Using 'Sharing Origination' Credit to Motivate Partners to Develop Business

In today's competitive practice environment, client origination looms large in its significance to the success of a firm's future. Hence, strong incentives should be provided to partners for “bringing new business from potential and existing clients through the door.” Below, several kinds of Origination Credit are examined.

Client Origination

At least one partner is responsible for bringing new clients through the door. Obtaining a new client is important enough that it should entitle the originating partner(s) to receive 100% of the Client Origination Credit of the dollar value of the revenue received from a new client, permanently or for a period of time.

Joint Credit for Originating a Client

Origination credit, the dollar value of the revenue received from a new client that comes to the firm as a result of multiple partners collaboratively bringing a new client through the door, will be shared among these partners. Such credit will be shared by agreement between the concerned partners. If these partners are unable to agree upon terms of sharing origination credit, the decision will be made by the Managing Partner, the Management Committee or the Compensation Committee.

Administering Origination Credit

The entitlement for the originating partner(s) to receive 100% of the origination credit, permanently or for a period of time, is presumed though not automatic, since the entitlement carries with it a responsibility to “mind” the client, at least to some degree, depending upon the circumstances, i.e., whether the client's work is within the area of expertise of the originating attorney.

It is important that the originating partner continue to receive client origination credit for some time, even if one or more other partners are significantly involved in managing and/or performing the work for that client. The firm will continue to benefit by having the originating partner retain some type of a personal or working relationship with that client. Also, the firm does not want the originating partner to believe that by assigning a client or client work to another partner, the latter partner may attempt to persuade the client to refer all future work assignments to them, thereby eliminating the originating partner from having a continuing relationship with that client.

Changing Origination Credits

Changing the partner allocations of origination client credit for a client is usually determined on a case-by-case basis, where appropriate, with credit sharing a reasonable option. For example, where a client was brought in by Partner A 10 years prior, but has given no business to the firm for seven years, and then was brought back to the firm through the efforts of Partner B, it may be appropriate to give all origination credit for that matter to B, or to share the credits, depending on the circumstances. Another circumstance under which origination credit for originating a “new” client may change is if Partner A brings in a client but after a period of years, Partner B has been managing that client and is responsible for maintaining the relationship. If that happens and the partners agree that a change in the origination credit is appropriate, then it can be changed with the consent of the Managing Partner. A third circumstance where origination credit may change is if a client that was originated by Partner A leaves the firm, and after several years of not doing any business for that client, Partner B brings that client back into the firm. Partner B will receive origination credit for that client. Without getting into detail on how that may come about, it will take the approval of the Managing Partner, members of the Management Committee or the Compensation Committee to approve this change in origination credit.

Obviously, the preferred means of resolving issues where more than one partner feels entitled to origination credits for a particular client, is for the partners in question to negotiate an agreed sharing. However, upon request, an issue as to relative entitlement to origination credits will be resolved by the Managing Partner, the Management Committee or the Compensation Committee.

Responsible Partner Credit for a Client Or Matter for Minding of Clients

The responsible partner credit is the dollar value of the amount of revenue received as the result of the work performed by a partner who has been designated as the responsible partner in charge of managing the work performed on a client matter (that was originated by another partner.)

Once the original originating partner no longer plays a principal role in retaining the client, i.e. , the former delegates the client/matter to another partner and the original originating partner does not continue to either service the client or schmooze the client in a way that makes him or her the primary contact, then the original originator no longer qualifies for full origination credits for the client. To illustrate this point, following is one example of sharing responsible partner credit I have recommended to other firms.

The original originating partner who is no longer responsible for that client may remain eligible to receive 75% of the originating credit for the first two or three years, with a further reduction to 50%. In some firms, the 50% of the origination credit may remain thereafter with the original originator for a designated number of years ' for two or three years or as long as that client remains a client of the firm.

As the amount of the origination credit for the originating partner is reduced, responsibility credit will be transferred to the partner designated to serve as the responsible partner by the originating partner. Questions regarding the allocation of origination credits and responsible partner credits will be referred to the Managing Partner, the Management Committee or the Compensation Committee.

It should also be recognized that the more important the client, the more it is in the firm's interest to have multiple partners develop a significant client relationship. The Managing Partner, members of the Management Committee and the Compensation Committee Executive Committee should continue to be mindful of the efforts of originating attorneys to foster the development of such relationships with important clients.

It is recommended that the Managing Partner and members of the Management and Compensation Committees define what a partner needs to do to qualify for this portion of the credit. Otherwise, the policy may not be administered in a consistent manner, and those partners who do not receive responsible attorney credit when others do will feel slighted. This will be especially important as the Managing Partner and members of the Management and Compensation Committees change. In other words, the present Managing Partner and members of the Management and Compensation Committees should set the parameters that will be used and interpreted by successor Committee members.

