Why business development is do or die for attorneys

Did anyone catch James B. Stewart’s piece, “A Lawyer and Partner, And Also Bankrupt,?” It recounts how Gregory Owens, a partner at the now-defunct Dewey & LeBoeuf  became bankrupt. It paints a pretty graphic picture, both of some very personal details of Mr. Owens, but also of the pressures on senior attorneys at BigLaw.

The article does highlight some of the very real economic issues facing BigLaw , and should be as noisy and vibrant a warning sign for all practicing attorneys.

In short, the days of being a “service partner” or “senior service associate”are pretty much over. If you do not have a book, I hope you have been diligently putting money away for the rainy day that is coming.

I hate to be the bearer of bad tidings, but the new reality is if you do not have clients, you do not have a great future in the law. Anecdotally speaking, as a legal recruiter, the more senior you become, the harder you are to place unless you have a book of business. If you are a service partner at a firm, and your practice area is trending toward a downward cycle, get out your rolodex now and call everyone you can.

Am I being an alarmist? Sadly, no. I am working with law firm partners in certain practice areas, as well as senior associates in these same areas, with top-notch credentials, the kinds of pedigrees many of us would have killed for, and firms are not interested in hiring them. In-house remains a challenging market, so the question for many of these attorneys is where do they go?

I too am not always satisfied by the anecdotal, so I share this with you as well from Kenneth Anderson’s Article entitled The rising economic pressures on non equity law firm partners where he quotes Indiana University Law Professor William Henderson:

But anyone who doesn’t have clients is in a precarious position. For the last 40 years, all firms had to do was answer the phone from clients and lease more office space. That run is over. The forest has been depleted, as we say, and firms are competing for market share. Law firms are in a period of consolidation and, initially, it’s going to take place at the service partner level. There’s too much capacity.

Mr. Anderson also points out that Professor Henderson also explained that:

The pressures on Big-Law business models are not cyclical and merely an overhang of the 2008 recession; the shifts are structural and the returns are simply not, and won’t be, what they were.  Although some would contest that big law firm practice is undergoing a genuinely structural shift, I think it is pretty widely accepted in the legal marketplace.

So what do we do? Let’s get busy building a book.

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Lies, Damned Lies and Statistics: Profits Per Partner Calculations

When we graduated and went to our firm from law school, many of us truly believed that there was a realistic chance at partnership at that firm. Some of this was mere self-delusion, but one of the carrots we all may have looked at while feeling the brunt of the stick, was the profit per partner calculation. If we worked hard, were enthusiastic, pro-active about getting work, and a little lucky, we too would join the partnership ranks and have significant earnings to prove to us that it was all worth it.

Ok. Times have changed, and maybe the cool-aid we all drank has become less potent. Also, maybe as I have turned 45 my youthful idealism has been replaced with mid-forties realism, which I hope has not yet turned into mid-life cynicism, yes, some people are starting to think that way…but while working with a partner candidate the other day, we were looking at the ATL PPP rankings, and he shared with me that it was not always the best or most accurate indicator. Ok, he used more colorful language than I want to print here, but I think you may get the point.

According to him, with the advent of FPE partners (fixed and partial equity) the numbers which according to him were somewhat dubious to begin with, have now even lesser relevance.

I myself like a version of the FPE approach, but then again I am somewhat of an odd duck. I think a fixed salary, where a partner also earns a percentage of the work he or she brings into the firm, and then also gets to benefit from the profits of the partnership, could be ideal. Many of my clients are now beginning to use this approach…they will give partners a percentage of what they bring in, a percentage of what they cross-sell, and a percentage of work they handle for the firm, all the while making some kind of contribution to firm overhead and expenses. (IF YOU LIKE THIS, CALL ME!!! I HAVE CLIENTS IN GROWTH MODE WHO ARE LOOKING FOR ALL DIFFERENT PRACTICE AREAS!!!)

Back to the point. You may be asking so what? Well, hypothetically, if a firm were to declare all partners who hold even a small fraction of an equity interest to be “equity partners,” then their profits would appear to be widely shared, and hence, profits per partner would appear to be lower. BUT, if the firm declares only those partners with as close to 100% equity to be “equity partners,” then they will appear more profitable, due to the fewer partners sharing profits. 

So, while I am not advocating the complete elimination pf a profit per partner analysis in your decision on whether or not to consider making a move to another firm, I am reminding everyone of what Mark Train said about statistics, and want you to be as well informed in your decision making as possible.