Editor’s note: first in a series.
The irony that unfolded during two recent phone calls, which occurred within the span of an hour, was rather remarkable. The first conversation was with a partner who had been targeted by another law firm because of his unique experience and some special opportunities, i.e., clients it could essentially hand him, if he were to ultimately come on board. Neither Sigmund Freud nor Tony Robbins could have found the key to unlock the vault in his mind where reason was stored, as he summarily proclaimed that “all law firms are alike” and stopped the inquiry in its tracks.
Shortly thereafter, I received a call from a partner I had placed in a firm that he initially knew very little about. Interestingly, he had sounded that same refrain many years ago but was at least open to testing his belief, especially since he had only been in one firm his entire career. After many extensive discussions and a long recruiting process (as he interviewed with several firms over the course of more than a year), the partner eventually joined a competing firm. This partner had called to let me know how happy he was. He noted — several times — how fundamentally different his new firm was in quite a few important ways.
I do not believe that all firms are alike. I offer that view based on the perspective of having practiced in two firms; worked with firms of all sizes, around the world, during my in-house career; and consulted and performed recruiting work for a broad range of firms for more than 10 years. This belief is also bolstered by input received from countless law firm lawyers over the years. While some of the basic elements of practice are highly similar (the eternal quest to get clients, the need to bill time and the necessity of working hard), the ways in which firms are dissimilar are rather pronounced. The top 10 areas in which firms differ will be analyzed in this series. This month, we will start with numbers one through five.
The types of law firm leaders, and their effectiveness, are as varied as the firms themselves. They range from those who love their firms, put tremendous passion into their efforts and are skilled managers, to others who are much more standoffish and lacking in leadership skills. As I believe in the axiom that “things flow from the top,” these differences do distinguish firms from each other.In the recruiting context, for example, I have seen many mergers, large group deals and individual partner recruitments turn on how impressive (or not) a firm’s top leader or leadership team may be.
The impressions that leaders make in the legal, business and civic communities, along with their facility for dealing with the media, are similarly important, as they help to shape the overall perception of the law firm. For many people, that perception, which may be stored away in the recesses of their minds, may be the one that is determinative when the time comes to hire or work with a law firm.
2. Financial Strength
Most partners I speak with in firms — who are outside of the leadership group — have only a cursory understanding of their own firm’s financial position. Some may know roughly how much debt their firm has and perhaps are aware of major financial obligations, but very few can go much deeper than that. The percentage who then can compare how their firm stacks up against its competition in this realm is far smaller. Even if such people were inclined to conduct such an inquiry, it would be exceedingly difficult to make a meaningful comparison, as much of the key data they need is not in the public purview.
The reality is that firms’ relative financial strength has greatly changed, especially since the recession took hold in 2008. Firms are all over the lot with respect to what their debt levels are, how deeply they go into their lines and, generally, how well they may be able to respond to a quick turn of negative events (such as the departure of a series of rainmakers, which could trigger covenant breaches and change things overnight). Anyone who thus thinks that firms are all in the same boat in this important realm is misguided.
The differences among firms are rather significant here, too. Some firms have open compensation systems, while others are closed, and there are quite a few firms that have hybrid models. A few firms have strictly arithmetic formulas (and even post this on a website), others try to weigh metrics and intangibles, and there are even some that still abide by a lockstep system for their partners. A common thread is that most expend a lot of effort in trying to make the process equitable, but, no matter how well intended those efforts are, the level of satisfaction with the results varies in firms.
While the fairness of a firm’s system should be important to a partner, most focus on the bottom line, namely: How does he stack up against comparable lawyers in his firm and in the marketplace? As to the latter, a partner’s ability to gauge where he stands is difficult. Profits per partner data, and even the average compensation per partner figures that some firms report, give some guidance, but they mean little as it relates to an individual partner.
The reality, from having done extensive work in this sector, and from having looked at the compensation data of legions of partners, is that partner compensation varies by a much larger amount than most people appreciate (or could even know). There are some partners who make more than similarly situated peers (with respect to the size of their book) who are in firms that report higher profits per partner, while there are others in which the opposite is true, and by a wider margin. There also are many partners who are paid much more than their relative market value and benefit from being in firms that are doing quite well or are drafting off big hitters who need them to handle their matters.
Cynics often note that virtually every firm boasts that it has great camaraderie among its lawyers, “doesn’t hire jerks,” puts a premium on client service and focuses on producing quality work product. While those claims are routinely made, the true culture that exists in firms varies greatly.
Some firms truly embody the principle of teamwork and put clients first. In these firms, partners do not throw sharp elbows when origination credits are at issue, do not hesitate to step in and help on a new pitch or with an existing matter, and devote significant time to mentoring and an array of internal firm matters. Other firms are more akin to an assemblage of solo or group practices where the emphasis is on them — and not the firm. Similarly, if one has an off year, he may get whacked rather hard in a firm that focuses heavily on short-term results. In other firms, there is a longer-term approach that offers much more support while one’s practice hopefully rebounds. The gradations along the spectrum on these points, and others, make the culture in firms much more unique than most lawyers appreciate.
5. Risk Tolerance
While there are some highly successful lawyers who are the byproducts of the firms in which they work — for example, they may have inherited a big part of their practice or have much of it fed to them by others — the majority of the biggest hitters I know reached the top through not being afraid to take risks. The same holds true with firms, as many of the best ones I have seen continue to move forward by not playing it ultra safe.
Why do some firms seem to land more high-profile partners and groups — and are able to consummate mergers with highly attractive firms, while others (perhaps yours), are not in the game or seem to be edged out each time? Often it is because the “winning firm” has the temerity to take a chance, even if it entails investing just a bit more money, even if the metrics don’t align perfectly. Similarly, firms differ greatly with respect to their inclination to gamble on new practice areas, offices in new markets and even on pursuing new business opportunities in which the competition will be fierce. These differences have become magnified because of the recession, as some firms have scaled their appetite for risk way back during tougher times.
Next month, my article will evaluate five more distinguishing factors that will further illustrate how the differences among firms are much more significant than most realize.
You can view the second part of this series here.