are currently billing $450 an hour. While your client probably would not care if you went to another firm where your rate remained the same (or ' ha-ha! ' decreased), he or she will care greatly if your new rate is $550. In that situation, for each client in your book, you really need to determine just how rate-elastic the relationship is.

While firms are generally sensitive to this issue and will often let partners raise their rates gradually over one or two years so as to not cause too much of a shock, you can't expect to keep servicing a client at $290 per hour if your new billing rate is twice that amount. Those aren't the kinds of clients the new firm is typically looking to keep.

5. Should I go alone or with a group?

Whether you should venture out alone or go as group really depends on your relative position within the group. If, for example, you are a partner with $1.5 million in portable business, and you want to move with another partner who has no portable business of his or her own, generally speaking you are making yourself less attractive to a new firm. Conversely, if you are partner No. 2, for obvious reasons it is usually in your interest to throw your lot in with the partner with business.

Sometimes, a partner going through the process feels the desire to have other partners join him or her. I would strongly caution that if you are already in the process of moving to another firm, resist the temptation to bring other partners into the mix unless their business is at least as strong as your own. Trying to include partners with lower numbers (especially significantly lower numbers) will likely dilute your own value.

6. What do I tell my clients? My partners? My associates?

To avoid giving legal advice, all I can say on this topic is that a partner preparing to move should become familiar with the related case law, ethical canons, fiduciary obligations, and partnership agreement provisions relating to these matters. The failure to play strictly by the rules in these areas, apart from being ethically and legally wrong, can subject a partner to significant exposure. Do it right and do it by the book so you don't lose sleep over it.

7. Should I work with a recruiter?

If you're going to make a move, there are obviously a number of ways you can do it. One option is to pick up the phone and start calling other firms directly. While this may be feasible at firms where you have strong personal contacts, it can be rather awkward if you don't, and many partners are unsure whom to call or what they should say.

Even if you do have strong personal contacts at a firm, calling on a friend to assist you may not be the best strategy, for several reasons. First, you will invariably have to disclose all sorts of personal information regarding your compensation and portables to your friend. Second, your friend may not be an influential person at the firm or, worse, may not be in management's good graces; hitching your wagon to him or her could put you behind the eight ball before you even get started. Third, if you ultimately decide not to join the firm, your friend may lose face.

If you do decide to work with a recruiter, it is definitely in your best interest to work with only one person. While it might seem tempting to have multiple people “test the waters” for you, ultimately it will decrease the effectiveness of all the recruiters.

A good recruiter should serve as an effective middleman (or middlewoman – middleperson?) for both the partner and the new firm. The ability to fulfill that role is drastically reduced if the recruiter has no idea what else the partner might have cooking in other pots. The uncertainty this creates can actually result in making the candidate less attractive to a firm, as the firm may feel it is being “played” by the partner.

If a partner is working with only one recruiter and is being actively pursued by several firms, a good recruiter is able to keep all interested firms up to speed and can advise them how to better attract the candidate.

It also reduces any potential conflict of interest ' no one need worry that a recruiter will blindly recommend “his” firm over the other ones that the partner has either located on his or her own or has been introduced to by another recruiter. If the same recruiter has introduced the partner to all firms under consideration, the partner is more likely to value the recruiter's opinion of the relative pros and cons of each one since the recruiter will earn a fee regardless of the firm the partner chooses. (All fees are typically paid by the law firm, not the candidate, and are usually a percentage of the partner's compensation to be paid by the new firm in the first year.)

Using only one recruiter also makes the process much easier for the partner. I've found that partners who want to work with me and other recruiters tend to “guard” all sorts of information regarding their other options out of the mistaken belief that I might try to use that information to their detriment. As noted above, this tends to create uncertainty and actually inhibits the process. In fact, I feel so strongly about the need to use only one recruiter that when faced with such a situation, I advise partners to pick the recruiter they feel most comfortable with and use him or her exclusively, even if it's not me.