Matter Proliferation Credit

Partners should have an incentive to “proliferate” new kinds of business from existing clients, regardless of who is the originating attorney for the client.

Matter proliferation credit is the dollar value of the amount of revenue received as the result of a partner proliferating work for a particular matter from an existing client that was originated by another partner. [Since it is important in many cases to know exactly what/who was pivotal in expanding existing client business, if the concerned partners are unable to reach an agreement, the decision will be made by the Managing Partner and members of the Management and Compensation Committees.]

A partner who proliferates new business from an existing client (for whom the partner is not the originating attorney) should request to receive matter proliferation credit for the file created for the new matter (from the originating partner for that client).

To prevent a “disincentive” for the originating partner to keep client relationships to themselves, matter proliferation credit should not be subtracted from client origination credit. (This presumes that the ability to proliferate the new business was somehow related to the existing client relationship. Again, this type of issue should be resolved case-by-case by the partners concerned or the Managing Partner or members of the Management and Compensation Committees.)

Production Credit

Production credit is the dollar value of the amount of revenue received as the result of a partner's personal production. For example, if a partner records $10,000 in time dollar value, which is billed and collected, he or she would receive production credit in the amount of $10,000. If a partner is designated by the originating partner to be the responsible partner for a client or matter, the former will receive production credit for all billable hours he or she devotes to working on that client matter (during the time he or she is managing the work on that client matter.)

Inherited Clients

In many firms, a partner who inherits a client from the originating partner, whether through the retirement of the latter partner or otherwise, may receive client origination credit for that client. In other firms, a partner who inherits a client from the originating partner will receive credits based on a responsible partner retention basis. The second partner serving as the originating attorney would share responsible partner credits, as appropriate, with other partners who have significant responsibility for managing the client or client matter, and would not have entitlement to client origination credits for that client.

Discretionary Subjective Credit

Discretionary subjective credits represent the value allocated subjectively to a partner for his or her discretionary subjective contributions to the firm. These contributions may not have any direct dollar value that may be attributed to them.

Below is a representative list of criteria that may receive discretionary subjective credit.

Seniority

Seniority should be recognized, but it must be understood that seniority should not be tenure alone, nor is it only the number of years a lawyer has been with a firm. It means the number of years the partner has spent developing and maintaining clients, building and enhancing the firm's reputation and participating in the training and development of a cadre of lawyers who produce for the benefit of all the partners in the firm.

Firm Management and Leadership

Contribution to firm management, including efficiency and effectiveness in handling management assignments, is critical to the firm's future and must be recognized. It also includes practice management, recruiting, marketing, etc.

Compliance with Firm Policies

This includes:

• Abiding by policies to keep time accurately, to turn in time sheets promptly, to follow policy on billing, collections, etc. The Managing Partner or members of the Management Committee and the Compensation Committee is expected to take specific note of partners' noncompliance with firm policies.
• Turning over client management and other controls to other lawyers when appropriate.
• Contributing to the equitable and efficient distribution of work assignments and client contacts.
• Specializing and developing expertise in particular areas to complement other abilities in the firm.
• Personal relationships and teamwork. Practicing a team concept, including participation in, and cooperation on, firm committees, etc. is expected, client sharing, client introductions, and overall promotion of harmony and goodwill among firm members is critical and absolutely expected. These include:

1. Maintaining good working relationships with both legal and non-legal personnel.
2. Lending personal support and enthusiasm to all personnel.
3. Respecting each lawyer's professional and management judgments and good faith; withholding all criticism except as necessary for management decisions; and the management of that side of the process in a private setting.
4. Respecting others' contrasting views and respecting each partner as a person.
5. Promoting and cross-selling other firm lawyers.
6. Partner participation in firm activities/functions. Partners are obligated to attend firm social and professional meetings, participation in those management decisions and activities which appropriately fall upon partners and participating fully in the “drudgery” side of the business.
7. Lawyer development and delegation of work. Time and effort in working with younger lawyers to increase their professional skills must be rewarded. This includes the training and development of associates.
8. Professional and community activities. Contributions that enhance the firm's image and prestige through maintaining good relations with other lawyers, speaking at CLE programs, publishing, participating in bar activities, and assuming bar and community leadership positions must also be recognized. These activities should be performed with the knowledge and “approval” of partners, according to a budgeted schedule, as required.

Joel A. Rose, a member of this newsletter's Board of Editors, is a certified management consultant and president of Joel A. Rose & Associates, Inc., Management Consultants to Law Offices (www.joelarose.com), in Cherry Hill, NJ. He has extensive experience consulting with private law firms, and performs and directs consulting assignments in law firm management and organization, strategic and financial planning, lawyer compensation, mergers and acquisitions, and legal services marketing. He also plans and conducts retreats, and has special expertise resolving problems within firms. Rose may be contacted at 856-427-0050 and [email protected].

