Firms Struggling With High-Maintenance Rainmakers
Maybe it is the lasting effects of Dewey & LeBoeuf’s collapse partly over guaranteeing partners high salaries for years. Maybe it is a shift away from rewarding revenue toward prioritizing profits.
For a number of reasons, firms might start to put their foot down when it comes to rainmakers who threaten to leave unless their salary is increased. These partners might not be shown the door in an era where capturing revenue is key, but the firms won’t block the exit—that is, if the circumstances are right.
“Firms are willing to let rainmakers walk if they feel like they are being extorted and they feel like they can keep the work,” recruiter Mark Jungers of Lippman Jungers said. “But if they don’t feel those two things, then hell no. They can’t lose it.”
Frank D’Amore of Attorney Career Catalysts said firms have learned from the demise of their competitors that paying solely on origination is not a sustainable culture for long-term survival. But that understanding is competing with the tension created from shrinking revenue streams and the need to keep revenue in the door at almost all costs. He said firms are saying one thing and doing another when it comes to wanting to stand up to rainmakers and actually letting them walk out the door.
Much of a firm’s calculus comes down to whether the work that partner was doing has been institutionalized, Jungers said. A practice that requires a number of other attorneys and is made up of matters that span months or years is difficult to switch firms even if the lead partner leaves.
“It’s difficult to move an army and it’s difficult to move things mid-case,” Jungers said.
Dewey & LeBoeuf was a prime example of a firm that made guarantees to partners that outpaced what those laterals actually brought to the firm. Since that time, signing bonuses for laterals are smaller, guarantees are much shorter and they often include an “out” clause if the lateral’s projections don’t come to bear, Jungers said. He said laterals often provide a prospective firm three takes on their book of business—an optimistic outlook, potential problems that would affect an average book and the worst-case scenario.
It used to be that firm leaders would have laterals bump up projections knowing the voting partnership would expect the actual number to be lower. Now, Jungers said, firms are going straight to that worst-case scenario when looking at a lateral’s potential.
D’Amore shared a similar sentiment that, while rainmakers are in higher demand than they have ever been, firms are much more cautious about signing deals.
Jungers was clear that he viewed rainmaking as being worth more on the dollar now than it was even four years ago. He said, however, that firms may be looking to minimize the number of outliers who are stretching the spread between the highest- and lowest-paid partners. Squeezing that top end becomes more bearable when the partner’s work is institutionalized, Jungers said.