Please Don’t Go!

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In the last ten years the legal landscape has been transformational. There are more law firms in every major jurisdiction and as such, the competition for talent is even greater. It is incredibly rare for partners to commit to one firm through their whole career (something which used to be the norm). Moreover, partners are more likely to move at least once in their career.

There are many reasons for the increased moves. Some firms are paying huge amounts of money to attract partners and, while not as popular as it used to be, some firms still offer guaranteed packages. In fact, since the last major downturn in 2009 I have seen the offers received for my partner candidates to have got bigger and bigger. Where a partner fits a strategic area, has clients that will move and track record for success, then I am sure they will be able to earn more at a competitor. This has been the case with our recent team and partner moves in London, Hong Kong, New York and Silicon Valley. This is a trend that will never stop. Aside from the money, partners are moving for a host of other reasons including great international presence, more aligned management strategy or simply because they want to have a change.

Here are my three top tips for retaining your best:

  1. Give them a voice: The best way to try and keep them is to make partners feel they have a voice and have a role in the direction of the firm. Most partners I move aren’t only looking for more money. They want to be part of something bigger than themselves and their practice. An open management which listens to their best is key to retaining talent.
  1. Dead wood: Firms tend to grow for the sake of growth. Some say size doesn’t matter and I always tend to agree with this in this case. Therefore, I am a firm believer that firm’s need to constantly be ditching their dead wood. There are too many partners in every law firm. I am not to say this applies to “service partner” as these are integral to growth. However, it is those partners who do not justify their position or remuneration that need to go (ideally to one of your competitors so they can be a drain of their resources). If I am a top billing partner or an up-and-coming junior partner then the last thing I want is to be part of a firm where my business is subsidising those whose no longer make the grade. I know this is a cold approach and I do get criticised for this by some on the industry. However, I believe as the market has become more competitive there is little room for loyalty other than to those who are integral to your success.
  1. Pay them: One thing that is going to really frustrate the best partners is to see new lateral joiners paid far more than themselves simply to come on board. This has happened more recently with the UK Magic Circle firms when competing with the top US firms. The principle is sound – in order to attract the best you need to pay the best and this includes, in some cases, breaking your lock-step and offering guaranteed packages. However, what I find puzzling is when firms don’t increase remuneration to such levels for their existing partners who meet a similar standard. Failing to do this means you will attract the best laterals but lose your own. When this happens, firms will question why “star” partners are leaving to join competitors and that is when your brand really suffers. Once this happens it is game over in my opinion. In short, if you want to keep your best then you must pay them the best.

Giovino

 

Should I Stay Or Should I Go Now

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Have you ever considered a move from your firm? If the answer is no then count yourself very lucky. If you are part of the other 99% who have answered yes then the fact is you WILL move. Maybe not in the next month or two but at some point in the future.

Considering a move of firm means something is missing from your current firm. It may be money or culture or management. In my experience it is very rare for these things to be corrected and in most cases, as time passes, these issues because much much bigger. And as such, that desire to move grows as well.

My advice is always the same when asked what job options are available: what is missing from your current firm? Without know the push factor it is impossible to know what you want. And without knowing your “want” you risk moving to a new firm with the same old issues. And then you become that individual who moves every other year (which is fine for me as a head hunter but probably not the best career move for the individual).

Once you have decided on what is missing from your current firm you must ask whether this is something that can be offered at a new firm. In a lot of cases this is just not possible. If you want to move somewhere with a more open, friendly management then the reality is this probably doesn’t exist. Even if it does when you move, it is guaranteed that management will change in the future.

Once you have decided what you want can be offered at a new firm then the next thing is to partner with a head hunter who can work with you to identify such firms that are able to offer the right platform. In most cases when I work with partners, the first thing I do is have them write me a note with the top three things they need from a firm. I don’t care at that stage about their remuneration or size of book because the key thing is ticking the boxes necessary for this individual to be happy and satisfied in his new role.

Once identified, then the next step is to meet with these firms. A good head hunter will know what these firms offer and whether they are, in principle, right for the individual. In case you don’t know what makes a good head hunter, simply ask them who they have moved, which firms they have moved individual’s to and have a quick scan of their LinkedIn (for the record, I have moved hundreds of partners into firms across every major continent over a ten year period).

The key things to take away from this post:

  1. Work out what you want from a new firm
  2. Commit to a move (life is short – if the problems at your firm are not going to change move straight away)

It really is that simply. Moving firm in theory can be traumatic. In reality it is straight forward, exciting and re-energising.

Size shouldn’t matter

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Coudert, Thelan, Dewey Lebeouf. Heller Erhman, Howrey, Olswang…. Former great firms which no longer exist. And yet the partners at these firms are still working and the clients are still writing cheques. What went wrong?

Most law firms aren’t run like modern businesses. It used to be that being a law firm was a way to print money. Clients were everywhere, brand was key and partners did not have to work too hard to win business. The demand in Asia, London and New York for skilled-lawyers was sky high and firms had no issue in raising their rates without clients questioning this. Some firms began turning over $1 billion in revenues and partners were making millions.