In today's competitive practice environment, client origination looms large in its significance to the success of a firm's future. Hence, strong incentives should be provided to partners for “bringing new business from potential and existing clients through the door.” Below, several kinds of Origination Credit are examined.

Client Origination

At least one partner is responsible for bringing new clients through the door. Obtaining a new client is important enough that it should entitle the originating partner(s) to receive 100% of the Client Origination Credit of the dollar value of the revenue received from a new client, permanently or for a period of time.

Joint Credit for Originating a Client

Origination credit, the dollar value of the revenue received from a new client that comes to the firm as a result of multiple partners collaboratively bringing a new client through the door, will be shared among these partners. Such credit will be shared by agreement between the concerned partners. If these partners are unable to agree upon terms of sharing origination credit, the decision will be made by the Managing Partner, the Management Committee or the Compensation Committee.

Administering Origination Credit

The entitlement for the originating partner(s) to receive 100% of the origination credit, permanently or for a period of time, is presumed though not automatic, since the entitlement carries with it a responsibility to “mind” the client, at least to some degree, depending upon the circumstances, i.e., whether the client's work is within the area of expertise of the originating attorney.

It is important that the originating partner continue to receive client origination credit for some time, even if one or more other partners are significantly involved in managing and/or performing the work for that client. The firm will continue to benefit by having the originating partner retain some type of a personal or working relationship with that client. Also, the firm does not want the originating partner to believe that by assigning a client or client work to another partner, the latter partner may attempt to persuade the client to refer all future work assignments to them, thereby eliminating the originating partner from having a continuing relationship with that client.

Changing Origination Credits

Changing the partner allocations of origination client credit for a client is usually determined on a case-by-case basis, where appropriate, with credit sharing a reasonable option. For example, where a client was brought in by Partner A 10 years prior, but has given no business to the firm for seven years, and then was brought back to the firm through the efforts of Partner B, it may be appropriate to give all origination credit for that matter to B, or to share the credits, depending on the circumstances. Another circumstance under which origination credit for originating a “new” client may change is if Partner A brings in a client but after a period of years, Partner B has been managing that client and is responsible for maintaining the relationship. If that happens and the partners agree that a change in the origination credit is appropriate, then it can be changed with the consent of the Managing Partner. A third circumstance where origination credit may change is if a client that was originated by Partner A leaves the firm, and after several years of not doing any business for that client, Partner B brings that client back into the firm. Partner B will receive origination credit for that client. Without getting into detail on how that may come about, it will take the approval of the Managing Partner, members of the Management Committee or the Compensation Committee to approve this change in origination credit.

Obviously, the preferred means of resolving issues where more than one partner feels entitled to origination credits for a particular client, is for the partners in question to negotiate an agreed sharing. However, upon request, an issue as to relative entitlement to origination credits will be resolved by the Managing Partner, the Management Committee or the Compensation Committee.

Responsible Partner Credit for a Client Or Matter for Minding of Clients

The responsible partner credit is the dollar value of the amount of revenue received as the result of the work performed by a partner who has been designated as the responsible partner in charge of managing the work performed on a client matter (that was originated by another partner.)

Once the original originating partner no longer plays a principal role in retaining the client, i.e. , the former delegates the client/matter to another partner and the original originating partner does not continue to either service the client or schmooze the client in a way that makes him or her the primary contact, then the original originator no longer qualifies for full origination credits for the client. To illustrate this point, following is one example of sharing responsible partner credit I have recommended to other firms.

The original originating partner who is no longer responsible for that client may remain eligible to receive 75% of the originating credit for the first two or three years, with a further reduction to 50%. In some firms, the 50% of the origination credit may remain thereafter with the original originator for a designated number of years ' for two or three years or as long as that client remains a client of the firm.

As the amount of the origination credit for the originating partner is reduced, responsibility credit will be transferred to the partner designated to serve as the responsible partner by the originating partner. Questions regarding the allocation of origination credits and responsible partner credits will be referred to the Managing Partner, the Management Committee or the Compensation Committee.

It should also be recognized that the more important the client, the more it is in the firm's interest to have multiple partners develop a significant client relationship. The Managing Partner, members of the Management Committee and the Compensation Committee Executive Committee should continue to be mindful of the efforts of originating attorneys to foster the development of such relationships with important clients.

It is recommended that the Managing Partner and members of the Management and Compensation Committees define what a partner needs to do to qualify for this portion of the credit. Otherwise, the policy may not be administered in a consistent manner, and those partners who do not receive responsible attorney credit when others do will feel slighted. This will be especially important as the Managing Partner and members of the Management and Compensation Committees change. In other words, the present Managing Partner and members of the Management and Compensation Committees should set the parameters that will be used and interpreted by successor Committee members.

