The toxic law firm
18 April 2012
3 March 2014
24 July 2014
23 April 2014
24 January 2014
10 October 2013
The recession has, whether law firms realise it yet or not, created an environment in many UK firms that is mildly hostile to its individual partners.
With that in mind, a partner’s only recourse is self-preservation at all costs.
“Hold on a minute,” you might say: “Hostile?” Consider this.
Partners are judged on their ability to win and keep on winning client work, or at least to achieve and maintain a position that is integral to client relationships. Nothing else really matters in the final analysis. Anyone who doubts this, perhaps fiercely advancing the case of ‘non-financial contribution’, need only remember the actions of the vast majority of law firms during the recession, when those shown the door were almost always those whose billings and client connections were deemed insufficient for the task.
Yet the climate inside most UK firms is one which, if not entirely inimical to this, seeks to prevent or minimise the degree to which individual partners can cultivate and retain client relationships.
Rather, client relationships are heavily diffused across the firm, where at all possible, with systems to make sure partners introduce their clients to other partners.
Ostensibly, this is a positive move by the firm, encouraging the totemic concept of ‘cross-selling’, but actually it is just as much a defence-mechanism by the body corporate of the law firm: the more diffused a client relationship, the less likely it is that a client will move when an individual partner does.
As if to add insult to injury, most UK firms still continue to have enforceable restrictive covenants, long notice periods and/or contractual gardening leave for partners. This ensures they are kept away from client relationships if they leave and creates a ‘toxic hire’ situation for a potential new employer. A predatory firm may have to invest considerably more to hire a partner if they are not going to be able to bring clients immediately, and said partner will be rightly nervous about being cut off from his or her carefully cultivated client relationships for an extended period of time.
What can happen in the most extreme cases is that the hire is simply ‘poisoned’ in the sense that clients are aggressively targeted to make sure they do not leave the firm and legal action sometimes occurs if they do. The unfortunate partner is twiddling his thumbs on gardening leave for up to a year and may find it difficult to gain instructions from his clients for another year after that. The hire becomes expensive and troublesome; partners find it difficult to develop new relationships and are loath to abandon their previous practice in any event. All too often, the hire simply does not work out, the firm becomes disenchanted, the partner’s career is in ruins. My own research suggests that at five years out from hire, around half of partner hires have left the firms they joined as laterals (see blogs passim or my website www.motivelegal.com for pdfs of my research).
US firms have a very different attitude to life. Many have ‘at will’ contracts requiring no notice from partners, and few have restrictive covenants. They take the attitude that when a partner moves from one firm to another, they take their clients with them, period. Their evolutionary environment has been very different to that of UK firms. Individual lawyers know from an early age that if they fail to win and keep clients they will not survive at the top level. This inculcates much stronger ‘sales’ behaviours in individual lawyers and creates what, on the surface of things, may seem like a more hostile environment. There is active competition between partners and client relationships are analysed to within an inch of their lives in order that remuneration reflects as precise as possible a determination of the client-ownership picture. Small wonder, then, that some US firms take five to six months of the year to settle partner remuneration.
This environment, which might on the face of it look more hostile, could also be seen as more honest; everyone knows where they are, that competition is real, and that if they fail to perform they are heavily downgraded or axed.
In this kind of environment, the partners who own the greatest aggregate share of client relationships are the most powerful, and the way to gain power is to get more clients and more work. The downside, for UK partners thinking of a move to a US firm at any rate, is that US firms tend to assume that a partner will bring business when they move, something many a UK partner joining a US firm has found to their cost just a few months in to their new home. Added to that, there are perverse disincentives to refer internally for fear of losing a chunk of the client (and hence remuneration). Put simply, it can seem a bit ‘dog-eat-dog’ in some US firms, although at least it is openly so. Lawyers in many UK firms speak derisively of these environments as being ‘eat-what-you-kill’, as if this is universally-acknowledged to be a Bad Thing. At least, one might say, lawyers in US firmsknow how to ‘kill’.
In UK firms, the behaviours have to be quite different. The ability to win and keep clients remains crucial, but senior lawyers are expected to diffuse those relationships across the firm. As that happens, the demands of the firm could be seen to work against the needs of the individual. Very senior lawyers are less and less responsible for direct billing, often having an overarching responsibility for client relationships but nothing more, for the concept of individual ‘ownership’ of a huge client is anathema to the UK firm.
Given the fundamental differences between the two cultures and structures, it’s hardly surprising that many UK partners struggle in US environments. My research suggests laterals into US firms in London are much more likely to exit quickly.
The UK firm would argue that the needs of individual partners are not as important as the needs of the firm, and that the partners collectively will be better off if they start to exhibit collective behaviours. That would be true if the firm in turn exhibited collective behaviours in tough times, allowing partners to rally round weaker members of the herd to protect them.
However, as we have seen during the recession, this was not the case in many firms. Partners were asked to justify their individual existence , not their existence as part of a collective – clearly something of a contradiction – and so many partners judged to be ‘without clients’ lost their jobs. Some felt punished for having exhibited the ‘right’ behaviours and felt that the ‘wrong’ behaviours (client-hoarding) were rewarded.
In an atmosphere where the ‘wrong’ behaviours are rewarded and the ‘right’ ones are publicly lauded yet seem to matter little when the chips are down, it would seem the sensible partner only has one proper strategy: watch your back.
I do not, here, mean to suggest that partners should aggressively manage their careers in the internally competitive, frankly exhausting manner that some law firm environments seem to demand, although this may, sadly, be necessary for partners wishing to remain in some firms.
Rather, partners need to be fully aware of the financial details of their own client base, be aware that your ‘friend’ down the corridor might not be your friend if the circumstances dictate otherwise, and that power-play within the partnership should be handled very carefully.
Ultimately, achieving this demands self-awareness. It is about understanding what you want out of life, what resources are available to you, and what threats there are to your continued prosperity. It’s not about what you should want. It’s about what you, personally, actually do want.
Mark Brandon is managing director of Motive Legal Consulting