Whatever you do, make sure to look before you leap. There is a lot involved and a lot at stake. You owe it to yourself to approach a move with the same diligence you give your clients.

One of the most difficult decisions any partner faces is whether to make a lateral move. Unlike associate lateral moves, which are relatively straightforward and can be accomplished in as little as one week, the issues facing partners are far more complex, and the process can typically take three to four months ' sometimes much longer.

Before making the leap, partners should consider the following seven questions:

1. What should I look for ' and look at ' in a new firm?

Unfortunately, in many cases, the main criterion partners focus on when evaluating other opportunities is the new firm's Profits Per Partner (PPP) listed in the AmLaw 100, The American Lawyer's annual survey of law firm revenues and profits. In fact, on several occasions partners have eliminated firms from consideration solely because the new firm's PPP is lower than their current firm's, “so they must make less money.”

Although a firm's PPP is important, I think very few partners realize that no independent entity is verifying those numbers and that, in a few cases, the numbers are probably about as accurate as Enron's financial statements.

Important factors to consider include:

• Platform. Will the new firm be able to support your current practice or, better yet, offer synergies that will allow you to further develop your practice?
• Compensation. Will the new firm's compensation structure complement your own practice? Will you be rewarded for continuing to develop your practice in the manner you prefer or have grown accustomed to, or will you be forced to change your practice or style in order to achieve your compensation goals?
• Billing. Is the new firm's billing structure consistent with your current billing rate?
• Conflicts. Are there potential conflicts between your existing clients and the new firm's clients?
• Culture. Is the “culture” of the new firm in line with your expectations?

While each of these factors could be the subject of its own article, the important thing to realize is that neither money nor PPP should solely drive the decision.

2. What does my partnership agreement say?

Do you remember, after making partner, that the firm sent around the partnership agreement for you to sign? Did you read it? Many partners never do, as they're still basking in the afterglow of having “made it.” The truth is, most partners would probably sign anything at that point, even if it included a provision requiring them to donate their children's internal organs to the managing partner.

In one of life's great ironies, the law firm partnership agreement is actually the ultimate contract of adhesion. But it is a contract, and if you're thinking of making a move, you need to know what your rights and obligations are under that contract. What will happen to your capital contribution? Do you have to give notice? Will you forfeit any retirement funds? All of these matters are typically addressed in the agreement, and if you haven't read it, you're operating in the dark.

3. What's my book?

When evaluating lateral partner candidates, firms typically focus on several metrics, notably the partner's originations, or “book”; personal collections (ie, money collected on the partner's own billed time); billing rate; and realization rate. Most firms will ask for at least two or three years of historical numbers and projected annualized numbers for the current year.

While all of these numbers are important and will greatly influence a firm's interest (as well as your compensation), the portable book is by far the most significant, and is often a threshold issue for many firms. Determining one's book should be relatively easy for most partners, as it involves two simple questions: 1) What clients do you think will follow you to the new firm, and 2) how much business do you think they will generate?

As a general rule, I've found that partners with significant books of business typically know or volunteer their books before even being asked, while partners without significant business (or with no business) often try to either hide this fact or convince the recruiter that it's really, really difficult to determine.

To those who might fall into the latter category, the best advice that I can give is to not take that approach, as it will only serve to undermine your credibility with both the recruiter and the firm. Be upfront about your book and let the chips fall where they may. Trying to hide the number doesn't fool anybody.

4. Will my billing rate change?

Partners looking to move should also be very sensitive to billing rates. This is especially true for partners with low billing rates looking to move to firms with higher rates. Is your practice sustainable at the increased rate? For example, let's say you have $2 million in portables and are currently billing $450 an hour. While your client probably would not care if you went to another firm where your rate remained the same (or ' ha-ha! ' decreased), he or she will care greatly if your new rate is $550. In that situation, for each client in your book, you really need to determine just how rate-elastic the relationship is.

