Enhancing Lateral Partner Opportunities and Compensation
by: Randi Lewis
This article appeared in Accounting and Financial Planning for Law Firms, an ALM publication delivering analysis and intelligence for Corporate Counsel, Managing Partners, Financial Planning Professionals, and Law Firm Administrators. Visit the website to learn more.
You are a partner in a law firm and you have decided to make a lateral move. You want it to be the right move to a better platform. Where do you start and how do you maximize the likelihood of a successful outcome? The lateral candidate process differs among firms and candidates. But the more you are prepared to answer and ask questions, the greater the likelihood this next move will be an optimal one for you and the firm you are joining. Consider the approach detailed below regarding the research, preparation and vetting activities associated with a lateral partner move.
Starting the Process
Begin your process by evaluating your current firm. Make a list of what is attractive about — and lacking in — your firm’s platform. Next, develop a chart containing a list of “must-haves” in a new firm, and add the names of firms whose platforms appear to provide what your practice needs. At this stage, it can be beneficial to enlist the help of a trusted adviser such as a close colleague or an attorney-search consultant with deep knowledge of the local market.
During the interview process, many firms will ask you to provide a business plan that projects future growth of your practice. Consider developing a business plan during this preparation stage. It will help you sell your practice down the road. Begin by listing your portable clients and the collections for each during the past three-five years.
Compensation is among the most important things you should be prepared to discuss. Most firms will pay lateral partners on a fixed deal for 18-24 months and then compensate them in the partnership array going forward. That deal typically includes a base compensation plus incentives on originations and individual timekeeper receipts. Be clear in your mind about what you want as base compensation and how much of the “risk” you are willing to share in the form of incentive compensation.
Finally, devise an elevator speech about your practice and what you are seeking in a move. As you develop a deeper understanding of the market and how the market perceives your value, you should re-evaluate and refine your speech.
Testing the Waters
Even if you have a sizable book of business, devising a way to promote yourself to other firms can be a daunting experience. Either you will reach out to firms on your own or you will partner with an attorney search consultant to make the initial inquiry. To grab the interest of other law firms, you should provide this basic information:
· A current resume or website bio (or both);
· A brief explanation of why you want to leave your current firm;
· An explanation of why this firm interests you (help the new firm to infer synergies with its practice);
· A three-year history of collections for your portable clients;
· A three-year history of your billable and non-billable hours;
· Your current standard and alternative billing rates;
· Your career moves (and explanations, where necessary); and
· A list of key clients, if asked (used to determine if there are any obvious conflicts).
Tackling the First Interview
If a law firm is interested in learning more about you, it will schedule an initial meeting. Preparation for each firm interview is important. You should research the firm, its practice areas and the lawyers/professionals you will be meeting. Bring a list of your clients and your historical collections (for your reference and not necessarily for distribution) to help you talk about your business.
Be prepared to answer questions about anything listed on your bio and resume. Also, be prepared to answer questions designed to confirm or explore the initial information you provided. Most important, be prepared to answer the “why our firm” questions and “are you a value-add” questions. Below are some examples of questions you will be expected to answer in your interviews. If you have made multiple moves every several years, be prepared to go through each move and discuss why you left. Be as positive about your prior firms as possible.
Why Our Firm?
· What do you know about our firm, our business model and our clients?
· Tell us about your current firm, what’s missing from your current platform and what you hope to find at our firm that might support and expand your business.
· Do you see any obvious conflicts with your practice and our clients?
· If you joined our firm, would you want to bring other lawyers? If not, what type of support associate and other support would you need?
Are You a Value-Add?
· How do you envision adding value to our firm?
· What is your client mix, what are the types of cases/deals are you working on and what is your role in each? Does your realization rate differ for each client?
· Which of your clients do you believe will follow you and why?
· What is your current caseload and what are your projections for the growth of your practice?
· Do you have a business plan? If yes, are you willing to share it with us? If not, can you tell us in general your plans to develop business?
Completing the LPQ Honestly and Thoroughly
Typically, a firm will schedule an initial meeting before it will ask you to complete its Lateral Partner Questionnaire (LPQ). The LPQ is the most time-consuming but very important part of the lateral process. You should consider the LPQ as a document of advocacy that shares your vision of how you expect to contribute to the new firm. The information requested includes biographical information, education, employment history, client-by-client billings, collections, ownership information and a variety of ethical questions. Take the time to complete the LPQ honestly and thoroughly. Send all documents in PDF format to maintain the integrity of the document and to ensure that you do not accidentally send metadata.