Matter Proliferation Credit

Partners should have an incentive to “proliferate” new kinds of business from existing clients, regardless of who is the originating attorney for the client.

Matter proliferation credit is the dollar value of the amount of revenue received as the result of a partner proliferating work for a particular matter from an existing client that was originated by another partner. [Since it is important in many cases to know exactly what/who was pivotal in expanding existing client business, if the concerned partners are unable to reach an agreement, the decision will be made by the Managing Partner and members of the Management and Compensation Committees.]

A partner who proliferates new business from an existing client (for whom the partner is not the originating attorney) should request to receive matter proliferation credit for the file created for the new matter (from the originating partner for that client).

To prevent a “disincentive” for the originating partner to keep client relationships to themselves, matter proliferation credit should not be subtracted from client origination credit. (This presumes that the ability to proliferate the new business was somehow related to the existing client relationship. Again, this type of issue should be resolved case-by-case by the partners concerned or the Managing Partner or members of the Management and Compensation Committees.)

Production Credit

Production credit is the dollar value of the amount of revenue received as the result of a partner's personal production. For example, if a partner records $10,000 in time dollar value, which is billed and collected, he or she would receive production credit in the amount of $10,000. If a partner is designated by the originating partner to be the responsible partner for a client or matter, the former will receive production credit for all billable hours he or she devotes to working on that client matter (during the time he or she is managing the work on that client matter.)

Inherited Clients

In many firms, a partner who inherits a client from the originating partner, whether through the retirement of the latter partner or otherwise, may receive client origination credit for that client. In other firms, a partner who inherits a client from the originating partner will receive credits based on a responsible partner retention basis. The second partner serving as the originating attorney would share responsible partner credits, as appropriate, with other partners who have significant responsibility for managing the client or client matter, and would not have entitlement to client origination credits for that client.

Discretionary Subjective Credit

Discretionary subjective credits represent the value allocated subjectively to a partner for his or her discretionary subjective contributions to the firm. These contributions may not have any direct dollar value that may be attributed to them.

Below is a representative list of criteria that may receive discretionary subjective credit.

Seniority

Seniority should be recognized, but it must be understood that seniority should not be tenure alone, nor is it only the number of years a lawyer has been with a firm. It means the number of years the partner has spent developing and maintaining clients, building and enhancing the firm's reputation and participating in the training and development of a cadre of lawyers who produce for the benefit of all the partners in the firm.

Firm Management and Leadership

Contribution to firm management, including efficiency and effectiveness in handling management assignments, is critical to the firm's future and must be recognized. It also includes practice management, recruiting, marketing, etc.

Compliance with Firm Policies

This includes:

• Abiding by policies to keep time accurately, to turn in time sheets promptly, to follow policy on billing, collections, etc. The Managing Partner or members of the Management Committee and the Compensation Committee is expected to take specific note of partners' noncompliance with firm policies.
• Turning over client management and other controls to other lawyers when appropriate.
• Contributing to the equitable and efficient distribution of work assignments and client contacts.
• Specializing and developing expertise in particular areas to complement other abilities in the firm.
• Personal relationships and teamwork. Practicing a team concept, including participation in, and cooperation on, firm committees, etc. is expected, client sharing, client introductions, and overall promotion of harmony and goodwill among firm members is critical and absolutely expected. These include:

1. Maintaining good working relationships with both legal and non-legal personnel.
2. Lending personal support and enthusiasm to all personnel.
3. Respecting each lawyer's professional and management judgments and good faith; withholding all criticism except as necessary for management decisions; and the management of that side of the process in a private setting.
4. Respecting others' contrasting views and respecting each partner as a person.
5. Promoting and cross-selling other firm lawyers.
6. Partner participation in firm activities/functions. Partners are obligated to attend firm social and professional meetings, participation in those management decisions and activities which appropriately fall upon partners and participating fully in the “drudgery” side of the business.
7. Lawyer development and delegation of work. Time and effort in working with younger lawyers to increase their professional skills must be rewarded. This includes the training and development of associates.
8. Professional and community activities. Contributions that enhance the firm's image and prestige through maintaining good relations with other lawyers, speaking at CLE programs, publishing, participating in bar activities, and assuming bar and community leadership positions must also be recognized. These activities should be performed with the knowledge and “approval” of partners, according to a budgeted schedule, as required.

Joel A. Rose, a member of this newsletter's Board of Editors, is a certified management consultant and president of Joel A. Rose & Associates, Inc., Management Consultants to Law Offices (www.joelarose.com), in Cherry Hill, NJ. He has extensive experience consulting with private law firms, and performs and directs consulting assignments in law firm management and organization, strategic and financial planning, lawyer compensation, mergers and acquisitions, and legal services marketing. He also plans and conducts retreats, and has special expertise resolving problems within firms. Rose may be contacted at 856-427-0050 and [email protected].