While firms are generally sensitive to this issue and will often let partners raise their rates gradually over one or two years so as to not cause too much of a shock, you can't expect to keep servicing a client at $290 per hour if your new billing rate is twice that amount. Those aren't the kinds of clients the new firm is typically looking to keep.

5. Should I go alone or with a group?

Whether you should venture out alone or go as group really depends on your relative position within the group. If, for example, you are a partner with $1.5 million in portable business, and you want to move with another partner who has no portable business of his or her own, generally speaking you are making yourself less attractive to a new firm. Conversely, if you are partner No. 2, for obvious reasons it is usually in your interest to throw your lot in with the partner with business.

Sometimes, a partner going through the process feels the desire to have other partners join him or her. I would strongly caution that if you are already in the process of moving to another firm, resist the temptation to bring other partners into the mix unless their business is at least as strong as your own. Trying to include partners with lower numbers (especially significantly lower numbers) will likely dilute your own value.

6. What do I tell my clients? My partners? My associates?

To avoid giving legal advice, all I can say on this topic is that a partner preparing to move should become familiar with the related case law, ethical canons, fiduciary obligations, and partnership agreement provisions relating to these matters. The failure to play strictly by the rules in these areas, apart from being ethically and legally wrong, can subject a partner to significant exposure. Do it right and do it by the book so you don't lose sleep over it.

7. Should I work with a recruiter?

If you're going to make a move, there are obviously a number of ways you can do it. One option is to pick up the phone and start calling other firms directly. While this may be feasible at firms where you have strong personal contacts, it can be rather awkward if you don't, and many partners are unsure whom to call or what they should say.

Even if you do have strong personal contacts at a firm, calling on a friend to assist you may not be the best strategy, for several reasons. First, you will invariably have to disclose all sorts of personal information regarding your compensation and portables to your friend. Second, your friend may not be an influential person at the firm or, worse, may not be in management's good graces; hitching your wagon to him or her could put you behind the eight ball before you even get started. Third, if you ultimately decide not to join the firm, your friend may lose face.

If you do decide to work with a recruiter, it is definitely in your best interest to work with only one person. While it might seem tempting to have multiple people “test the waters” for you, ultimately it will decrease the effectiveness of all the recruiters.

A good recruiter should serve as an effective middleman (or middlewoman – middleperson?) for both the partner and the new firm. The ability to fulfill that role is drastically reduced if the recruiter has no idea what else the partner might have cooking in other pots. The uncertainty this creates can actually result in making the candidate less attractive to a firm, as the firm may feel it is being “played” by the partner.

If a partner is working with only one recruiter and is being actively pursued by several firms, a good recruiter is able to keep all interested firms up to speed and can advise them how to better attract the candidate.

It also reduces any potential conflict of interest ' no one need worry that a recruiter will blindly recommend “his” firm over the other ones that the partner has either located on his or her own or has been introduced to by another recruiter. If the same recruiter has introduced the partner to all firms under consideration, the partner is more likely to value the recruiter's opinion of the relative pros and cons of each one since the recruiter will earn a fee regardless of the firm the partner chooses. (All fees are typically paid by the law firm, not the candidate, and are usually a percentage of the partner's compensation to be paid by the new firm in the first year.)

Using only one recruiter also makes the process much easier for the partner. I've found that partners who want to work with me and other recruiters tend to “guard” all sorts of information regarding their other options out of the mistaken belief that I might try to use that information to their detriment. As noted above, this tends to create uncertainty and actually inhibits the process. In fact, I feel so strongly about the need to use only one recruiter that when faced with such a situation, I advise partners to pick the recruiter they feel most comfortable with and use him or her exclusively, even if it's not me.

Whatever you do, make sure to look before you leap. There is a lot involved and a lot at stake. You owe it to yourself to approach a move with the same diligence you give your clients.