Those were the good old days. Fast forward to 2017. Corporations are so focused on cutting costs that firms cannot just rely on brand anymore. It used to be that Firm A was one of a couple go-to firms for a particular type of work (private equity mandates for example). Now these firms are competing with more competition and clients are always focused on who can do the work for the best rate.

So what’s the problem?

Simply put, law firms are too big. In the golden period of law firms, partnerships were smaller and run in a way which benefited all of their partners. The concept of a salaried partner was rare and many firms shared the same vision, ambition and culture. Now it seems law firms are in a race to see who is the biggest – for law firms, size does matter. The issue arises when trying to maintain a core strategy and culture when you have 500 partners to please.

A knock-on effect is that firms need to keep their partners happy and their brand strong and this means they are now almost entirely focused on annual profits. Firms always talk about long term strategy and investment but when it comes to it they only care about one thing – annual profits per partner (PEP). When PEP is high, times are good. When PEP falls, it is a disaster. And everyone looks to management. Why then would a firm look to invest profits for a long term strategy when they need to get PEP high at the end of the financial year?

At least once a month I meet with a firm who pitches me their long-term strategy. When I talk about potential partner hires, the first question asked is what their portable book of business is? Personally I would prefer they ask what their predicted book will be in three years but this would take some investment. This wouldn’t be a huge issue if making one or two partners hires a year but as mentioned before, size matters to law firms and they tend to want to recruit a couple dozen.

Another issue with short-term focus on profits is that partners can simply move whenever they want to earn more money. In my experience, a firm is more likely to hold on to under-performing partners rather than fight tooth and nail to keep their superstars happy (again, size does matter a little bit too much here). Once profits drop in a year, earnings fall. If you are a rainmaker in a firm, then you can cross the road to a competitor and earn more money. Compare this to a listed company – when the stock drops shareholders will moan but in most cases customers and employees don’t run away.

Until firms start to take a long term approach to growth, invest in the best and get rid of the rest then this problem will continue. Ironically, I believe that not only is the next Dewey Lebeouf around the core but more are necessary. As more firms fall at the way side we will then see the next generation of successful firms which allows to promote their own, retaining rainmakers and making bigger profits.

Giovino

What is my book of business?

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Given the current market I am reviewing anywhere between 10 and 30 partner business plans at any one time. Every one of them is unique but they all have one major issue to overcome – what is the book of business?

Portability of practice is not guaranteed but frankly, is the most important thing in a business plan. Firms want to know where the money is coming from.

My advice is simple – put down what you think you will bill assuming everything goes perfectly in the first year and  assuming you also have a little bit of luck.

This is not to say that you lie or even exaggerate. Partners have done this in the past and I refused to work with them. I am just saying think “best case scenario”.

And I know what many of you partners are thinking already – “but Alberto, I want to under-promise and over-deliver”. That one phrase no longer has a place in lateral partner recruitment.

I understand why some partners and recruiters take this approach. Why over promise and fail to deliver meaning you have a target on your back? What happens if your clients don’t move and you don’t reach these numbers? What if the market tanks six months in?

All of these are valid points. But the question is this – would you rather take a lower salary and be rewarded if you beat these conservative numbers? If so, great – take the higher salary after you reach your targets. However, you can imagine what most partners say when I suggest this.

 I recently worked with a private equity partner from a top firm in Los Angeles. Year on year since 2010 his personal billings were $6.5m. He was taking home around $2.3m and expected the same or a small uplift. However, when I saw his business plan he was predicting $4m in his first year. When questioned on this he said to me he would probably do $6m but wanted to be cautious in case clients didn’t come.

I couldn’t help but laugh. When I suggested he take home $1.5m for the first year and then increase this when he hit $6m+ he was astounded.

“Alberto, you’re crazy – why should I take a pay cut?!?!”

“Based on those numbers you aren’t worth $2.3m”

“But I will probably do it, I just want to be careful in case it doesn’t happen”

“Why would you want a firm to invest in you if you don’t have the confidence to back yourself?”

And there it was – that moment of clarity….

The fact is this – law firms will automatically cut your predicted book by 25%. They assume you’re exaggerating! So there is no room for caution. Back yourself, remain positive and visualise your first year going absolutely perfectly. Unless of course you are willing to share the risk and take a massive pay cut until you reach success (I have yet to meet a superstar partner who is willing to do that).

Oh, and that partner I moved. He billed $7m in his first year and is projecting hitting $10m over the next two years….

Giovino

Welcome

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Year on year the challenges facing law firms, its partners and staff generally grow. I have spent a decade working with leading firms across the world to help combat problems and prepare for forthcoming challenges. Whether it is assisting a firm re-branding, assisting with a merger or hiring their future leaders I have been privileged to gain an insight into the key issues facing this industry. This blog focuses on some of these issues.

If you are a partner considering a move, management members debating growth plans or a just someone interesting in the misspelt ramblings of a headhunter I hope you find this content useful.

Alberto Giovino – GSL Partners