Vetting Your Book
Although the process of determining cultural and practice fit will start during your first meeting, lawyers who meet you after you submit your LPQ will ask questions to determine whether the business you listed on your LPQ is likely to follow you. Other firms may assign one colleague to evaluate your book more fully after the interviews are completed.
Law firms cannot afford to make mistakes in their lateral hiring process because of the costs involved in bringing in new lawyers. As a result, law firms have become more intentional about the vetting process, particularly related to the lawyer’s portable business. Although a lateral lawyer’s success cannot be guaranteed, many firms engage in strategic vetting to help maximize the likelihood of a successful match.
These are the types of questions you should be prepared to answer for each client you list on your LPQ.
· What type of work do you perform for the client?
· What are you working on right now and how long do you expect this work to continue?
· What type of work do you expect to perform for this client in the next year?
· Is the client a firm institutional client?
· Who brought the client into the firm?
· Are you the primary originating partner for this business? If so, how long have you been the relationship lawyer?
· Who is your contact at the client?
· Where is the client’s corporate office? Have you ever visited the client?
Additional Portability Questions
· Are other lawyers working on this client’s matters? Names? Status? How long?
· Is there work that people in other practices handle for this client?
· Do you expect the client will move all its work with you to our firm?
· Why do you think this work will be portable? Are there other partners who do this type of work at your firm who can pick it up?
· How long has the relationship partner (if not you) been involved with this client?
· Do you think the firm will fight to keep the work?
Your Book and Compensation
· Some firms will review with you your historical collections and portable projections for each client. Be prepared to discuss what you are working on and what business you expect will continue and why.
· Be prepared to explain discrepancies between historical collections and projected portables.
· What is your compensation history and how are you currently compensated?
· What is your total compensation including benefits at your current firm?
Vetting the Firm
As a lateral candidate, you should vet potential new law firms as carefully as they vet you. You may be able to glean information during the normal back-and-forth of your conversations. Use good judgment to determine the best time to ask hard questions. Timing is important. Strategically, it will not be during your first or even perhaps your second interview. You want to be in sell mode until you have a sense that there is a mutual interest. That interest will not be clear before a firm has had an opportunity to evaluate the information you presented in your LPQ.
Use the initial list you developed of “must-haves” to shape and refine your questions. Those questions will vary, of course, depending upon what you seek in a new firm. If your current firm lacks certain capabilities that have caused you to lose work, then you want to determine whether the potential firm has those capabilities. If you are looking for a firm that has a cross-collaborative culture, your list should include questions that elicit specific examples of successful cross-selling.
Below are examples of some questions you may consider asking during the interview process. Use your judgment to determine when to ask more probing questions.
Practice Area Synergies
· Do you think my practice will be a good fit? Do you see synergies between my practice and others in the firm?
· How do you typically you take advantage of synergies to grow practices?
· Do you see any obvious opportunities for cross-selling between our practices?
· What would be the best way for me to refer matters to partners in other practices?
Firm and Practice Area Culture
· How do partners operate within each practice group? How are large matters staffed?
· Are there industry groups or other teams? If so, how are team members chosen?
· How often do the partners, practice groups and other teams meet?
· How do different practice groups interact with each other?
· Have you added partners to the practice in the last three years? Have any partners in the practice left the firm?
Firm Management and Finances
· What is the firm’s governance structure and how does it operate?
· Are there any current succession planning issues among leadership or top business generators of the firm? Does the firm have a strategic plan? Can you talk about the key strategies?
· What is the current revenue per lawyer and what are your projections for the future?
· Has the firm made its plan over the past three years?
· What are the firm’s loan and lease obligations?
· Does the firm have a strategic plan? Can you talk about the key strategies?
Be prepared to negotiate compensation terms. The more confident you are about the value you bring to the firm, the more you will be able to negotiate from a position of strength. It can be helpful to rely on a colleague or a recruitment professional as an adviser and sounding board during the negotiation process.
· After my deal ends, how would I be compensated within your partnership structure?
· What are the requirements for equity partner capital contributions?
· What other contributions are equity/non-equity partners required to make?
· What is the range of partner compensation and how is compensation distributed?
· Has the firm withheld or skipped any draws in the past two years?
Your list will include other questions about firm management, its strategic plan, succession issues, firm historical and projected profitability, client base, partner compensation and benefits, cross-marketing activities and firm culture. You should explore questions about the importance of your practice to the firm and the number and reasons for recent acquisitions and departures. You also may want to ask more specific questions about firm capital, debt obligations and lease obligations. If the firm is reluctant to provide certain information, that may be a signal for you to conduct further research.
As you can see, the lateral process requires strategic thinking, research and mutual vetting. If you invest more in the early stages, you are likely to land a lasting and fulfilling opportunity.