Firms Struggling With High-Maintenance Rainmakers
Marcie Borgal Shunk, a senior consultant with LawVision Group, told The Legal earlier this week that while the compensation spread among the highest- and lowest-paid partners grew significantly during the recession as firms threw money at rainmakers to keep them from jumping ship, some firms are now taking a stand. She said they are putting culture over dollars and letting those attorneys walk out the door. Firms can’t just think about this year’s revenue but where revenue will come from three to five years from now. In order to do that, they have to maintain a culture where people want to stay, Shunk said.
It is the time of year when these issues might come to a head, according to Los Angeles-based Edwin Reeser, an attorney to law firms and lawyers and former head of Sonnenschein Nath & Rosenthal’s office in the city.
Firms now have a pretty good idea of what their profit pools will be at the end of the year and they are starting the budgeting process for 2014, he said. It may become more common for firms to let rainmakers walk out the door in the coming years because of the lessons learned from other firms’ breakups, a shift by firms away from compensating based on revenue and looking instead at profitability and a general acceptance that the market is not going to return to pre-recession levels or form, Reeser said.
Reeser said rainmakers are clearly still critical to the business of a law firm. Compensation comes down to paying all of a firm’s partners fairly and the problem occurs when a partner’s view of what is fair differs from the firm’s view.
"You have to have at some point the ability and the willingness and the backing of your partners to stand up to a partner who is asking for too much,” Reeser said.
A system that pays different amounts to attorneys for the relatively same contributions is problematic, he said.
"They are sending a message to you as a leader that they value their personal interests over the collective interests of the firm,” Reeser said of partners who demand too much. “As soon as that happens, that is poison.”
Firms had often compensated based on the gross revenue a lawyer brought into the firm, Reeser said. But a $10 million book with a low profit margin isn’t worth as much as a $7 million book with a much higher profit margin, Reeser said. Firms are starting to recognize that and are beginning to pay accordingly. He said they can be some difficult conversations to have, but it is something firms have to address.
“If what I’m asking for is a negative to the firm, you’ve got no choice,” Reeser said. “You are better off if I leave.”